Debt from irresponsible lending

A growing debt problem in the UK

Debt from irresponsible lending is widely accepted as one of the main factors for the growing debt problem in the UK.

Money Advice Direct receives 1000’s of calls from people in debt due to irresponsible lending. The problem has got to such an extent that the advice team are speaking to the banks and lending banks issuing loans to people who have little prospect of being able to pay them back.

One of the major contributing factors to irresponsible lending is banks in the UK failing to check the applicant income levels. This is a particularly popular practice with credit card issuers offering individuals on low income credit facilities of up to £25,000.

Example of Irresponsible lending :-

• Increasing credit card limits too easily.
• Increasing overdraft limits without authorisation.
• Not requesting proof of income.
• Credit facilities being offered as incentives to purchase more.
• Credit cards being sent through the post that are pre approved.
• Credit card cheques being sent through the post.
• False and Misleading adverting veiling interest rates.
• “Small print” trickery in long and text heavy credit contracts.
• Lending money to the unemployed
• Giving loans and credit cards to those on benefits.

The route cause of irresponsible lending is the staff employed at credit companies who are given incentives such as bonuses or commission to actively sell credit cards and loans. These staff are paid on the volume of the loans they sell which itself is irresponsible.

Is society to blame for irresponsible lending?

The advice team at Money Advice Direct is becoming increasingly concerned that individual irresponsible lending become a major reason for debt in the UK. In some cases people being mis-sold loans by the multitude of 'credit factories' which have sprung up over the past few years.

Our own specialist “Irresponsible Lending Advice Unit (ILAU)” receives over 100 calls a day from people being poorly advised by many profit-making advertising loan firms and persuaded that an loan or credit card is right for them in circumstances where it clearly is not suitable.

The Irresponsible Lending Advice Unit (ILAU)” is concerned about the quality of advice given by loan advisers to consumers. Firm action must be taken against any credit company found to be issuing false or misleading advice. People with debts are morally obliged to repay them. How much they repay depends on their circumstances not on the maximum they are offered as a debt product.

The Irresponsible Lending Advice Unit (ILAU)” is urging people to weigh up all the options before signing up to any type of credit arrangement. If you have a debt problem, an new loan or credit card may not be the best option because it may be more expensive than you can afford, for example.

An end Irresponsible Lending in the UK is near.

The UK Insolvency Helpline are trying to make irresponsible lending a thing of the past. The banks and credit providers freely admit they are the cause of irresponsible lending after all, What came first, the lender or the spender?

Lending and credit brokers are being forced by the government to be more vigilant in their lending practices to try and reduce bad debt levels and halt the rising number of IVAs and Bankruptcies. The fact is that the rise in debt has led to record number of insolvencies to around 50,000 cases per year. This enormous amount could have been reduced if lenders would have been less irresponsible.

The increase in irresponsible lending has led to an new type of addiction; shopping addiction, the figures show that estimated level of debt by the average person is £5,000. Money Advice Direct are at the forefront of the irresponsible lending problem. We are urging loans and credit card providers address irresponsible lending and put an end to aggressive marketing strategies and cut down on commission based lending practices to put an end to rising debt levels.

A positive step toward ending irresponsible lending is that the leading credit and loan providers are now going to work together to share information about borrowers struggling with debt.

The Government

Irresponsible lending should made ill legal, and the Government should place a statutory responsibility on lenders to do lend more compliantly.

The government should take action to ensure that credit card and loan companies are unable to raise credit limits in the absence of a specific request from the borrower.

The financial Services Industry

The financial services industry also needs to look at its own practices as well as those of its customers. Ensuring that all parts of the industry understand the needs of their customers and can react appropriately will improve the situation for everyone.

advice sector

Credit card and loan companies should to provide customers with more information about their dent, and for all credit card statements to state how long it would take the customer to clear the current balance.

Money Advice Direct

We would like to see additional provisions to ensure all consumers have adequate protection from irresponsible lending

Common questions arising from debt from irresponsible lending are the following:

• Can an IVA sort out my debt from irresponsible lending?
• Can Bankruptcy be a cure for my debt from irresponsible lending?
• Can debt management be a cure for my debt from irresponsible lending?
• Can a trust deed be a solution for my debt from irresponsible lending?
• Can I still get a mortgage if I have debt from irresponsible lending?

If you or someone you know is in debt due to irresponsible lending please call us on 0800 074 6918.

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