Banks blamed for rising debt
Consumer groups have blamed spiralling consumer debt on aggressive tactics used by banks and credit card.
14:33 02 June 2004
Consumer groups have blamed spiralling consumer debt on aggressive tactics used by banks and credit card issuers to sign up more customers.
A report into the credit card industry by MPs last year found consumers were being bombarded with "highly misleading" marketing and cards, which had "excessive" rates of interest, the Financial Times reports.
Mick McAteer, senior policy adviser at the Consumers' Association, told the FT: "Banks have contributed to the growth in personal debt by confusing marketing although I agree borrowing is the responsibility of the consumer and the bank."
But banks have dismissed suggestions that they are to blame for soaring debt levels. Many said there was little point in lending to consumers who could not afford to repay.
Some banks responded to the MPs' report by tightening lending criteria. They also pledged to be more selective about extending loans.
Martin Ellis, chief economist at Halifax, said economic conditions had encouraged consumers to take advantage of low interest rates. Rising house prices meant consumers had more wealth even though debt had risen, he said.
Barclaycard, the UK's largest credit card issuer, said the industry typically rejected half of all applications for credit cards. Though there had been an increase in consumer debt, in real terms this meant consumers owed on average 100 more than they did two years ago.