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Irresponsible Lending Cause of Consumer Debt
Many lending institutions now have to shoulder the majority blame for the increase in personal debt in the UK. Irresponsible creditor lending can be classified by the following:
Credit Sold to Consumers with No Level of Affordability
Many creditors and especially finance companies do not have proper checks in place to calculate a consumer’s level of affordability. Lenders should take into account the consumers income, outgoings and the current level of debt but often fail to do the proper checks and lend money to those who simply cannot afford to repay the loan or credit card.
Loans and credit cards have also been offered to people who are out of work and claiming benefits as their main income and have no hope of repaying the debt at the required repayment level.
Enticing Credit Card and Personal Loan Offers
Banks and finance companies use all types of methods to ensure that they continue to increase their business and get more consumers to sign up to their credit cards or loans. By simply personalising credit card or loan offers to new or existing customers is often enough for a customer to take the offer as it gives the customer the impression that any loan or credit card has been approved by the bank as they feel they can afford the repayment on the new approved level of debt.
You will also find that the timing of many loan or credit card offers is increases around children’s holidays or around Christmas when they know families need the extra injection of cash; failing to calculate the personal circumstances of an individuals debt levels or affordability.
This is another reason why in recent years the personal debt levels in the UK have increased so much.
Extending Credit Card or Overdraft Limits
As creditors do not need to ask a debtors permission to increase their credit limit many credit card companies and banks increase their customers borrowing limits if they feel the customer can afford the credit repayment on their current debt. Unfortunately many consumers do not realise the increase on their credit card or overdraft until it is too late when they receive their statement demanding money they cannot afford to pay. The debtor will then be charged late fees and extra interest charges if the minimum repayment is not met causing debt problems to escalate as the arrears build up. This process is then difficult to reverse as creditors demanding a greater amount each month to catch up the arrears.
Misleading Advertising
Creditors frequently sell the advantages of further borrowing on credit by a credit card or a loan but fail to advise consumers of the consequences of non payment should the consumer not meet the minimum repayments. These consequences include the threatening phone calls and threats of legal action should the consumer not continue with their repayment regardless of discussing the situation.
Many banks finance and credit card companies have their credit agreements so complicated that many consumers do not understand the full meaning of what they are signing onto. This is classed as misleading.
If you are experiencing any financial difficulty please contact Debt Plan Direct for advice.
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