Monday, October 02, 2006

Big banks whinge about IVA's

From last Sundays Telegraph, (1st of October 2006).

Apparently the big banks have warned the government that they may stop lending to poorer families in the face of a boom in personal insolvencies, presumably both bankruptcies and Individual Voluntary Arrangements (IVAs).

IVA's are up 153% in the second quarter of this year.

I can see why they might be upset. They seem to blame insolvency practitioners operating in debt counselling firms, possibly aggressively looking for business, and their fairly confusing regulatory arrangements. There are 6 separate bodies to which an insolvency practitioner can belong to, and I agree that needs looking at. Possibly there is a need for there to be regulations about cold calling debtors.

However the banks could also try responsible lending. They could when issuing new credit cards, ask:

  • Have you got any other credit cards?
  • If so what is the limit and balance?
  • Can we see some statements please?
  • Have you just been making the minimum payments?

This would ensure that they do not issue to cards to people who then would end up with structural debt at fairly high interest rates, who already have the same problem on other cards.

They could also try not constantly upping credit limits on credit cards when it should be obvious that the person is not paying off the current debt.

Of course banks won't do this as I suspect they would rather reap the high profits inherent in this sort of lending. This is why the law should stay broadly as it is. If the banks are negligent with their money they surely deserve to lose it.

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