Banks unite to tackle bad debt
Banks unite to tackle bad debt
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Thursday, 30, Mar 2006 12:36
Four of the UK's leading high street banks have joined forces in a bid to tackle the problem of consumer over-indebtedness in the light of increasing concerns about levels of bad debt.
HBOS, HSBC, Lloyds TSB and the Royal Bank of Scotland have agreed to share their application income and current account data with credit reference agency Callcredit in a bid to improve communication between banks over levels of personal debt.
The scheme will alert banks to consumers who are already substantially in debt with one of their rivals in a bid to stop continued lending to borrowers already lacking the means to meet their existing commitments.
Banks will also be able to run an affordability check on all prospective borrowers before deciding whether to give them credit.
John McAndrew, managing director of Callcredit, believes the new initiative will be welcomed by the government, consumers and banks.
"The government wants more customer protection for borrowers and the lenders want to provide a better service to their customers," Mr McAndrew said.
"We are delighted to have been able to help the industry achieve this. It is true that only a small percentage of customers are overindebted and our initiative provides additional opportunities to offer these customers appropriate advice and support."
MPs have given their backing to the scheme, with Conservative MP Michael Fallon, chairman of the cross-party treasury sub-committee, insisting that greater data sharing was the only way to ease overindebtedness in the UK.
"There is a great deal of data around and there are people who get into difficulties where they have over-borrowed or borrowed irresponsibly with one bank, and they're simply able to move onto another bank," he told BBC Radio Five Live.
"So I think it's quite straightforward: where data can be shared, it should be shared."
He also called on the government to co-operate with the data sharing initiative by making its debt records more widely available to lenders.
"We've encouraged banks to share data, we've encouraged the government to share more data with the banks, but the government itself holds an awful lot of data about student loans, housing benefit and council tax, whether people are responsible payers or not," Mr Fallon added.
The UK's leading banks have all voiced growing concerns over rising bad debt costs in Britain, with HSBC singling it out as an area of concern in its full-year profit announcement earlier this month.
A recent study by research group Datamonitor suggested that the average British adult currently has debts of £4,021, not including a mortgage, an increase of a third since 2001.