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Record number of Britons going bankrupt

"People are being given inappropriate levels of debt. Some of the marketing devices used by some credit card companies leave a lot to be desired."

Dan Levene, spokesman for the Citizens Advice service

Credit-card companies came under fire on Friday night as new figures showed a record number of British people going bankrupt as a result of the country's growing mountain of debt.

UK Department of Trade and Industry figures showed a 37 percent jump in the number of people becoming insolvent in the second quarter of the year. The three-month total of 15,394 is the highest quarterly figure since records began in 1960.

The low interest rates of recent years pushed the UK's total personal debt levels above the ?1 trillion (US$1.78 trillion) level for the first time last year.

The recent slowdown in the economy and last year's interest-rate rises are being blamed for pushing some people over the edge.

The level of personal debt is equivalent to the country's entire economic output in a year and three times the UK's national public debt.

Dan Levene, a spokesman for the Citizens Advice service, said the vast bulk of the debt people were unable to cope with was on credit cards, where typical interest rates were between 20 percent and 40 percent.

"People are being given inappropriate levels of debt," Levene said. "Some of the marketing devices used by some credit card companies leave a lot to be desired."

People were often lured into taking on credit at 0 percent, only to see the rate leap if they failed to make a single payment.

Around one in five of all the cases that Citizens Advice Bureaux (CAB) handle now concern excessive debt, and that share is growing. The average debt of people coming into CABs was equivalent to 14 times their salary, Levene said.

The Liberal Democrat treasury spokesman, Vince Cable, said the figures were worrying.

"The government needs to stop being complacent and take action to tackle the problem of personal debt by clamping down on unsolicited mailing, reckless lending and misleading advertising," he said.

A manager at a high street bank, who declined to be identified, said debts were the biggest problem he dealt with. "I have people coming in front of me every day with ?40,000 or ?50,000 or more of debt. It's just amazing how much debt people have managed to run up," he said.

The insolvency practitioners Grant Thornton agreed that unsecured (non-mortgage) debts were spiralling out of control, but cautioned that debtors had a responsibility not to borrow too much.

"The UK's mountain of personal debt continues to have no peak in sight," said Mike Gerrard, a personal insolvency specialist at Grant Thornton.

"The problem rests squarely on excessive credit and store card use, personal loans, and often unsustainable `champagne' lifestyles," he said.

The company said it had recently advised someone who had run up ?312,000 of debt on 63 credit cards.

The high street banks this week admitted that customers have been having difficulties repaying credit card debts and other loans. Barclaycard, the credit card arm of Barclays, yesterday reported a 17 percent fall in profits to ?379 million after having to put ?508 million aside to cover problem debts -- up 42 percent on the same time last year.

The Department of Trade and Industry figures showed strong growth in the number of people who had elected to make what is called an individual voluntary agreement (IVA), whereby they work out a plan to repay their creditors gradually, rather than straightforwardly declare bankruptcy.

IVA numbers were up 70 percent in the second quarter on the same period last year while bankruptcies were up 27 percent to 11,195. Both are record highs and together they make up the 15,394 of total personal insolvencies during the period.
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