We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Banks call for data-sharing on personal credit histories
pin
Posts: 4,265 Forumite
Following story from today's Guardian:
Stories of customers with wallets stuffed full of credit cards, stacked up with more debt than their holders can afford to repay, have become commonplace amid the outcry about the level of personal indebtedness in Britain.
Now, for the first time in recent years, the banking industry appears to be showing signs that the strain on consumers' pockets is feeding through to them in the form of rising provisions for bad debts.
In a desperate attempt to head off criticism that they have been too ready to grant loans, the banks have begun calling on each other to share data about customers' credit history - good or bad - to spot those who might be running into trouble.
Last week, Barclaycard provided the clearest illustration of the situation. Its provisions against bad debts for the first six months of 2005 rose 42% to £508m - helping to knock 17% off the bank's profits, which came in at £379m. The country's largest credit card company is also cutting credit limits and turning away one in two applicants in an effort to avoid further problems.
HSBC also helped to set the tone after describing Britain as the "most difficult credit market" in any of the 77 countries in which it does business.
The question now being asked by banking analysts and insolvency experts is whether the trend of bad debt will continue into the second half of the year.
Michael Lever, a banking analyst at CSFB who warned about rising bad debt levels at the start of the companies reporting season, said: "People who see the uptick in consumer provisions as not continuing are deluding themselves."
Analysts are taking comfort, however, from the fact that the problems are largely in credit cards and unsecured loans rather than mortgages. Card payments tend to be the first that customers miss when they run into trouble. But if unemployment were to start rising rapidly or small businesses began having difficulties, this sanguine approach to bad debts would probably change.
Simon Maughan, an analyst at Dresdner Kleinwort Wasserstein, said: "It's a question of affordability. It's not about unemployment."
While the banks' bad debt provisions, now known as impairment charges, are rising, so are the number of people becoming insolvent.
There is some suggestion this is because it has become easier for people to declare themselves bankrupt, but most experts believe that is only part of the picture.
Pat Boyden, a partner in the business recovery services practice at PricewaterhouseCoopers, notes that bankruptcy figures tend to be a lagging indicator, reflecting debts taken on 18 months ago.
His research also appears to contradict any suggestion that changes in circumstances, such as divorce or unemployment, caused the rise. He analysed 500 voluntary arrangements in July and found 372 people gave expenditure in excess of income as a response, while 58 cited marital break-up and 52 unemployment. Many bankers think last week's quarter-point cut in interest rates last week to 4.5% will ease the debt burden. But Mike Gerrard, a personal insolvency expert at Grant Thornton, wonders if it might be a double-edged sword. "While it will help people with mortgages, will it actually encourage people to take on more debt?"
http://money.guardian.co.uk/creditanddebt/debt/story/0,1456,1545508,00.html?gusrc=rss
Stories of customers with wallets stuffed full of credit cards, stacked up with more debt than their holders can afford to repay, have become commonplace amid the outcry about the level of personal indebtedness in Britain.
Now, for the first time in recent years, the banking industry appears to be showing signs that the strain on consumers' pockets is feeding through to them in the form of rising provisions for bad debts.
In a desperate attempt to head off criticism that they have been too ready to grant loans, the banks have begun calling on each other to share data about customers' credit history - good or bad - to spot those who might be running into trouble.
Last week, Barclaycard provided the clearest illustration of the situation. Its provisions against bad debts for the first six months of 2005 rose 42% to £508m - helping to knock 17% off the bank's profits, which came in at £379m. The country's largest credit card company is also cutting credit limits and turning away one in two applicants in an effort to avoid further problems.
HSBC also helped to set the tone after describing Britain as the "most difficult credit market" in any of the 77 countries in which it does business.
The question now being asked by banking analysts and insolvency experts is whether the trend of bad debt will continue into the second half of the year.
Michael Lever, a banking analyst at CSFB who warned about rising bad debt levels at the start of the companies reporting season, said: "People who see the uptick in consumer provisions as not continuing are deluding themselves."
Analysts are taking comfort, however, from the fact that the problems are largely in credit cards and unsecured loans rather than mortgages. Card payments tend to be the first that customers miss when they run into trouble. But if unemployment were to start rising rapidly or small businesses began having difficulties, this sanguine approach to bad debts would probably change.
Simon Maughan, an analyst at Dresdner Kleinwort Wasserstein, said: "It's a question of affordability. It's not about unemployment."
While the banks' bad debt provisions, now known as impairment charges, are rising, so are the number of people becoming insolvent.
There is some suggestion this is because it has become easier for people to declare themselves bankrupt, but most experts believe that is only part of the picture.
Pat Boyden, a partner in the business recovery services practice at PricewaterhouseCoopers, notes that bankruptcy figures tend to be a lagging indicator, reflecting debts taken on 18 months ago.
His research also appears to contradict any suggestion that changes in circumstances, such as divorce or unemployment, caused the rise. He analysed 500 voluntary arrangements in July and found 372 people gave expenditure in excess of income as a response, while 58 cited marital break-up and 52 unemployment. Many bankers think last week's quarter-point cut in interest rates last week to 4.5% will ease the debt burden. But Mike Gerrard, a personal insolvency expert at Grant Thornton, wonders if it might be a double-edged sword. "While it will help people with mortgages, will it actually encourage people to take on more debt?"
http://money.guardian.co.uk/creditanddebt/debt/story/0,1456,1545508,00.html?gusrc=rss
"An eye for an eye leaves the whole world blind" - Mahatma Gandhi
0
Comments
-
What do they mean by Britain being 'the most difficult credit market'?0
-
Who knows. But any move to pass more information between the banks on credit worthiness is a good one.Baby Year 1: Oh dear...on the move
Lily contracted Strep B Meningitis Dec 2006 :eek: Now seemingly a normal little monster. :beer:
Love to my two angels that I will never forget.0 -
Not for us stoozers. What they mean is they will be fully reporting to the CRAs which not all of them currently do. That means smaller stooze pots.0
-
Reaper wrote:Not for us stoozers. What they mean is they will be fully reporting to the CRAs which not all of them currently do. That means smaller stooze pots.
Thank god. Stoozing is wrong!!!0 -
Stoozing per se is not wrong....its simply taking advantage of a loop hole that has been left open to consumers. I have chosen not to take advantage, but many others do.Baby Year 1: Oh dear...on the move
Lily contracted Strep B Meningitis Dec 2006 :eek: Now seemingly a normal little monster. :beer:
Love to my two angels that I will never forget.0 -
THE_ROCK84 wrote:Thank god. Stoozing is wrong!!!
Care to elaborate?"An eye for an eye leaves the whole world blind" - Mahatma Gandhi0 -
pin wrote:Care to elaborate?
You make money from a credit card company who's extending you credit? Hows the not wrong? What about people who wanna actually reduced there debt. All stoozers do is make it hard for everyone.
Ill get so glad when i see threads like "missed payment Promo Apr lost". Serve's you right.
haha!0 -
what about people who wanna actually reduced there debt. All stoozers do is make it hard for everyone.
Why is it alright to benefit from the system if you are in debt - but not alright if you are not in debt?
.0 -
i personally dont see any harm in someone stoozing as long as they are in control of it and dont come bleating about how hard done they are, cos the messed it up and cant any more 0% ccard deals........smile --- it makes people wonder what you are up to....
:cool:0 -
So, you think it is 'wrong' to make use of what the credit card companies choose to offer?THE_ROCK84 wrote:You make money from a credit card company who's extending you credit? Hows the not wrong? What about people who wanna actually reduced there debt. All stoozers do is make it hard for everyone.
Ill get so glad when i see threads like "missed payment Promo Apr lost". Serve's you right.
haha!
What about the effective 'interest free' period on credit cards when you make purchases - ie the time between making the purchase and paying the associated credit card liability? Do you see this as 'wrong'?
What about low rate offers, say 2.9%, as opposed to 0% offers? These are still below the base rate so you are making use of the card companies' funds, ie it is costing them to let you have money at this rate. Your post on another thread indicates that you seem to think this is OK:
Double-standards anybody? :rolleyes:THE_ROCK84 wrote:i applied for my barclaycard about 2 years ago and got the standard card (not intital - next up) In Jan after a couple of years ofgood practice including spending full and paying off they upped my limit from 2K to 6K and sent me a gold card.
sneekily i applied for a mastercard - split the limit and used both at 2.9% balance transfers.
thank you very much barclaycard!
have you got the new sytle gold card
?«««¤ Richie ¤»»»0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.7K Banking & Borrowing
- 253.8K Reduce Debt & Boost Income
- 454.6K Spending & Discounts
- 245.8K Work, Benefits & Business
- 601.8K Mortgages, Homes & Bills
- 177.7K Life & Family
- 259.7K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards