Wednesday, Sep 27, 2006

Bashing the Banks

MoneySavingExpert: Debt suicide. The banks fault or the deceased?

Martin Lewis aka MoneySaving Expert has a bash at the Banks and their lending practises in his blog.
I actually quite like this bloke's view that we live in a "Adversarial Consumer Society".

Posted by denzil @ 12:33 PM (1941 views)
Add Comment
Report Article

25 Comments

1. talking rot said...

A sad case - my feels go towards his family. BUT did anyone force Mr Cullen to buy these things on credit? Errr, probably no. It was his decision. What this sorry episode demonstrates is the paltry and pathetic state of education in the UK. Children are taught to assess media output and how tough conditions are in Africa. But looking at potential employees, they are not taught how to interact as part of a team, how to cook and lookafter themselves (like shaving), or even how to balance their outoings against income.

It is interesting that after the best part of 10 years of "Education, Education, Education" I am instigating a basic written skills training programme for GRADUATES. I also note that the average reading age for the 50% of the Army's Infantry is 7, (Yes, that is SEVEN), years old. Clearly it is in the interests of New Liebour to have an illerate Army so the soldiers can not read how poorly their circumstances are.

Wednesday, September 27, 2006 12:48PM Report Comment
 

2. talking rot said...

Having ranted about the state of written English in my Graduate employees, I am embarrassed over my last post. Clearly "feels" should be "feelings" - apologises for all the mistooks! I am having to rush today.

Wednesday, September 27, 2006 12:51PM Report Comment
 

3. Sovietuk said...

"Education, Education, Education", "Deception, Deception, Deception".

Wednesday, September 27, 2006 01:00PM Report Comment
 

4. sovietuk said...

"Education, Education, Education", "Deception, Deception, Deception".

Wednesday, September 27, 2006 01:01PM Report Comment
 

5. denzil said...

Rot said:)
>What this sorry episode demonstrates is the paltry and pathetic state of education in the UK.

I agree but it also indicates the pathetically poor lending criteria practised by the banks. I remember the hoops I jumped through 15 years or so years ago to borrow a few quid. I remember being turned to by the Midland Bank for a loan to buy a bicycle to get to work on. I had a full time job and no debt and lived at home. The decision still staggers me today. We live in a culture of "must have" and "have it now" which has been brought about through easy credit. When easy credit comes to end either through credit tightening or borrowers being maxed out there is going to be one almighty social crunch which I believe will see crime rates rise significantly.

FWIW. The bicycle that I wanted finally came my way. I walked to work, an hour and 20 minutes each way for about three months and saved every penny. Looking back the appreciation I felt for that bike still gives me a feeling of warm satisfaction as I type in this blog.

Wednesday, September 27, 2006 01:14PM Report Comment
 

6. paul said...

The credit reference/reporting industry has been a mess for a long time.

There is currently only a 3 in 5 chance that any particular credit reference agency will actually have up-to-date, accurate and relevant information about you, mostly because they don't share information because well, that would be giving away company secrets!

I challenged one of them (a big one too) once under the Data Protection Act. And I won. I recommend everyone does the same to expose the farce that they represent.

Wednesday, September 27, 2006 01:39PM Report Comment
 

7. monty said...

"Therefore to be fair to RBS, it couldn’t have known the full extent of the indebtedness with the other banks - where there was another 105,000 debt outstanding."

Despite Paul's comments above on the state of the credit check industry, I still struggle to believe this statement. What about Equifax or CreditExpert? It cost me 12.95 (on credit card) to find out exactly what the banks know about my credit worthiness. The data was accurate up to the previous month and included the balances on my Vodafone account and both credit cards!! Scary stuff but highly recommended. So how on earth does this guy run up 140k without anyone noticing?

The banks are either guilty of irresponsible lending, stupidity or both. Ultimate responsibility, however, still lies with the individual.

Wednesday, September 27, 2006 02:39PM Report Comment
 

8. Blueschick said...

I'm totally with you on this one sovietuk...

Wednesday, September 27, 2006 03:15PM Report Comment
 

9. inbreda said...

The trouble is that it wasn't the same bank that lent him the money on 4 cards - it was 4 subsids of the same bank. Therefore when each of them did a creditsearch, the information that came back will not have told them that the individual was already highly in debt to the SAME mother company, it would have said that he owed a lot of money (presumably) to competitors. It also would have said that he was managing repayments well. If anything the credit report would have made each of the four subsid companies feel like the individual was a good creditrisk and that they should have a piece of the action.

The real downfall is that each of the subsid companies did not know what the other was doing. However, complications can occur here through data protection laws - one subsid may not be allowed to release customer details even to another subsid of the same company.

Frankly the law is a mess. The easiest thing to do would be to merge all the credit reference companies, make them state owned, make it illegal to lend money without a credit check, and then introduce laws on maximum borrowing and various other procedures.

And it's not going to happen.

Wednesday, September 27, 2006 04:14PM Report Comment
 

10. The Capitalist said...

It makes my blood boil hearing them speak of their achievements these last 10 long years...walking down a busy high street on a Saturday is a depressing experience: an overweight, scruffy, foul-mouthed, tatooed bunch of losers the British people are!

Wednesday, September 27, 2006 04:16PM Report Comment
 

11. Ticktock said...

Ref- Ultimate responsibility, however, still lies with the individual.

Up to a point maybe, but given that the world is full of irresponsible people, poorly educated people, gamblers, chancers, and dreamers, surely it is the Banks job to decide exactly who to lend to, and how much debt individuals can afford?

Credit adverts invite ALL people to apply, not just those with a good understanding of finance, and apply they do.

Moreover, Banks are meant to be experts in assessing risk,where as most consumers are not, and never claimed to be.



Wednesday, September 27, 2006 04:18PM Report Comment
 

12. waitingfor hpc said...

well what the hell lets have a law for everything - what about how many bank accounts we have. What about common sense - where has that gone - and personal responsibility - you stand or fall by your actions, not expect the state to bail you out.

Wednesday, September 27, 2006 04:42PM Report Comment
 

13. Monty said...

Fair comment hpc. According to the Guardian, Richard Cullen aquired 22 credit cards between 1998 and 2004, all of which (I maintain) should have shown up on his credit record. It doesn't make the blindest bit of difference whether the four subsids could view each other's data or not - they could still see his overall rating and the amount of debt owing to each lender. I would add that this isn't the first time that the Data Protection Act has been used as a flimsy and pathetic excuse - Ian Huntley's records check leaps to mind. The only possible excuse I would give RBS is if it (via the infamous four subsids) was one of the very first lenders. As this is a debt accumulation problem, the incompetence (or guilt) is heaped upon the last card issuer of 2004 and works its way back.

I don't know how the DPA treats credit agencies but there is clearly enough legislation in place already to allow them to function. State control is not the answer. The financial markets trust the ratings agencies like Moody's and S&P to give accurate information on the credit worthiness of businesses and entire countries. The same should work for individuals.

If the state cannot be trusted to educate people (a reasonably simple task), how on earth can it be trusted to look after our financial well being? It cannot.

Wednesday, September 27, 2006 05:08PM Report Comment
 

14. monty said...

Fair comment hpc. According to the Guardian, Richard Cullen aquired 22 credit cards between 1998 and 2004, all of which (I maintain) should have shown up on his credit record. It doesn't make the blindest bit of difference whether the four subsids could view each other's data or not - they could still see his overall rating and the amount of debt owing to each lender. I would add that this isn't the first time that the Data Protection Act has been used as a flimsy and pathetic excuse - Ian Huntley's records check leaps to mind. The only possible excuse I would give RBS is if it (via the infamous four subsids) was one of the very first lenders. As this is a debt accumulation problem, the incompetence (or guilt) is heaped upon the last card issuer of 2004 and works its way back.

I don't know how the DPA treats credit agencies but there is clearly enough legislation in place already to allow them to function. State control is not the answer. The financial markets trust the ratings agencies like Moody's and S&P to give accurate information on the credit worthiness of businesses and entire countries. The same should work for individuals.

If the state cannot be trusted to educate people (a reasonably simple task), how on earth can it be trusted to look after our financial well being? It cannot.

Wednesday, September 27, 2006 05:08PM Report Comment
 

15. Ticktock said...

ref - you stand or fall by your actions, not expect the state to bail you out.

A good message for the banks perhaps?

Wednesday, September 27, 2006 05:13PM Report Comment
 

16. Chillilizard said...

Why do we need credit cards anyway? Originally it may have been a convenient method to buy stuff in lieu of cash. But these days we have debit cards.

Personally, i have one credit card that i use to buy books on amazon etc. I think the limit is 1800, but i rarely use it to go above 100 quid. I keep a healthy balance in my current account, and i never go into overdraft. I got caught out one or twice and HSBC charged me 50 quid in penalties each time. So keeping a healthy balance in there is probably the soundest investment i have on the go at the moment. (no risk and returning a massive return)

I should add that i get 71p interest per month on my balance in my current account which is a complete ripoff. Something like 0.2 % interest. I really don't trust these bankers anymore.




Wednesday, September 27, 2006 06:08PM Report Comment
 

17. paul said...

Monty, it works like this.

Credit reference agencies are treated by the ICO (the folks who administer the DPA) with kid gloves. They are actually very chummy and on first-name terms. And the ICO is very lenient with them. Consequently whenever there's a likely breach of the Act by credit reference agencies, the ICO all but turns a blind eye. The problem is that this does not encourage the credit reporting industry to get its house in order.

Credit reference agencies have an obligation (albeit a loosely defined obligation) to share information under principle 4 of the Act.

To complicate it further (and to detail what I suspect happened in this case), high street banks often don't give out positive lending data (called "white data") to credit reference agencies. Why? Because then their customers could take their top notch credit records and go to other banks. So positive credit data is actually deliberately withheld to prevent you exercising your right to change lender. The CRAs don't require that banks give them the information either because ... you guessed it the ICO won't force them to under the DPA.

So I strongly suspect that one business arm of the bank did not disclose details of their credit agreements with the customer because they feared that the customer could take their borrowing habits elsewhere.

What is needed is a legal obligation for banks to share ALL data - good or bad - with the CRAs, and a further legal obligation for all CRAs to share ALL data. Otherwise the system is just a mess, and banks can't rely on it when making credit decisions, so they use guesswork, or ask the customer (who - of course - can always lie).

Scandalous? Yes. Surprising? Not really. This practice of witholding "white data" is completely illegal in the US under the Fair Credit Reporting Act 2000 - a piece of legislation that (thanks to UK banks' pressure) the UK government is not at all keen to adopt. Consequently, this incident could never have taken place in the US under their current laws.

Wednesday, September 27, 2006 06:34PM Report Comment
 

18. Such_short_memories said...

The lending (or borrowing) of money is a transaction. Both parties involved in the transaction agree to the terms beforehand and therefore are equally responsible for creating it.

Wednesday, September 27, 2006 08:31PM Report Comment
 

19. indiablue19 said...

paul....
What you say about US credit law is a fact. When you sit down to work out any credit agreemnt, and in particular a mortgage, the Bank or Company lending to you will already have a computer printed sheet, not only listing every debt you currently have, how old it is, and how your payments have been taken care of; but most likely listing every debt you have EVER had and how it was handled. After seven years, any really bad information is generally ignored if you've cleaned up your payment history.

This is so critical that, if Experion, for example, should get wrong information on you, it is urgent for you to get to them and clear up the matter. I was once refused for credit because a person of the same name had perpetrated some insurance scam in another State. I had to prove that I was not this other person. It wasn't difficult to do, a mere matter of comparing social security numbers, but it was essential to take care of immediately and I was glad to have found out. It is not impossible, even so, to get into a stupid amount of debt in the USA, particularly for people who make a lot of money and then suddenly lose their employment. This is why "credit protection" insurance has become so popular over there -- just in case.

Wednesday, September 27, 2006 09:04PM Report Comment
 

20. inbreda said...

I think what some people are missing is that the guys credit report was very positive. Yes he was up to his *&$! in debt, but he wasn't necessarily missing payments. That is the exact definition of a good customer - someone who is not missing payments, but doesn't repay the balance in full. Why would a bank be interested in giving a credit card to someone who pays the balance off in full each month? They're not a charity!

And as for the ICO being chummy with credit reference agencies - what do you expect? All the credit reference agencies do is collate data, to allow the banks to make a decision on whether to lend. The banks will have looked at this customer as someone worth having a slice of. Each of the four subsids probably didn't realise that they effectively already had a slice of this customer. Had they known that, they may well have not lent any more. In the absence of that info, of course they will want to wade in. After all, if the customer defaults, they could default at any or all of the banks, so in terms of banks competitiveness, it's always likely to be profitable to lend to someone like this individual.

There is such a thing as a credit marketing conundrum. The people who respond to banks marketing - who want credit - are generally the people who are riskiest and you wouldn't want to lend to. The entire lending industry is like a big tightrope walk. People who need money are a risk to lend to. The idea is to lend as much as possible and lose as little as possible. You are able to have more defaults so long as you are making more money from those who don't default (i.e. higher APR).

However, what we are seeing now is a realisation by the banks that defaults are higher than they expected - that's why they are raising APRs. This will make more people default and so on until it spirals out of control.

IVA and Repo figures are the ones to watch

Thursday, September 28, 2006 10:13AM Report Comment
 

21. Fair_deal said...

There is an ancient saying - Interest is more dear than the capital. I suppose the same psycology works for the bank people. They encourage the customer to transfer all the existing debts to their card ( greed of getting more interest ) by making confusing and faulty presentations. For example the real warning or danger sings are somewhere at the bottom of a long page in a very small font which normally, 90% of us fail to read.
Either this person was very naive (trusting the banks) or ignorant. Do people really think sucide is th eultimate bail them out of debt ?

Thursday, September 28, 2006 10:17AM Report Comment
 

22. denzil said...

>>IVA and Repo figures are the ones to watch

And what will happen then is the banks will try to recoup their loss by cutting savings rates. Saving and investment are a thing of the past for banks as they have realised there is big bucks in debt at least that is until the IVA's and repos come in.

Thursday, September 28, 2006 12:37PM Report Comment
 

23. inbreda said...

There has been no money in savings while the cash and carry trade was on better terms than the bank of england.

Japan is ending this liquidity, and before long there will be more money in savings.

Thursday, September 28, 2006 03:20PM Report Comment
 

24. indiablue19 said...

I hope that Inbreda is correct and that having substantial savings begins to make a whit of difference. Savers have been abused long enough. I know many young people who honestly think debt is the only way if you're smart and that savers are way behind the times. Their motto is to borrow while the borrowing is good and write off the debt when everything crashes. What a morality.

Friday, September 29, 2006 12:00AM Report Comment
 

25. Squirrell said...

surely bankruptcy is a better option than suicide. And who are you hurting by going bankrupt? Unscrupulous lenders, oh no ... my heart bleeds.

Friday, September 29, 2006 12:10AM Report Comment
 

Add comment

  • If you do not have an admin password leave the password field blank.
  • If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines
Username  
Admin Password
Email Address
Comments

Main Blog | Archive | Add Article | Blog Policies