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Bankruptcy blamed on irresponsible lending
03/02/2006 18:03:00
An insolvency expert has blamed irresponsible lending practices for the rising number of bankruptcies in the UK, with misuse of credit the main culprit.
Reuters reports that a survey by Kingston University's Centre for Insolvency Law found that as a reason for bankruptcy, business failure was only one third as common as credit misuse.
"A credit agreement is a two-sided contract and therefore you could argue both the debtor and the bank are equally culpable," said John Tribe, author of the report, according to Reuters.
According to the British Bankers' Association, however, the number of bankruptcies is rising at a rate concurrent with the increasing number of people taking out credit, suggesting that the banks are being unfairly blamed for the situation.
Eric Lenders, the BBA's director for retail credit, said: "If you look at the macro picture, what you see is that we're a nation of responsible lenders as we are responsible borrowers. Yes, bank staff are incentivised on loans but they are also incentivised to minimise bad debts."
According to PriceWaterhouseCoopers' Precious Plastic 2005 report, UK personal debt reached £1 trillion in 2005. Of this figure, £820 billion is secured and £180 billion is unsecured 'personal lending'.
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