Calls for tighter lending rules after record insolvencies in 2006

| February 5, 2007 | 0 Comments

A report released last week by the UK government’s Insolvency Service that said the number of people declaring personal insolvency in 2006 probably exceeded 100,000, a new annual record, has spurred the Financial Ombudsman Scheme, a financial watchdog group, to call for UK banks to implement more stringent rules for issuing credit cards and granting loans. The most recent data, from the third quarter of 2006, showed that insolvencies rose in that period by 55 percent over the same quarter in 2005, and includes both individuals who declared bankruptcy and those who took out Individual Voluntary Arrangements (IVAs) to pay back part of what they owe to creditors.

The call for more stringent rules comes after a report that less than 10 percent of those being offered a credit card were asked for proof of income before being offered a card. Half were asked to disclose their income, but only a small portion of those were required to provide bank records proving that they make what they said they do.

The Insolvency Service report blamed the rise on insolvencies not only on more personal debt, which has doubled since the beginning of the decade, but also on the fact that more people are aware that they can declare insolvency and the fact that doing so carries less of a social stigma than it once did. Another factor contributing to the rise in insolvencies was said to be easier access to IVAs, in which their credit report is damaged but does not carry the risk of the individual losing their home, as in a bankruptcy.

Comments (0)

Trackback URL | Comments RSS Feed

There are no comments yet. Why not be the first to speak your mind.

Leave a Reply

Visited 1502 times, 4 so far today