'Financial industry regulators sleeping on the job', claims top charity

Leading charity Citizens Advice claims that lenders are acting irresponsibly by helping push more people into debt, as regulators sit aside and let them get on with it. However, the announcement comes at the same time as figures highlighting that over half of personal loan applications are now being refused, meaning that financial institutions are already tightening their purse strings without the intervention of regulators.

Almost 1.7 million people have sought advice and help on debt problems from Citizens Advice over the last 12 months, representing a huge 20% increase on the previous year. But, leading figures at the charity believe that the financial industry regulators are ‘sleeping on the job’ and urge them to take action over the amount of irresponsible lending. Teresa Perchard, director of public policy at the charity said: “We are continually coming across people in serious debt whose problems started when firms lent to them in an irresponsible manner in the first place. And while some regulators have acted on scandals such as the mis-selling of payment protection insurance, others seem to be asleep on the job.”

Perchard believes that the population’s confidence in the financial services industry is at an ‘all-time low’ following the problems at the Northern Rock and, even though not strictly a financial institution, the collapse of hamper firm Farepak. Even though Citizens Advice is putting a huge amount of effort into developing more services to help prevent debt it firmly believes that regulators should stand up and be counted.

Britons spent a record £511 billion during 2006 using debit, credit and store charge cards. But, according to the Bank of England the amount owed on credit cards has been steadily decreasing since the start of 2006 suggesting that more people are shifting to paying on debit cards. That news shows that the tide may be turning as more people prefer to pay with debit cards than incur more debt using credit cards. And the financial industry may now be self-regulating as the spectre of bad debt raises its ugly head following the collapse of the sub-prime market in the US.

Recent figures show that more than half of all personal loans applications are now being refused. Many of these are not just for bad credit loans as one would expect after the tightening of credit criteria but applications from people with good credit ratings as the banks clamp down on anything less than top quality lending.

Ironically, it could be the denial of such loans that forces even more people into more serious debt problems, as they may have relied on securing on a debt consolidation loan to solve their current financial woes.

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