Debt Summit Announced

FRIDAY, DECEMBER 08, 2006

“Banks are calling for a halt to irresponsible selling of debt relief products, chief executive of the British Bankers' Association (BBA),” Ian Mullen said today after he issued invitations to various debt “write-off” companies and banks to discuss the current state of the financial services industry. According to Mullen, the key issues which will be discussed are the manner in which debt management products are promoted, the advice that consumers receive when they call for help, and the relative costs of different management solutions

Mr Mullen said:
"Banks lend responsibly and assess a customer's ability to make repayments before lending to them. Sadly for a small proportion of people, personal problems can get in the way and some find themselves in financial difficulties. The answer, in the first instance, should always be to contact your lender or to seek independent advice. However, individual voluntary arrangements can be appropriate in some cases, but we are concerned that young, inexperienced and vulnerable people are being targeted by adverts and mail shots which lead them to believe they will be able to walk away from their responsibilities.

The results for their long term financial position could be disastrous as they may find in years to come that they can't get a mortgage or raise a loan to start a business. This would not just be bad news for them but bad news for the whole of the UK economy. Accordingly I have invited the companies involved in debt resolutions to meet the banks to discuss a way forward."

One of the major problems is that banks are not clear about the terms of agreement and will approve just about anybody. Recent market research has shows that “eight out of ten firms did not provide adequate information about their service, costs and the consequences of entering into different arrangements and nine out of ten firms failed to clearly explain available options and their consequences - most only focused on the advantages of an individual voluntary arrangement (IVA) .”