Internet bank reports debt levels rise

WEDNESDAY, NOVEMBER 22, 2006

Egg has reported a 40 per cent rise in debtors resorting to debt management companies in the last three months.

Internet bank Egg has reported a 40 per cent rise in the number of debtors resorting to debt management companies over the last three months.

Levels of debt in its loans and credit card businesses have been worse than expected over the last third of this year, Egg reported.

Prudential, which owns Egg, reported similar levels of bad debt in relation to loans .

The company stated: "There has been a marked increase in consumers using individual voluntary arrangements, debt management companies and in some cases bankruptcy to alleviate their debt burden.

"These arrangements typically result in lower recoveries from customers than have historically been achieved view Egg's collection strategies."

Prudential only took control of Egg this year and expects the losses for the second half of the year to be approximately £39 million.

Meanwhile, debt management company Debt Free Direct has called a summit of banks and lenders to discuss the increasing popularity of IVAs, which wipe out the bulk of the money that a debtor owes.

IVAs have seen a massive upsurge in popularity in the past year or so, as the UK's personal debt problem spirals out of control.

Total consumer credit lending to individuals in August 2006 was £211.8 billion, according to debt charity Credit Action.