Desperate debtors need to take responsibility and give lenders some credit

Published on Sunday 9 July 2006 03:05

IT HAS been another bad week for the banks. Financial Ombudsman Walter Merricks reported a rise in complaints of about a third when he published his annual report.

However, this all needs to be kept in perspective. Given the millions of transactions every day which banks carry out on our behalf (and in most cases for free), the number of complaints are astonishingly tiny.

Of course banks are not perfect and make mistakes. Who doesn't?

But the evidence to support the "big bad banks" lobby with their accusations that the high-street institutions are "evil organisations" simply doesn't stack up when you look at the scale of disputed transactions.

Which brings me to last week's Panorama programme, 'The Money Trap', which has triggered an investigation into Royal Bank of Scotland's lending procedures by the Banking Code Standards Board.

The programme explored the cases of indebted borrowers of various banks, including two RBS customers who took their own lives.

Mark McDonald's body was found on a railway line last year. There was no suicide note but his backpack with him was stuffed full of statements showing he had amassed debts of 120,000 on two RBS credit cards and had remortgaged his home.

Similarly, Richard Cullen, a car mechanic, only earned 15,000 but clocked up debts of 135,000 with different banks. RBS had lent him 35,000 on different cards within the group, or so the programme alleged. He also killed himself.

Now these are sad stories, and our hearts will go out to their wives and children. But such programmes make me feel very uncomfortable.

As a nation we are highly indebted, and there are serious issues here which need exploring. But programmes sensationalising the subject and virtually alleging "the bank killed my husband" are unhelpful, not to say dangerous in the extreme.

I'm not a psychiatrist, but it seems to me to be a very perilous leap of association to conclude that because someone who kills themselves has debts, it was the debts which drove him or her to this desperate act.

I did attend countless suicide inquests as a cub reporter, and in every case it was deemed the deceased had taken their own lives while the balance of their mind was disturbed.

In other words, it was either mental illness or clinical depression that led to such desperate measures. It is perfectly possible to argue that rather than causing the suicide, the debts may have themselves been a symptom of an illness.

This is what I mean about serious issues that need exploring. Maybe the piling up of debts which individuals have no means of repaying is itself a form of illness, a cry for help or a symptom of another condition such as chronic depression. Maybe we need to find new ways of helping and advising such consumers, even new avenues of locating them.

There are many excellent sources of help and advice, such as Money Advice Scotland and the Citizens Advice Bureaux. They are extremely adept at getting debts written off or reduced. There are some consumer debts that you don't actually have to repay. Often there is little the bank can do to get the money back.

They may try to take you to court, and should they win, the worst that can happen is they slap a charge on your house. But often courts will throw out excessive charges.

Alternatively, you can declare yourself bankrupt and start all over again. There is even a bill going through parliament which will reduce the stigma of bankruptcy from three years in Scotland to just 12 months. Not exactly a big deal.

There is a second reason why I find programmes like Panorama unhelpful when it comes to educating the public about how to stay out of a financial mess. It seems to imply that we have no responsibility for our own financial affairs, and that whatever goes wrong is always the fault of the banks.

I am frequently shocked when I go to the shops on a Saturday to see people pouring out of department stores clutching six, eight or even a dozen bags, knowing they probably do this every weekend.

And while I have no intention of being an apologist for the banks, because they do need to keep their lending practices constantly under review, and are far from blame-free, I do have some sympathy with them over these cases.

Imagine what an outcry there would be if they had said: "No, we're not lending money to you because you are poor and we think you are inadequate. We only lend to rich, clever people."

So if the Panorama programme provokes some grown-up debate about what are serious issues, then I welcome it. But let's get away from hysterical accusations that do nothing to get to the heart of what are, given our record levels of borrowing, potentially grave matters.