Income Divide And Debt

[La_Dolce_Vita]

I found this to be an interesting column in the Independent about the debt that the poorer sections of society have built up.

 

http://www.independent.co.uk/opinion/comme...ng-1771885.html

[thebees]

I was thinking last night, if someone can walk into a shop and nick £14million worth of diamonds and they've already been sold, then insurance companies must be really really rich.....ahem, the debt people are in is fake, like all the money that is being created, its all rubbish

 

What will happen when it all goes wrong? it is on its way but the banks are spouting more and more bullshit, oh I dunno.

[Cambon]

It is quite interesting but the same as it has always been really. If you don't have the required credit score, you don't get an official loan, so a loan shark it is. Or, more realistically, DO WITHOUT!

 

As for credit agencies buying debt from banks etc. that is true, but not as cheaply as 6p per £, well not from a bank anyway.

 

The desicions one makes in the late teens to around thirty affects and directs their entire lives. Getting into serious unsecured debt in that time time frame is a very bad idea, but has been encouraged by the uk government for nearly 20 years. The most criminal is the student loan. Imagine going to college and then leaving with no job and five figures of debt! That is an obscene idea.

[manshimajin]

A bit of an 'unspeakable chasing after the uneatable' type of topic.

 

Fundamentally I agree with Cambon's comment - IMO the marketers have created a 'must have' society and there are people out there whose response to this is to get up to their necks in debt (or as it is called by the banks 'credit'). The best thing is WAIT until you've saved the money, or do without. I think it was one of the UK banks that had a credit lending 'strap line' of 'Why Wait?' - absolutely immoral and scandalous but perfectly OK to the FSA.

 

We have immoral institutions targeting stupid borrowers. As with most problems it is a two-sided issue. All that 0% interest for first 6 months nonsense should have been stamped on years ago.

 

This is why (as mentioned in the past) I would have liked to see the UKG passing taxpayers money into the banking system via the removal of some debt, instead of just giving it directly to the banks. That way the slate could have been wiped part-clean and the threats of reposession etc reduced.

 

It would have been seen by many as 'rewarding' careless borrowing and bad lending (and it would have been) - but putting it straight onto the balance sheets of the banks was rewarding irresponsible lending without any corresponding social benefit. Up until now banks do not seem to have used their taxpayer sourced refinancing to stimulate small and medium size business in order to get the economy in the UK moving to minimise unemployment and to promote economic recovery.

 

If you borrow what you can't afford to repay it is inevitable that people will look for their money back (unless you borrow millions/billions) - I see nothing wrong with this - with the one caveat that if a lender loans money in an irresponsible, high risk manner they should not automatically assume that they will be allowed to recover the costs of their stupidity and cupidity.

[Albert Tatlock]

The irony is, as I understand it, you can also build up a poor credit history by not borrowing anything or little i.e. little record of paying anything back. That approach penalises the frugal IMO.

 

'Credit scoring' is all a bit of a black art I think, in the hands of a few dodgy organisations who are now running a system that even markets your credit score to you to get you sucked in even more.

 

All needs far more stringent privacy, regulation and monitoring controls IMO - probably far more so than the banks etc. Over borrowing/lending is the nub of the problem for the credit crunch.

[manshimajin]

The irony is, as I understand it, you can also build up a poor credit history by not borrowing anything or little i.e. little record of paying anything back. That approach penalises the frugal IMO.

A friend told me yesterday that he had received a letter from his bank notifying him that they were withdrawing his credit card because he had not used it. Also a couple of years ago my brother received a letter from his bank saying that they were reducing his credit limit because he paid off his borrowings by direct debit every month.

 

The banks do not really want clients who fail to run up debt at 17.5% or whatever it is at present.

 

Beware also what is happening in the US Banking sector:

 

a customer overdrawn by as little as $6 could trigger a $35 penalty. If the customer does not realize they have a negative balance and continue spending, they could incur that fee as many as 10 times in a single day, for a total of $350. Failing to repay the overdraft within a few days results in an additional $35 penalty.

[Evil Goblin]

There is good reason for a bank to reduce a credit limit that's not being utilised or scrap an unused card (apart from the greed motive). If your card has a limit of £5k then they always need to be able to cover your spending up to that amount and thus always need to have sufficient interbank lines of credit available for that sum. The higher your limit the bigger the lines they need in place, even if they are never used. Unused lines cost money, the bigger the more costly. So, by getting rid of cards or reducing limits the bank saves cash and, probably important in the present climate, less need to try to have large interbank lines available.

[manshimajin]

There is good reason for a bank to reduce a credit limit that's not being utilised or scrap an unused card (apart from the greed motive). If your card has a limit of £5k then they always need to be able to cover your spending up to that amount and thus always need to have sufficient interbank lines of credit available for that sum. The higher your limit the bigger the lines they need in place, even if they are never used. Unused lines cost money, the bigger the more costly. So, by getting rid of cards or reducing limits the bank saves cash and, probably important in the present climate, less need to try to have large interbank lines available.

Quite right - and put another way - the bank wants you to take out unsecured debt so they can charge insane amounts of interest on the basis that they are taking 'risk'- having put themselves into that high risk situation by offering credit cards through mail shots.

 

It is not part of their plan that clients don't build up debt and/or pay money back before they can charge interest. Very unprofitable and rather unsporting of the client.

[bellyup]

A bit of an 'unspeakable chasing after the uneatable' type of topic.

 

Fundamentally I agree with Cambon's comment - IMO the marketers have created a 'must have' society and there are people out there whose response to this is to get up to their necks in debt (or as it is called by the banks 'credit'). The best thing is WAIT until you've saved the money, or do without.

 

I dunno thats what i did - and look where its got me.

I often think of the things i could have done but didnt because I was savings up.

 

 

 

I think it was one of the UK banks that had a credit lending 'strap line' of 'Why Wait?' - absolutely immoral and scandalous but perfectly OK to the FSA.

 

I agree

 

We have immoral institutions targeting stupid borrowers. As with most problems it is a two-sided issue. All that 0% interest for first 6 months nonsense should have been stamped on years ago.

 

Immoral institutions target people who save too. I have never had a credit card.

 

 

If you borrow what you can't afford to repay it is inevitable that people will look for their money back (unless you borrow millions/billions) - I see nothing wrong with this - with the one caveat that if a lender loans money in an irresponsible, high risk manner they should not automatically assume that they will be allowed to recover the costs of their stupidity and cupidity.

 

But the cost is not borne by the irresponsible lender ( in the case of a bank) but by the innocent depositors.

[bellyup]

I found this to be an interesting column in the Independent about the debt that the poorer sections of society have built up.

 

http://www.independent.co.uk/opinion/comme...ng-1771885.html

 

This is a horrifying scenario.

 

I think that children should be given lessons in avoiding the pitfalls of debt from early on.

I have never been in debt as i was brought up to 'never a borrower nor a lender be'

However has it done me any good ?

At this present moment in time none at all.

A life time of savings gone in a moment.

 

The gross arrogance of MPs giving themselves immoral expenses at the same time as devastating ordinary savers ( obviously my life savings would be less than chicken feed to these b*****ds) makes me think they really all do come from a parallel world.

 

What can people look forward to ?

 

Houses are unaffordable for many .

Young people are strangled by impossible mortgages.

So they think what the hell we may as well get some pleasure out of something.

 

There has to be a fundamental change for the better somehow.

[manshimajin]

Bellyup, I do empathise with your situation. It is pretty grim to find that when you deposit funds with a long standing UK institution they have sold on their business to an Icelandic banks at a time when the Icelandic banking industry was starting to get overblown and in trouble etc...

 

My comments here though are very much about bank lending behaviour and culture, particularly in the area of unsecured loans. I remember in the Thatcher era when I used to visit the UK on business from Australia how in particular the younger staff in the office were being targeted by banks to take out credit cards with (what was then) massive lines of credit immediately available. Lots and lots of unsolicited mail with pictures of Spanish houses and supercars (never an old banger!). Of course the market crashed but not as badly as now. But the banks did not learn their lesson. They simply started doing exactly the same when the upswing came - even to the extent of sending unsolicited 'credit card cheques' to people who should have been classified as 'high risk' borrowers.

 

I am a capitalist but I am not a supporter of out and out bonus-earning financial stupidity which is where the banks got to pre-crash.

 

Frankly I think the only way some bankers will ever learn is if they are denied the right to reclaim debt in cases where that debt has not been lent without appropriate checks of the client risk involved. Which would mean that an awful lot of their unsecured credit lending would not be recoverable. It might also be necessary to make it illegal to register the names of any such debtor with credit rating agencies.

 

IMO people who lost track of themselves in their borrowings were stupid - but the banks who did the lending were supposed to be staffed with expert lending staff who should have known how to assess risk and when to say 'enough is enough' to a client. It is an example of an appalling culture - driven by targets not by reality.