Are lenders irresponsible?

[GlasgowGirl]

I know that irresponsible lending has been discussed a lot in the media since all the sub-prime stuff happened, but do you think it is still happening? I ask because I have been astonished by the behaviour of one major credit company (oh all right, it's Black Horse). My partner and I both bought bikes a couple of years ago, and took advantage of the interest-free credit option to spread out the payments. This involved entering into a credit agreement with Black Horse.

Since we repaid the loans, they have deluged us both with regular offers of silly amounts of credit, available instantly - ranging between £2,000 - £7,000. I got fed up and asked them to take my name off their mailing list a while ago, but my partner is still getting frequent mailshots from them, regardless of the "credit crunch". Of course there's no guarantee that he would actually get the credit, if he tried to apply for it, but still, wouldn't you expect them to be reining things in a bit?

[Tony]

I suppose they still need to make money and getting people into debt is one of their main income streams. I heard that some credit cards are now offering normal terms on cash withdrawals using your credit card i.e. you don't have to pay interest as soon as you withdraw. One of my brothers worked for a high street bank for a very short while - he simply got fed up with the pressure to sell loans with a total disregard for circumstances.

I was also shocked to learn from someone who works in a call centre about the number of people who don't realise they have to pay back money after the interest free period expires. Draw what conclusions you like from that, but it strikes me that is very easy to underestimate the level of consumer protection required to cover everybody and to stop the most vulnerable getting fleeced.

[Paul Carcone]

I agree with Tony that it is still important for these companies to still be making money and GlasgowGirl was probably seen as a "good bet" by the credit card company after successfully discharging the obligation.

I would expect that almopst everyone who has a good credit rating wil be under marketing pressure to take out further credit as lending institutions narrow their lending criteria.

As for those people mentioned in Tony's post who believe that they don't have to pay anything back after an interest free period...I don;t think any amount of warnings would preotect these people from themselves...There are certain things that should be taken as a "given" and this should be one of them. We don't want to get to the point where we are like the US in that the legislature successfully prosecuted a microwave manufacturer because the instructions did not specifically state that animals weren;t to be dried within (and some morom blew up their dog doing just that!).

[GlasgowGirl]

Certainly some people do seem to sign up for credit without giving the consequences any thought. I suppose the issue is, how do you protect genuinely vulnerable people who might be at risk of being ripped off, as Tony says, without getting to a situation like the one Paul describes where no-one is expected to take any personal responsibility?

[gabriel]

I reckon just about every financial institution indulged in irresponsible lending during the years leading up to the when the credit crunch hit. Call it pressure for profit, call it greed, call it ignorance... whatever. Most lenders are only truly interested in themselves and not the customer. Unfortunately, that's the way our capitalist society seems to function IMO.

As for these same lenders continuing to be so free and easy about putting temptation under consumers' noses, I suppose as long as they remain in business they will carry on taking the same risks and relying on people to take responsibility for themselves.

[Paul Carcone]

Of course lenders are trying to get more customers...that's the most basic, simple law of business.

Also, the reason that salary multiples have gone so much higher recently is primarily because the market has demanded it. Rising commodity prices and the British population's avaricious greed and compulsion to have more "stuff" has created a demand for credit that a lended will be delighted to fill.

If capitalism doesn't appeal...then try living in a commune or moving to Russia and see how the alternative has worked out there.

[gabriel]

Market forces are always ultimately the driving factor, I agree. But many other mitigating circumstances played their part in the lending getting out of hand. Greed and fear, as the saying goes, are the things that move markets, but these are exacerbated by government incompetence and short-termism.