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Tories outline debt-busting plans

The Tories have outlined a six-point plan to tackle the growing personal debt “crisis” among people in the UK.

They want people to better understand financial matters, with banks and credit card companies lending more responsibly and being more transparent.

Shadow chancellor George Osborne also called for a seven-day “cooling off” period when store cards were acquired.

But the Lib Dems said the Tories had waited “too long” to consider the issue and were “jumping on the bandwagon”.

Speaking at a Tory-organised debt summit in London, Mr Osborne claimed British people owed £212bn, excluding mortgages, and nine people were declared bankrupt every hour.

He said he had six “robust and sensible proposals” to promote personal debt as “an issue of social responsibility”.

‘Robust and sensible’

Action to tackle “the low levels of financial literacy and awareness” was needed because “a well-informed public is better-placed to borrow responsibly”, he said.

1. Tackle financial illiteracy
2. “Cooling-off” period on store cards
3. Greater corporate responsibility
4. Clearer information on cost of debt
5. Look at advertising code for Individual Voluntary Agreements (IVAs)
6. More competition within “door-to-door” credit firms

“As well as promoting individual responsibility, it’s also important to encourage greater corporate responsibility,” he said, calling on greater sharing of data so banks had a “full financial picture” on customers before agreeing to lend them more money.

“We should not allow people to take out that tenth credit card without the credit card company knowing about the other nine.”

Mr Osborne said the plan for store cards would “give consumers the opportunity to think about whether other forms of credit, such as an overdraft extension or conventional loan, might be more appropriate”.

Lessons on money management for school pupils aged between 11 and 18 were needed, he said, claiming that only 53% of teenagers have been received any kind of teaching about how to organise their finances.

Legal agreements:

Mr Osborne also called for tighter restrictions to be placed on Individual Voluntary Agreements (IVAs).

These are legal contracts between lenders and borrowers to pay off a reduced amount of a debt, but can leave the consumer with a poor credit rating.

Earlier the British Bankers Association warned that people were being “ill-advised” about these.

“Frankly, suggesting that 90% of your debt will be written off is simply misleading,” , Eric Leenders, the executive director of the British Bankers Association, told BBC Radio 4’s Today programme.

“Many people are concerned about the sort of advice people are being given.”

Citizens’ Advice policy director Teresa Perchard said that while people needed to be better informed about financial matters, there was a “strong responsibility on lenders to look thoroughly at a person’s ability to pay before giving them credit”.

“It was under the Tories, with David Cameron in the Treasury, that personal bankruptcies and home repossessions hit their highest levels,” said Lib Dem treasury spokesman Vince Cable.

“It was under the Tories that the fall in the housing market led to negative equity across vast swathes of Britain.

“For too long, the Tories have been quiet on solutions to this major problem,” he added. “It is simply not credible for them to pipe up now.”

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