Cost of easy credit: a 70% rise in arrears

The amount of debt being chased by Britain's bailiffs has soared by 70% over the past two years to a record £5bn in fresh evidence of Britain's growing debt crisis.

A report by Leeds University Business School published today blames the increase almost entirely on an alarming rise in the number of people falling behind on credit card and personal loan payments.

It found that the typical household falling into difficulty owes £25,000, spread across an average of 15 different lenders, compared with £10,000 three years ago. The report, compiled for the Credit Services Association, which represents the UK's debt collection industry, also uncovered a surge in individuals declaring themselves bankrupt, particularly in Scotland.

In total, 20 million cases have been passed to debt collectors over the past year, the report said, but because of what is called multiple delinquency, precise figures on the number of individuals in debt are difficult to establish.

Spending sprees lie behind the jump in debt as much as traditional causes such as divorce and unemployment, according to the report, and borrowers are treating debt with less concern and feel less social stigma about the problem.

It estimated that Britain's borrowers have fallen behind by one to two months on debt payments totalling £60bn, equal to more than £2,000 for every household in Britain.

Critics blame the surge in debt on aggressive marketing tactics by lenders, with 1,500 different credit cards now available in the UK. The total amount of credit card lending has doubled in the past four years.

Vince Cable, the Liberal Democrat Treasury spokesman, said the government must crack down on loan sharks. "It is clear to me the aggressive promotion of debt is behind this rise.

"Unsolicited mailshots ad vertising credit should come with a health warning much like cigarettes, saying 'This product can seriously damage your wealth'."

He added that complaints about utility companies and local councils resorting to bailiffs on "the slimmest of pretexts" have become a com mon feature in MPs' postbags.

The Leeds University report confirmed that lenders are moving far more swiftly to punish delinquent borrowers, with cases passed to bailiffs when an individual is only two months behind on payments.

"The emphasis in recent years has switched to being more aggressive in dealing with early delinquency. Customers are contacted earlier and more frequently in very early stage delinquency and late payment charges are threatened and imposed," it said.

It also noted a worrying trend towards debt sale in which lenders that have been unable to recover debts sell on the names for as little as 1% of their total value to external agencies. These agencies can then keep any cash they make from continuing to pursue the debt, making a profit if they can extract more than 1p in the pound from severely delinquent borrowers.

The poorest households are increasingly turning to doorstep lenders charging high levels of interest as a means of fending off spiralling debts elsewhere. The campaign group Debt on our Doorstep said yesterday that rates charged can be as high as 177%, with almost anyone able to set up as a lender provided they have an easily-obtainable consumer credit licence. The National Consumer Council said yesterday it is considering an urgent complaint to the Office of Fair Trading.

The OFT recently acted to toughen up the policing of debt management companies which promise to sort out debt problems by amalgamating an individual's loans, credit cards and other debts into one monthly payment. But they usually do this by merely spreading the debt repayment over many more years.

Growing concern about the easy availability of credit comes ahead of the Department of Trade and Industry's white paper on consumer credit, to be published this month. It is expected to call for a root-and-branch overhaul of the 1974 Consumer Credit Act, which governs any loan below £25,000.

But there are few signs yet in Britain's high streets that debt-burdened households are tightening their belts. Figures from the British Retail Consortium yesterday showed sales surging ahead at an annualised rate of 5.5%.