Credit card frenzy leads to debt society

When the creditors began phoning and knocking at their door, Angela Adams and her husband, Roy, ignored them at first.

They told their friends and family to ring a few times, hang up, then phone back so that the call would be answered. "It was like a password," Angela said. But then the phone was cut off.

Angela and Roy, from Ward End, Birmingham, owed around £60,000 in unsecured loans - a huge sum for them, but nationwide just a tiny part of a mountain of consumer debt which has grown by more than 60% in four years as credit cards proliferate and attitudes to debt change.

Their problems began five years ago when Roy lost his job with TNT only three weeks before Christmas. "We were living beyond our means," Angela said.

"My husband had quite a good job and so we bought lots of things on credit. When he lost the job, we couldn't afford to pay back the loans, we just buried our head in the sand and dug ourselves in deeper and deeper.

"We wrote letters to the creditors asking if they would accept lower payments, but they wouldn't accept that."

The couple were not alone in their difficulties. According to David Cairns, managing director of Debtcall, which operates a free telephone advice line, we are now living in a debt driven society.

He said last month broke all records when people borrowed more than £1bn on their credit cards. Part of the reason is the advent of more competitive rates which encourages people to use their cards more.

"They have also developed some neat little tricks such as encouraging long term clients to pay a low rate as long as they keep using their credit cards every month. Lenders have become involved in a feeding frenzy because there are so many credit cards and loans available."

The office of fair trading says that the total amount of consumer credit, including loans, has increased by more than 60% in four years and is now running at £159bn a year. The average debt per person on unsecured loans (those excluding mortgages) is £2,500. There has been a 37% increase in queries about debt at Citizens Advice Bureaux in the last two years.

By December 1999, the average debt per credit card was £717, a rise of 50% in four years. It is estimated that 31% of people have more than £250 owing on their credit cards.

Earlier this year the Department of Trade and Industry set up a debt task force in an attempt to combat the rising tide of credit card debt. Kim Howells, the minister for consumer affairs, said the problem had been building up for five years.

"This is partly caused by a fundamental cultural change," he said. "People seem to have evolved a different attitude and they are not as worried about being in debt.

"There has also been a change in the way that banks and other lenders market their products. People seem to be inundated with offers of credit cards now. The upside of this marketing is that it offers lots of financial products to people, but the downside is if they do not get it right then it can lead to trouble."

Malcolm Hurlston, chairman of the Consumer Credit Counselling Service, said there was a lot of social pressures on people around Christmas. "Credit cards are the most convenient way of spending and borrowing money in the short term because there is no arrangement fee. But because they are so convenient, it can leads to problems.

"The people most at risk are those on regular, but low, incomes who had generally been pillars of the community in terms of repayment. But because of the increasing social pressures, they are at risk of getting into debt."

The office of fair trading advises people to work out their monthly budget, to shop around for the best deal and not to buy on impulse. Customers should check the annual percentage rate on loans, to read the small print and always open post as credit card statements do not go away.

Angela and Roy Adams were lucky in that their family helped them out. Their credit rating remains in tatters and they face a string of county court judgments, but they are slowly paying off their debts.

"It is far too easy to go into a place and get money," Mrs Adams said. "Just the other day I got an offer of a credit card with a £1,000 limit. I just tore up the leaflet and put it in the bin.

"I am much more sensible with money now. If any of my friends get into debt, then I can advise them what to do."