Soaring debt needs tighter credit checks

Tomorrow, the Government will announce the biggest shake-up in the regulation of credit in 30 years. Timed to coincide with the Christmas spending binge, it will aim to tackle a series of problems and abuses in the credit industry.

The Government has promised to put a stop to irresponsible lending, but charities providing debt advice are awaiting details on how this will be achieved. When the Consumer Credit Counselling Service launched its advice service 10 years ago the main reason for borrowers seeking help was because of a change in personal circumstances. Now, says the CCCS, more than half its clients are in trouble because they have overspent on credit. On average they have 10 creditors. As a CCCS spokeswoman says, where clients have more than 10 creditors, how responsible was it for lenders 11 onwards to advance more credit.

Borrowing habits are changing. There are problems for people on very low incomes, but many of today's credit victims are on average or higher incomes. Their problem is not lengthy periods of unemployment, quite the oppo site. After a long period of relative economic prosperity, millions of borrowers have incomes to support large levels of debt. Forcing lenders to be upfront about the catches in the terms of credit cards and loans - among the proposals expected tomorrow - is sensible, but will not get to the root of the problem.

Tomorrow's white paper must include proposals for ensuring that lenders consider a borrower's existing lines of credit before offering more. This will mean sharing of information about payment histories.

Norwich Union is the latest financial institution to announce it is exporting thousands of jobs to countries where labour is cheaper than in the UK. NU's management might care to read the account by Jill Insley on page 3 of the difficulties she had when she tried to sort out fraudulent transactions on a credit card.

The India-based member of staff she first spoke to quickly floundered because he did not have the information he needed to help. This is not an issue of race; financial institutions must ensure that the staff they use abroad have the training and resources they need to provide a seamless service. But perhaps we are asking a lot of an industry not generally noted for levels of service dispensed by UK offices, much less those based thousands of miles away.