Banks should help people in debt says report
A new report calls on major banks to do more for people asking for help with their debts.
Consumers struggling with their finances are sometime forced to take out loans from 'sub prime' and 'near prime' lenders, which can exacerbate their problem as these lenders charge much higher rates of interest on their loans.
The report, sponsored by the Economic and Social Research Council (ESRC), urges better communication between major lenders, which could help people slipping into extreme debt, a growing problem for some UK households.
The problem stems from the introduction of credit scoring around 20 years ago, which pushed financially less well off consumers into using 'sub-prime' lenders as they were unable to receive credit from mainstream banks.
Although sub-prime lenders help consumers examine whether they can afford credit, advice tends to be restricted to what is legally required by codes of practice, and doesn't outline the practical implications of debt, the report reveals.
However, near-prime lenders do have their uses, as they can help consumers build up a better credit rating by regularly meeting repayments, which then allows them to move to the main marketplace where loans are considerably cheaper.
Professor David Knights, who led the study, recommends a more "benevolent" corporate approach to credit.
"A more responsible way of behaving would be to seek to move borrowers up to the mainstream when they have reasonably long histories of not defaulting on their payments" he said. | 
