Debt: It certainly isn’t honourable
Ever noticed that those shiny pieces of plastic the lovely banksters hand you is called a CREDIT CARD and not a DEBT CARD, making it sound like it’s some kind of benefit for you to have one?
A quick look in the dictionary under the word CREDIT results in an association with honour, pride, trustworthiness, credibility and is advertised as some kind of badge of honour, as the Bank has entrusted you with the confidence in your ability and intention to pay and therefore they will loan you funds.
How nice of those lovely people to entrust you with their credit.
Now a quick look in the dictionary under the word DEBT results in an association with an obligation, liability, something that is owed or that one is bound to pay or perform for another.
These words are clearly quite different to each other, so how can they be interchanged so easily?
I believe the poor labelling of these products have contributed to their proliferation in the UK to such an extent that outstanding consumer DEBT was £160.4 billion at the end of June 2014. Per household, that’s an average consumer DEBT of £6,071.
These figures are even worse as an average is dramatically altered by the financially responsible in the UK.
Total shiny credit card DEBT in June 2014 was £56.9bn. Per household this is £2,154.
With the average interest rate on credit cards at 17.37%, it would cost £38 a month to clear this debt in 10 years! – Now where is the honour in that credit?
I have no idea where the FCA and its predecessors have been in all of this, but surely there is a case for at least these things being marketed in an honest way by correctly labeling their ‘services’. Here is my suggestion for some honest product labelling.
The products of DEBT that (INSERT BANK) can offer:
Mortgage – Long term secured DEBT
Personal Loan – Medium term unsecured DEBT
Credit Card – Open Ended DEBT Card with very high interest
Overdraft – Surprise DEBT balance with very high interest
Payday Lending – USURY (Should be illegal)
It would also be nice for the debt agreements to have a very clear bold message before the signature, rather than the numerous pages of gobbledegook small print.
Perhaps the following would be helpful.
(INSERT BANK NAME) WILL BE LENDING YOU £X,XXX AT AN INTEREST RATE OF XX% PER ANNUM.
YOU WILL THEN BE IN DEBT TO (INSERT BANK NAME).
YOU WILL HAVE AN OBLIGATION TO REPAY £X,XXX OVER A TOTAL OF X YEARS THROUGH YOUR FUTURE HARD WORK, LABOR AND EARNINGS.
Clearly, the marketing departments wouldn’t be very impressed with this approach, but it’s in keeping with the FCA’s apparent goals of being ‘clear, fair and not misleading’ or ‘treating customers fairly’.
Hopefully it will reduce the amount of people who just see the gloss and end up with the dross. If you take a look at the figures outlined above, it’s clear that we need to reduce and restrict the amount of household debt.
Every day, on average, 60 people are being declared bankrupt, 77 debt relief orders are being granted and 160 Individual Voluntary Arrangements are being entered into. You have to wonder where the honour and pride is in that credit.