ANALYSIS: Creditors' language is foxing the consumer

To what extent is financial services marketing to blame for soaring UK consumer debt? Ben Bold investigates.

The UK is a nation in debt. Collectively, consumers owe the financial services industry £930bn - twice the government's annual expenditure.

The UK is well ahead of the European average and it is getting worse.

So why is this country so obsessed with borrowing? Why is credit such an attractive proposition and to what extent is financial services marketing to blame for the problem?

The Citizens Advice Bureau (CAB) is unequivocal. "Financial services marketing contributes to poor borrowing practices, which leads to debt," says a spokesman.

There is an onus on consumers to borrow responsibly, but critics say a proportion of poor borrowing practice stems from a lack of understanding. Egg positions itself as a consumer champion and says the industry has a duty to empower consumers.

"Financial services marketers have a responsibility to educate consumers," says UK marketing director Jerry Toher. "Finance products are complicated and providers sometimes use this complexity for their own gain."

Critics argue that with line after line of copy trumpeting super-low interest rates and periods of interest-free credit, consumers are often lulled into a false sense of security.

One high-profile example of the confusion inherent in financial services marketing verged on farce. Barclays Bank chief executive Matthew Barrett was one of several UK banking chiefs grilled by a Treasury Select Committee on credit in October. He was asked to calculate the interest a consumer would pay on transferring to Barclaycard's '0% forever' card. "Nothing," was Barrett's response. It was the wrong answer. Barclays agreed to withdraw all ads and marketing promoting the card after a claim by the Office of Fair Trading that it was "highly misleading".

Some claim the language used by financial services firms is at the core of the nation's debt problem. The Insolvency Helpline was established in 1997 to look at the need for debt and credit and provide consumer advice. "What we're particularly blaming (high levels of debt on) is direct response advertising," says a spokesman. "A consumer can phone straight away and get a credit card. People can't resist."

The body is currently making a recommendation to the Treasury and Bank of England to limit the amount of credit on the basis of income. It is also trialling a system with high-street banks, whereby anyone applying for credit of more than £10,000 must speak to a Helpline representative, who will let them know their responsibilities.

"Much of the marketing emphasises the ease and speed of borrowing, rather than the commitment and responsibility needed to pay the money back," argues the CAB.

Since rebranding last year, high-street bank Abbey says it is 'turning banking on its head'. This lofty claim refers to a mission to market its products in a 'transparent' way. Customer director Angus Porter says: "It's a principle for us. Financial services ought to be simple and straightforward." Toher agrees: "It is in both parties' interests that products are fully understood."

A nervousness clearly exists in the financial services industry over the role of marketing practices in the nation's debt problems; many companies declined to comment when Marketing approached them.

Privately, many say it is too easy to point the finger solely at financial services marketing. They argue that consumers borrow because they want to and can. But the way credit is marketed is clearly contributing to the problem and the issue is unlikely to just go away.

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