Debt suicide. The banks’ fault or the deceased?

On Friday morning I interviewed the Chief Executive of Royal Bank of Scotland (RBS) Retail Banking for the ITV1 Tonight with Trevor programme I’m presenting on this evening (Monday 25 Sep). It specifically concerned the case of Richard Cullen – who sadly committed suicide with £140,000 of unsecured debts in early 2005.

Of the large number of credit cards he had, four were with RBS brands, with £35,000 of outstanding debt on them, costing £4,000 a year in interest. Richard’s salary was £15,000. At one point while the RBS branded card Mint was chasing him for arrears, another RBS branded card, Tesco, was increasing his credit limit. On the surface this sounds a clear cut case of irresponsible lending.

We must stop believing the banks will look after us

There are many debt junkies in this country (the term the Chief Exec of the British Bankers Association used when I interviewed him last week) and that of course makes banks the pushers. Yet we don’t blame shops for our over-spending – so why do we blame banks for our over-borrowing?

As site regulars will know, I believe we live in an Adversarial Consumer Society – a bank’s job is to make money, our job is to stop them. If we assign the banks the job of ensuring ‘responsible lending’ then it’s a dangerous path. This leads us to trust them, to believe that if they say we can afford to borrow we can. The best way to behave is to consider that the bank is the opposition, and to act accordingly. Always make decisions based on your own judgements, not what the bank says – why listen to the ‘pushers’?

Were the banks culpable in the Cullen case?

It’s a tough call – and the interview wasn’t easy to do – it was an emotional one for both of us. My job as interviewer for the programme was to interrogate the bank over its culpability and to examine all the issues. Yet with my ‘expert’ hat on – I’m used to being the interviewee not the interviewer – on this occasion I found myself asking challenging questions, but sometimes sympathising with the answers.

The Chief Exec defended the bank’s position. His view, rightly in my opinion, is this was a complex issue with the interaction of many banks. At the time this happened only ‘black data’ was shared between banks, in other words they only knew whether a person had “defaulted or missed payments on other accounts.” (These days there is more sharing of “white data” which actually indicates how much outstanding debt people have).

So someone rotating debts and getting new borrowing to pay off old borrowing (which is different to shifting debts to get cheaper rates) as this situation seemed to be, could quite easily be missed by each individual bank as there are no defaults on the system.

Therefore to be fair to RBS, it couldn’t have known the full extent of the indebtedness with the other banks – where there was another £105,000 debt outstanding. Yet, still, it did have £35,000 debts outstanding for a man who earned just £15,000. So even if we ignore the other debts this is a serious question. Its argument is the four sub-brands were all operating separately and thus weren’t allowed to communicate with each other – they were in fact separate companies. Again these days the system has changed. Yet when I put the question “are you telling me now that there won’t be anyone on £15,000 income who is lent £35,000???? of course he couldn’t say so.

Blame depends on your viewpoint

Whilst my view that ‘the banks are the opposition’ thus abrogates responsibility for the banks they cannot foreswear all blame. The truth is most people don’t think that way. One reason for this is a historic overhanging loyalty and feeling of pastoral care; the other is the fact that banks deliberately market us “advice, trust, guidance and a helping hand.”

They want us to believe them and come to them for information and advice. So, perversely when I examine it from my perspective they aren’t to blame, yet if you look through their hype then collectively (as with the limited info I have, I don’t believe any single lending institution is responsible for this tragic situation) they should bow their heads in shame.

It’s society’s problem too

When it comes down to it – this is a societal problem too. We are a nation that educates our students into debt, but never about debt. We provide debt crisis help but never genuine one-on-one independent help on how to borrow in the first place. Our TV screens are swamped with commercial debt consolidation and IVA agencies paying fortunes to pump out their message, yet our non-profit debt counselling agencies are underfunded and have to rely on unpaid media to get the message out – when much of that same media is being funded by the commercial debt advertisers.

My condolences to Mrs Cullen.

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Further Help If This Affects You: If you are in debt or worried about it, please read ‘Problem Debts: Where To Start’ which includes a checklist of what to do, information about non-profit debt counselling agencies, The Samaritans and Relate.