Barclays - the Ryanair of banking
My son ran up an unauthorised overdraft a couple of years ago - or, rather, he inadvertently exceeded his agreed overdraft limit by £200.
The bank slammed some usurious penalty charges on his account and the sum he owed soon multiplied to a figure that he couldn't possibly afford to repay. He tried to talk to the bank about repaying the original overdraft, plus appropriate interest, but it ignored him.
So instead he waited for the High Court ruling on whether banks should be allowed to charge whatever they like on unauthorised borrowing, hoping it would solve his problems. But it went against him - and many other thousands in the same boat. Meanwhile, the sum had escalated wildly into a four-figure debt.
His bank is our old friend Barclays, which is fast becoming the Ryanair of British banking when it comes to customer service - although I gather all the banks are at it.
Now, I accept that customers, like my son, who run up debts have only themselves to blame - it's all in the small print, blah, blah, blah. But my point is that he wanted to repay the original sum and tried to do so. The bank could have had its money back, if it had co-operated.
Instead, it has invented a ludicrous debt that it has no hope of seeing repaid.
More extraordinarily, Barclays sold the debt on to a credit agency some time ago. What is Kafka-esque in its absurdity here is that, in doing so, the bank has made an entirely notional sum of money into a real one. This debt never existed, other than in the fevered imagination of some clerks in the Bank of Lilliput.
By capitalising it and selling it on, this invented money has become commoditised. And there must be loads of it out there. I fully expect some wünderkind of the financial markets to securitise all this bogus debt and flog it to a US bank to fuel the next sub-prime housing boom.
Anyway, this means for us that a series of entertaining credit agents periodically phone up. The names of the agencies change weekly, as the debt is passed around the market, like the plate of cocktail sausages that no one wants at a party.
One spiv told my son that he'd knock 25% off the debt if he paid it off by credit card over the phone immediately. Unsurprisingly, he resisted this temptation, as there would have been no record of the agreement.
I fear that there may be some borrowers who do deal with these charlatans of the financial world. After all, they threaten that they're about to come round to your house and impound everything from your clothes to your pets in order to settle the debt.
This is nonsense. The Citizens Advice Bureau advises that under no circumstances should anyone ever respond to a telephone approach from a credit agent. That seems like sound advice.
But there are other factors at play too. These debt collectors phone and, first of all, ask you to identify who you are and where you live. Excuse me, do they really think we're that dumb? No one has the right to phone and demand information about you.
These giants of credit control, however, are evidently a few beads short of a full abacus. One phoned the other day. Apparently, they couldn't speak to me unless I identified myself. Fine by me.
A firm called RMA Partners, for example, told me I had to provide personal information for security purposes. I had to prove that I was who I said I was. I asked him to identify himself and to prove he was from the company he said he was, otherwise I couldn't deal with him "for security reasons".
There was silence at the other end. It was like a fuse had blown in his head. I wished him well and gently hung up.
But the problem is that the high street banks allow these agents to operate under the banks' brand names. I have had people on the line claiming that they are from Barclays. They are rude, aggressive and unprofessional.
Credit is really the issue. Does a bank like Barclays really think that these ethic-free operations do its brand and reputation any credit? But, then again, perhaps brand values and reputation have long since ceased to be a valid currency for our banks.
Reverend George Pitcher is a former industrial editor of the Observer. He is the Archbishop of Canterbury's secretary for public affairs and curate at St Bride's, Fleet Street.
All sub-prime financial products are aimed at borrowers with patchy credit histories and the term typically refers to mortgage candidates, though any form of credit offered to people who have had problems with debt repayment is classed as sub-prime. Depending on the lender’s own criteria, sub-prime can apply to borrowers who have missed a few credit card or loan repayments to people who have major debt problems and county court judgments (CCJ) against their name. To reflect the extra risk in lending to people who have struggled in the past, rates on sub-prime deals are typically higher than for “prime” borrowers.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.