It has been claimed that irresponsible lending practices in the past from banks and other personal loan companies has led to an increased level of debt problems amongst consumers.

The Citizens Advice Bureau (CAB) has blamed lending institutions for offering unsecured loans and secured loans to individuals without carrying out adequate checks on their personal circumstances to ensure that they will be able to manage their monthly loan repayments on an ongoing basis. Since the beginning of the credit crunch, an increasing number of people are either losing their jobs, or seeing a reduction in their income through a drop in bonuses and overtime, leading to a severe build up of arrears on their personal loans.

CAB has seen a dramatic increase in the number of individuals contacting them for debt advice and how to manage their loan repayments. A spokesperson for CAB said “People have been able to take out loans, mortgages and credit cards, sometimes in circumstances where they have been persuaded to take them out and the lender should have been checking much more carefully.”

The charity has seen such an increase in the number of debt related enquiries, it has been forced to extend opening hours and employ additional staff to deal with the numbers. The average consumer seeking advice from CAB on their personal loans, owes around £17,000 and somewhere in the region of 10 per cent of borrowers have at least ten different sources of credit, through things such as personal loans, credit cards, store cards and overdrafts.

According to the charity, the average level of loan debt in the UK has increased by around two thirds since 2001, and many borrowers who seek advice have no realistic way of ever paying off their loan debts within their lifetime at affordable rates.