RUNCORN, England — Today's era of commerce relies on the relationship between lenders and borrowers who, without one another, wouldn't have the means necessary to satisfy their desires. Creditors have the desire to loan money to individuals, and individuals have the desire to purchase goods and services for their daily lives. This symbiotic relationship falls into a delicate balance where consumers must practice personal financial responsibility and restraint whilst lenders must carefully evaluate to whom they lend money. But if an individual becomes mired in debt due to overspending or irresponsible lending, does the creditor have an obligation to provide assistance?
Steve Rhode, chairman of the not-for-profit financial crisis centre Myvesta UK said that while lenders have an obligation to their shareholders to increase profits, they also have a responsibility to assist the individuals who are attempting to repay what they have borrowed. Mr Rhode said:
"Recent changes in lender policy such as one major lender requiring a minimum dividend in an Individual Voluntary Arrangement of 40 per cent will only force more people into bankruptcy who are trying to repay their debts. By forcefully setting this standard across all IVA cases, many arrangements will fail as unrealistic monthly payments are demanded. By instituting minimum percentages in IVAs, creditors aren't even giving consumers a chance to repay what they owe."
Mr Rhode said that while increased lending has allowed many people to realise personal goals and dreams, the unwillingness of some lenders to assist individuals smacks of poor corporate citizenship.
"Sometimes it appears that if lenders would rather see people be made bankrupt than have to administer repayment plans. As long as a total loss in bankruptcy versus partial repayment through an IVA is acceptable to a creditors bottom line, honest people trying to repay their debts will not have an opportunity to make good on their promise to repay what they can afford."
Mr Rhode added: "Blame for problem debt in the UK can be placed on both sides of the lending coin. Some lenders overextend individuals, and some individuals overextend themselves. Personal responsibility is always paramount when conducting ones own finances, but so is allowing the individuals drowning in debt the opportunity to repay what they owe in a fair and equitable manner. Creditors give people the opportunity to get into debt, they should also give them the opportunity to get out of debt."
