Bank write-offs double for bad credit card debt
The Bank of England has reported a significant rise in the amount of money that banks have written off as bad debts on their credit cards.
The Bank figures show that the total value of the write-offs doubled to 1.6bn in the third quarter of 2009.
In the first and second quarter, the figure had been around 800m. The total amount of credit card related write-offs totalled 3.2bn during 2008.08.
These unusually high figures are largely due to the recession and are an acknowledgement by the banks that defaulting borrowers will never repay the outstanding debts.
In comparison, the total amount of mortgages written off in 2008 was just 408m, while averaging 260m in each of the first three quarters of 2009.
Banks and other lenders put much larger sums, running into several billions of pounds, aside each year to cover potential losses on credit cards, mortgages, overdrafts, and personal loans.
“There was a one-off write-off of impaired credit card balances by one of the banking groups,” said a spokesman for the British Bankers’ Association.
David Black of the financial consultancy Defaqto, said that over the last four years, banks have been much more careful about who they will lend to.
“HSBC, NatWest and RBS will only offer new credit cards or unsecured loans to their current account customers,” he said.
“Banks also want to sweep bad news into one year’s accounts to make future years look better,” he added.