1000 DROWNING IN DEBT EVERY DAY; FAILED BY OUR BANKS.

Byline: Kevin Schofield

BANKS have been savaged for failing 1000 Scots a day who are drowning in debt.

The major institutions must be less aggressive in chasing debt and show more sympathy to those in dire straits,MPs will be told today.

The call is being made by Citizens Advice Scotland. CAS's SusanMcPhee said: "The banks may be suffering but the people who have been coming to Citizens Advice Bureaux are suffering even more."

CAS have been inundated with pleas for help from 360,836 Scots in the last year.

That's 988 every day and a 14 per cent rise on last year. McPhee said: "Many of them are drowning in debt."

CAS blame the bailed-out banks - kept afloat by billions of pounds of taxpayers' cash - for making people's problems worse by hiking overdraft fees and other charges.

And the banks stand accused of making millions out of misery.

Now CAS have demanded that the Royal Bank of Scotland and Halifax Bank of Scotland, as well as others, do much more to help low-income families keep their heads above water.

CAS's problem debt figures - excluding mortgages - are horrific.

The average CAS client has debts of more than pounds 20,000.

About 10 per cent owe more than pounds 50,000.

One client owes almost pounds 240,000. McPhee, CAS's head of social policy, said: "There's a lot of talk about the huge shock the banks have suffered and how we must all help them regain the position and influence they had before the recession.

"We see things differently because we deal with the real impact the recession has had on people and we believe much of that has been made worse by poor banking policies that existed before the recession.

"So, as far as we're concerned, a return to 'business as usual' in the banking sector will not be good enough."

The alarming caseload dealt with by CAS's 83 branches include:

A bank customer who accumulated pounds 1000 in charges in just three months, despite being only pounds 270 overdrawn.

A single mum charged pounds 5 for every day she is overdrawn - and pounds 25 for every transaction she makes.

McPhee accused the banks of exploiting the misery suffered by those on low incomes to help boost their balance sheets. She said: "We agree that a strong banking sector is a key part of a vibrant economy and we want to see the banks recover as economic players.

"But we also want them to recognise that they have responsibilities to all of their customers and to society in general.

"Many of the people who come through our doors have been hit financially - not just by the recession but because of harsh banking policies like high overdraft charges.

"And it is those on lowest incomes who have been hit hardest. Effectively, the poor have been subsidising better banking services for the rich.

"Now banks have been bailed out by taxpayers' money, we say they can't be allowed to go back to the same old policies."

Representatives from CAS will give evidence today to MPs on Westminster's Scottish Affairs Committee. They are carrying out an inquiry into the banking industry in the wake of the financial crash.

The meltdown saw RBS and HBOS bailed out to the tune of pounds 37billion from the public purse to stop them going bust.

Chancellor Alistair Darling handed over a further pounds 30billion to the beleaguered banks earlier this month.

Taxpayers now own 84 per cent of RBS and just under half of HBOS, who have merged with Lloyds TSB to become the Lloyds Banking Group.

A shake-up of bank fees could be on the way after the Supreme Court rules today on complaints by thousands of customers about sky-high overdraft charges.

In their written submission to the committee, CAS say banks should use the fall-out from the economic crisis as an opportunity to mend their ways.

They say: "Many of our clients have found to their detriment that banks are more difficult to deal with, with credit and mortgages more difficult to access, banks taking a harder line on those in arrears, and showing an unsympathetic attitude to customers suffering financial difficulty.

"Many of the current problems for our clients are caused by policies that were causing detriment prior to the recession and which are becoming more obvious now as jobs are lost, incomes fall and debt rises."

McPhee said nearly 90 per cent of the queries they deal with on debt are from clients who owe money to their bank.

Vulnerable

Nearly half of those say they have gone without food or heat in order to pay off their debts, she said.

She added: "People are are facing the misery of redundancy, home repossession or falling incomes - as a direct result of banking policies which have failed to take proper account of the economic realities under which many people live.

"The recession's impact on such people will last much longer than the recession.

"We must make sure that, when the smoke clears, Scotland's banks do everything they can to help their most vulnerable customers - and that means they must gain a sense of social responsibility.

"Banks cannot simply go back to the policies they were operating before the recession."

A spokesman for Lloyds Banking Group insisted they do a lot to help customers facing financial difficulty. He said: "We would always encourage any customer having difficulty, or who thinks they may soon be in difficulty, to contact their lender as soon as possible so they can discuss their situation and agree a solution.

"We have a number of free services available to customers to help them organise their finances and cope with any debts they may have.

"We work proactively to identify customers who may be struggling to meet their commitments, even before a payment is missed, and aim to keep in regular dialogue with any customer who is struggling to ensuretheir borrowing remains affordable."

RBS did not return a call from the Record.

RECORD VIEW: Page 8

CASE STUDIES..CASE STUDIES..CASE STUDIES..CASE STUDIES

AN East of Scotland CAB reported a single mother who is in serious financial difficulties due to disproportionate and unfair bank charges.

The client is being charged pounds 5 by her bank for every day she is overdrawn.

That's topped up with pounds 25 for every transaction she makes.

The client is living on Income Support with a five-year-old daughter.

A CLIENT of a West of Scotland CAB incurred an overdraft of 70p after a company failed to cancel a direct debit as requested.

Since then, she has incurred overdraft charges of pounds 176 - with pounds 20 being added every day.

AWEST of Scotland CAB had a client who made a repayment offer to her creditors and was instead offered a further loan.

The loan would have helped the client to avoid default.

But it would have cost a further pounds 2700 in interest and charges.

The client rejected the offer and decided to stick to the repayment plan prepared by the bureau.

ONE customer received phone calls at all hours from his bank after falling into arrears, a West of Scotland CAB reported.

The client was phoned from 8am until the evening.

His wife often took the calls. Sometimes they were "silent" but the client was sure they were from the bank.

The bureau wrote to the bank complaining on behalf of the client. The reply stated that all customers who get into arrears receive phone calls like this.

Some calls start out as silent as the operator can't always respond immediately. These calls cause unfair stress and worry.

ANORTH of Scotland CAB told of a lone parent whose bank are insisting that she increases her repayments on her overdraft to more than four times the level she is currently paying.

The client has an agreement to pay pounds 66 per month.

But now her bank are insisting on the overdraft being cleared in six months. That would mean payments of more than pounds 300 - an amount the client cannot afford to cough up.

Debts double in five years

PERSONAL debt among people seeking help from CAB has doubled in five years, while some lenders' recovery tactics get more aggressive.

The average has risen from pounds 13,000 to more than pounds 20,000 - not counting mortgage debts.

For every pounds 1 of monthly income, clients owe on average of pounds 28. Almost half have gone without food or fuel to pay off what they owe.

Lone parents, elderly people, young people, the sick and disabled are hardest hit by debt.

Clients aged 60-plus have the highest average level of debt at pounds 26,010 - an increase of almost 50 per cent in two years.

More than one third of CAS clients are disabled or ill and 40 per cent are in debt. because they are ill.

About a quarter had to take out a loan to pay off another loan.

Creditors are pursuing debts more vigorously than in 2003 - 40 per cent of clients report aggressive harassment.

Almost all clients said debt had affected their mental health and a third said it been bad for their physical health.

A BANK took pounds 400 from one North of Scotland CAB client's account to repay debts without her permission. The client has credit card and overdraft debts with her bank, with whom the bureau have been negotiating repayments.

The bank took pounds 400 from her current account after her wages had been paid in, leaving the client with no money at all.

She contacted her branch,who said she'd be taken to court if she moved to another bank.

49p over limit has now cost me pounds 135

CASE STUDY

A TEENAGER racked up pounds 135 of bank charges after he exceeded his overdraft limit by just 49p.

Unemployed Lewis Ottery, 18, is a Bank of Scotland customer and has a pounds 100 overdraft on his current account.

But he was stunned when the bank wrote to him two months ago to tell him he had gone over the limit without approval and charged him pounds 28.

When he couldn't pay that, more charges followed. Lewis, from Nairn, phoned the bank and got three charges cancelled but others have been added.

His most recent letter said he now owed pounds 135 in unpaid charges and could face court action to retrieve the cash. He said: "It's ridiculous that they keep adding more charges when they know I can't afford to pay them."

Nairn CAB manager Bryan Bain said they were dealing with an increasing number of people unable to pay their bank charges.

He said: "In many cases, they are accruing charges that they just didn't expect. The banks even charge them when they send out a letter. "Our advice to clients is to contact their bank and hopefully the branch manager will be understanding."

CAPTION(S):

OVERDRAFT: Lewis Ottery