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Debt - Between A Culture of Debt and Government Regulation

In his characteristic frankness, even in the face of criticism, the Archbishop of Canterbury Dr Rowan Williams has strongly taken a swipe at Britain’s debt culture, accusing it of joining forces with millionaire bankers, who profit from it, and ministers, who allow it, to dangerously put pressure on the fabric of society.

Borrowers in the UK have collectively amassed debts of over £1.5 trillion and this has immensely made life tough for particularly amidst credit crunch. The spiritual leader of the world’s 77 million Anglicans on Friday critically analysed the situation and arrived at the conclusion that unless a wedge is driven to check the drift, the final result would be the complete erosion of family life and the attrition of self-confidence for many people who have been weighed down by debt burden.

A possible way to stop this trend, he said, is for the government intervene by imposing stricter for lenders and bridge the wealth between the poor and the rich.

His appraisal of the entire system and the lapses that have evolved over the years saw him condemning a culture that inflicts more pains on the poor than the rich. Particularly, he blamed the lending system which gives people who know next to nothing about financial management access to loans amounting to hundreds or even thousands of pounds.

Many of these people are today technically on death row, as they have been sufficiently stressed by the debt burden that they feel the only way out is suicide. This he clearly captured thus: “Younger people are under greater pressure, often becoming burdened by crippling levels of debt because inadequate financial education leaves them unable to understand the consequences of the loans they take out.” Even in addition to this there are countless several sources of loans to students who graduate into working class shouldering the problem.

While everyone reels under the stress imposed by credit crisis, there is a more unfortunate majority who, compelled by personal circumstances, opted to for taking out expensive loans from ‘Shylock’ lenders who demand higher interest rates in term of repayments. These loan sharks or doorstep lending companies earned Dr Williams strongest condemnation for routinely charging borrowers up to 1,000 per cent interest rates. In his words the situation is “indefensible”.

Reflecting on the flaws of usury as it relates to the current situation he said: “If the historic sin of usury still has any meaning in the world of smoke and mirrors that our modern credit economy seems to have become, it is surely in this context.”

Mainstream banks and building society greatly add to this problem as they shun people of lower income when they approach them for loans. In the end those who are desperate turn to loan sharks or doorstep lenders for help. This kind of situation compels people which genuine and urgent need for money to fall into the trap of exploiters who take advantage of their desperation. This crop of lenders, who profit from charging the poorest members of the society high rates interests deserve no sympathy from the religious leader as he said he was bothered their acts.

To put them under control he said there should be stronger regulation, including the possibility of capping interest rates. A further complication in the system, as enumerated by the esteemed spiritual leader, is the way credit crisis is disproportionately affecting the most disadvantaged. Whereas some people, like those working in financial institutions for example, earn fat salaries and appear not to be affected, many of those at the bottom of the ladders are traumatised. This, Dr Williams said, breeds envy and cynicism and leads to those who are less well-off feeling alienated from the society.

To resolve the problem, especially where people at the bottom In order to resolve this major problem of widening gap between the haves and have-nots, he said the government should regulate high salaries.

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