Credit card provider Barclaycard said it expects to have to write off around £1.5 billion of debt defaulted by customers this year.
By comparison, the amount written off by the company in 2005 was £1.1 billion, but during the second half of this year, Barclaycard has been cancelling £31 million worth of personal loan and credit card debts every week.
The rise in defaulted payments has been attributed by the lender to an increase in personal insolvency declarations such as individual voluntary arrangements.
And while this year’s total debt write-off equates to £140 per customer, the Times reports that around 100,000 people are expected to declare themselves bankrupt this year.
Barclaycard’s decision to cancel the debts is, according to the paper, effectively an acknowledgement that it will not receive its money back from borrowers.
However, the news comes as no surprise to Citizens’ Advice (CA), which told the paper that many banks have reported a rise in debt levels.
“Lenders should always make sure that people are able to repay the money before they agree to loans,” a CA spokeswoman said.
Last month, the British Bankers’ Association recorded the total amount borrowed on credit cards for September 2006 was £6.9 billion – a seven per cent drop from September 2005.
© Adfero Ltd