BBC Documentary - The Money Trap - How Banks Control the World Through Debt

this is a story of how high street banks can lure their customers into debt it's told by a powerful insider in all my years of experience in the banking industry I would say that consumers should be very very wary of their banks they put profits before the customer at every given opportunity it's the story of how banks routinely encourage customers to borrow more than they can afford sometimes with fatal consequences they told me we found on the railway line in the morning I can't even I can't begin to describe how I fell yeah my children to deal with and I have to tell this family and it's like the world just stopped those are common isn't over the bank with the biggest slice of our credit card business doesn't want to talk about debt suicide but this top executive from one of the biggest financial institutions in the UK is prepared to speak out I am a senior executive working in the banking and credit card industry and I have decided to blow the whistle on this industry late at night in January last year her body lies by a railway line the only clue to the death is a bag nearby inside dozens of credit card statements detailing a mountain of debt mark McDonald who was 43 had thrown himself under a train leaving a widow and two children mark was one of at least 17 debt related suicides across Britain in the last three years his story was first highlighted a month ago by our colleagues on Britain's streets of debt now panorama has fresh revelations about the lending practices of the high street banks these tragic cases where people have taken their own lives are the cost that is paid for irresponsible lending practices and this is exactly why they need a curbed these suicides have been an inconvenience to the industry as a whole and they have exposed the practices that the banking industry have got away with for years and years and years those are the words of someone who knows she's a senior executive who works here in the very heart of the banking world in the city of London and she's the first high-ranking whistleblower prepared in fact she felt compelled to break the bank's code of silence and reveal the industry's inner workings today she tells us how the high street banks precisely target customers for borrowing and how they profit from those in financial difficulty I cannot overemphasize the focus on profits and it simply gets to the point where when you see real-life cases of people who are really suffering or who lose enough one when you just just can't take any more by speaking out our top banking executive has risked her livelihood and career because she signed an agreement never to disclose publicly details of the banks lending strategy in order to protect her we've agreed to disguise her and her words are spoken by an actor my experience is with the big banks in this country the high street banks that 80% of US bank with I don't think any bank once it's internal procedures exposed um maybe the reason for that is that some of them are quite questionable the banking industry is a giant machine that pushes borrowing and makes enormous profits staff tend not to be paid particularly well every branch of any bank and every individual who works lebesgue has very ambitious sales targets to sell you more products effectively to make you borrow money and to get you into further debt they will have targets on every product that is available through the branch and they will have Commission's or bonuses on every product it's a very very sophisticated tailored tested marketing strategy and sales pitch to a public that have very little knowledge of what's going on effectively though the most profitable customers are perhaps the most vulnerable customers like Mark McDonald who stepped in front of that train one night late last January was midday the next day and they came told that they found him they tell me we found on the railway line in the morning he left the backpack at the side of the railway track they knew he was full of bills credit card bills loans all the the evidence of the dirt to the industry mark was a revolver someone who borrows heavily makes minimum payments and never fully repaid their debts the revolvers are the customers who borrow money month in month out they're the people who are paying very high interest charges where the people who are likely to pay extra fees when they go over their credit limit they're the people most likely to pay penalty charges so you want to retain these customers at all costs mark had been a revolver for years he lived in down a market in Norfolk where he worked as a writer of technical manuals his wife Marian had given up work to have two children the family relied on his income of roughly twenty six thousand pounds a year and they struggled he would occasionally say things like we can't afford that this month and he would say you know I've got the gospel and the phone bill to pay and I say okay well you know what wait we'll do that next month in the space of ten years Mark had acquired eight credit cards two of which were issued by his own bank the Royal Bank of Scotland and he owed thousands of pounds on them he survived by just paying the minimum charge each month people who have traditionally made the minimum payments people who are heavy borrowers people whose repayments are not even covering the interest and never mind the capital that is outstanding on the card they are the ideal credit card customer that is the perfect customer the ones that makes you the most profit and let's face it is an industry that focuses on profit RBS knew exactly what Mark's income was it knew he was making only minimum repayments on the money he owed yet his credit limits on both cards were increased several times one was upgraded to platinum which eventually had a credit limit of over twelve thousand pounds in the last 12 months of Marc's life the bank made over three thousand pounds in interest and charges on the two cards he considered credit cards to have a status always had always had a you know the fact that he he could have a card with his name on it and I think the idea of paying for something with a platinum card seemed to say to him that he you know he was respected and respected him the platinum card says you've got a lot of prestige and look for money and he wasn't true it was just like a sham Bailey it is generally felt that in the industry by increasing the customers credit limit by upgrading their card to gold or platinum you are increasing customer loyalty and hitting those marketing targets of retaining profitable customers Marian only discovered how much mark owed after his death he just said he'd got into debt with credit cards I mean I knew he had credit cards so I presumed that was it it is only looking through finance now that I found out that he also had overdrafts and loans with the bank and loan companies despite his twenty six thousand pound income RBS lent mark huge sums it allowed him to build up a 6,000 pound overdraft the bank lent him fifteen thousand pounds to pay off his other lenders credit card debts they'd let him remortgage his and Marian's home to the tune of eighty thousand pounds and it didn't end there by the time you took his own life mark owed his bank almost 120,000 pounds I remember when I was quite a bit younger and I wanted to buy my first car I had to sit in front of a bank manager and explain exactly how much the car was going to cost how much I could afford what my other outgoings were but I think now because it's offered I think people somehow think if they're offered that amount of money therefore they can afford it we showed the whistleblower Mark's financial records there were a number of warning signs from a relatively early stage that the bank should have picked up on here was a man on a very modest income he was roughly earning 26,000 pounds a year he was lent his annual take-home pay just on credit cards on to credit cards he was making minimum payments on the cards for years he wrote credit card checks from one of his RBS cards on a regular basis at exorbitant rates of interest and deposited them into his RBS bank account the fact that he was overdrawn on his bank account there are so many things the bank should have picked up on there is no possible justification for the bank not to have understood that there were serious difficulties in this man's financial position in my opinion the bank was grossly irresponsible the Royal Bank of Scotland knew exactly what his bank details were they knew how much he earned he knew what he was paying out of him um they knew the sort of balance and account I can't understand why they would just keep letting you have more and more money the banks are basically neglecting their duty of care they are putting profits before human life almost in circumstances like Mart McDonald's where there has been clear irresponsible lending in my opinion there should be laws introduced where banks can be prosecuted this is how serious I believe this is in a statement last month the Royal Bank of Scotland said throughout mr. MacDonald's time with RBS we dealt with him in a responsive and professional manner he had a regular dialogue with his personal banking manager and the lending decisions on his account were consistently based on strict lending criteria mr. McDonald managed his count account and maintained regular payments to both of his credit card accounts he did not exceed his credit limit the bank's records showed that at no time did mr. McDonald make contact with the bank to inform us that he was in financial difficulty that statement is seriously misleading the bank says that mark MacDonald didn't tell them he was in financial difficulty but the fact is the bank knew we've seen an internal RBS document which makes it clear that marked branch was aware of what it refers to and I quote as his financial difficulties we've tried repeatedly to get an interview with RBS about their consumer lending decisions but they've turned down all our requests so I'm heading off to the global headquarters of RBS just outside Edinburgh to see if I can have a word with the chief executive sir Fred Goodwin with profits for 2005 of 8 billion pounds and a gleaming modern headquarters RBS are certainly in no financial difficulty sorry for you I'm from BBC Panorama and we were hoping to have a word with the chief executive sir Fred Goodwin what I expect what you expected what do you want me to do the photo the high street banks are constantly adjusting their financial strategy and launching new lending products it's a fiercely competitive market servicing a UK debt burden currently running at over a trillion pounds excuse me is that camera sound off though otherwise he'll have to get the police here obviously the marketing department is the engine of the business and it will have a whole series of targets and it will have targets to attract new customers which are extremely ambitious and then you have you have very aggressive targets to maximise profits on existing customers monthly sales targets and meetings are what the marketing department lives for credit cards are banks biggest and most profitable consumer lending product especially when we can be persuaded to increase our spending and to carry debt over from month to month what one needs to be aware of is the fact that a credit card company has the ability to communicate with its customers once a month so therefore there is the ability to really target those customers to ensure you're getting maximum profitability however sad it is that people get into debt and however much the banks may encourage it surely it's people's own fault they're responsible the individual always has a responsibility to make sure that they are not boring beyond their means and that they are able to repay whatever unsecured lending they take on the banks have other techniques to get you to borrow more from them Robert Jenkins is another revolver he's married to Evelyn and they have five children in their teens he's a school caretaker and he earns 18 thousand pounds a year we lived very much and tonight we had to budget carefully major bills unexpected bills were a problem for us robert's take-home pay was 250 pounds a week while Evelyn earned 100 pounds a week in a part-time catering job for years they were getting by just but in the eyes of their bank Robert and Evelyn needed some financial help Robert was called in for a meeting he remembers this as a financial health check but Lloyds TSB disputes this we received a telephone call inviting us along to the bank for a health check which seemed a good idea when you're conducting a health check you will look at areas where that person doesn't have perhaps one of the bank's products they don't have a credit card they don't have a loan and in most cases they probably don't need it but if they don't have it you're going to try and sell it to them Robert and Evelyn left the bank happy they had a restructured mortgage deal and within a few months Robert had a platinum card with a 6,000 pound credit limit it was a good feeling to know that you you know you've got this sort of period of austerity behind you you finances wrong track and they were so on track then you were credit worthy not just for a few hundred pounds but for a few thousand pains then that made me feel very good this week the credit card celebrated its 40th birthday today there are over a thousand different cards available all you may not realize is this 70% of them are owned by the big five high street banks at any one time a single credit card will have up to a hundred different interest rates for purchases introductory offers and cash armed with his new platinum card Robert started to spend spend spend if for example I went to the garage whereas before I would have had perhaps 10 or 20 pounds more wallet to use for petrol I'll fill up with the credit card and I don't think you know that that was a sensible thing to do I'll pay off at the end of the month but of course I didn't before long you get to the stage where suddenly you haven't got that any credit left on your card and at that point all there abouts the bank would step in and and invite you to increase your credit limit unsolicited increases in your credit limit can take place up to twice a year in some cases your credit limit could literally double in the space of two years the customer doesn't really have a say in it the higher your credit limit the more you're likely to spend robert started with 6,000 pounds of credit on his platinum card within two years the bank bumped up that figure to eleven thousand pounds then Lloyds TSB gave Evelyn a platinum card her credit limit four thousand five hundred pounds Robert was tempted by other offers that came through the letterbox however one caught for comparison 7.8% APR it seemed to indicate to us that we were a much sought-after commodity and that we were were credit worthy which made you feel good you know you feel quite important when they take such an interest in you some companies will send maybe 20 packs of direct mail to one individual so it's bombarding someone with an unsolicited application to borrow large sums of money without necessarily knowing whether they have the ability to repay the debt by now the Jenkins had four new cards I was horrified to find that we've got a total debt I'm about 29,000 pounds with credit card and I was absolutely gobsmacked it had taken less than three years for the Jenkins family to reach a debt crisis we've been meeting the minimum payments but even they added up to somewhere in the region of about six or seven hundred pounds a month just to keep the credit card companies off your back it was almost half of my monthly income was being used to service the credit card debts I woke up about five o'clock in the morning and it suddenly dawned on me that I'd put the house at risk and the problems the bankruptcy would incur and suddenly you know I really start to suffer a panic attack more stomached start to churn I began to so for a cold sweat and I I curled up in a ball you know and I thought I had ordered had I get out of this you know boy what is it happened why they let it happen and I felt guilty and I felt all the the emotions associated with with sheer terror this is Trowbridge Wiltshire in January 2005 a local mechanic killed himself with the exhaust fumes from his car the reasons people take their own lives are complex what's clear is that 65 year-old Richard Cullen died with over a hundred thousand pounds of credit card debt the end of his garden which it's workshop and garage and that's where he was found in car in the morning ten o'clock in the morning he'd come back overnight sometime my my son found his car down the bottom and we called the police and he was in the garage Richard and Wendy were married for 18 years they had eight children from previous marriages Richard earned roughly fifteen thousand pounds a year and was a mother revolver someone who borrowed heavily and never repaid the debt it was really about two to three months before he died the telephone was ringing almost sort of maybe 1718 times a day sometimes asking to speak to him and I say and they would say there was a the bank or the credit card and um and I just give him the message or if he was in the garden I'll go and give him the phone and then he started to walk off with the phone and I asked eventually why are they calling so often you must be in trouble and just before Christmas he admitted that he was terribly in debt these are some statements I've discovered since Richard died he owed roughly 135 thousand pounds on 22 credit cards it's absolutely unbelievable shocking several lenders had issued more than one credit card to richard cullen the market leader the Royal Bank of Scotland Group lent him over thirty five thousand pounds they had issued him with four cards under different brand names mint Tesco personal finance and to NatWest cards which together generated the RBS group over 4000 pounds in interest and charges in the last 12 months of Richard's life we took the statements to the whistleblower this is one of the worst cases of irresponsible lending that I have ever seen customers like Richard Cullen they are the ideal customer they hold multiple brands with one institution in this case credit cards are pushed all the way to the limits throughout his whole payment history he's only making minimum repayment he takes cash out there are no interest-free periods this is your perfect customer he spends on the card every single month he's a regular user he was earning a very modest income of 15,000 pounds the bank knows that they lent him thirty five thousand pounds if that's not an alarm building worries there is an inconsistency in these statements in that there are credit limit increases at the same time as we're seeing a history of arrears and minimum repayments it's it's completely inconsistent this is just a very very good example of why the banks cannot be trusted to self-regulate why do they do it because they know they can get away with it I'm angry at Richard and an angry at the banks Richard had a responsibility he took out the credit cards and loans but surely the bank must take responsibility as well for allowing him to go on and on getting deeper and deeper and several months after Richard's death RBS agreed to write off his outstanding debt of thirty five thousand pounds it's very very different life now one day you're happy your next day there's nothing you're just on your own RBS told panorama they were not aware that mr. Cullen had a serious debt problem and hadn't made any errors in handling him or his accounts we took our evidence to the man responsible for policing the banking code of practice oh hi mr. Fortescue let me show you these fifth of November 2004 Richard Cullen is being chased for arrears on his mint card which is operated by the Royal Bank of Scotland two weeks later his credit limit has been increased on his Tesco personal finance card to seven thousand seven hundred pounds Turco personal finance card also run by the Royal Bank of Scotland the letters have been sent from the same address the same P o box even isn't that a clear violation for banking code well I find it extraordinary that this has happened I think it's a case of the right hand not knowing what the left hand is doing was no excuse for that but it was clearly very strange indeed for them to be increasing his card limit to it on the one side and at the other side trying to ask for their money back this is within one bank this is an excuse of for sure I I agree I think this is this is wrong I will investigate to see whether there's being a breach of the banking code we will need mrs. Collins authority to do that but I will gladly do that in Norfolk mark MacDonald's widow remains angry with RBS despite the circumstances of his death the bank chose to pursue his estate for the money he owed them after her husband's death I received letters from them basically saying he old and money and implying that I should pay don't they wanted their money every major bank will have what they call a special recovery unit or a debt collection department and the job of that department is to recover repayments from those people who have fallen into is at the end of the day if they don't recover that debt the bank will have to write it off so they have extremely aggressive targets and this is why such aggressive tactics are employed to ensure the bank recovers its money at almost any cost mark MacDonald's insurance policies had enabled RBS to recover over ninety thousand pounds but it still wanted full payment of its remaining 27,000 pounds when other creditors were prepared to settle for a percentage of the money he owed there have been many other similar cases where the banks including the Royal Bank of Scotland have chosen to write off the debt in the case of Mark MacDonald the Royal Bank of Scotland chose to pursue his estate this is not this case of irresponsible lending so I'm very surprised and shocked it was a slow process a year after marks death the bank still wouldn't agree to a compromise settlement it's still a millstone round my neck basically if I have to pee I have to pee but I just want it to be gone and it's not I'm constantly having to be brought back to the situation six months ago the Jenkins started to sort out their financial problems and to clear the 29,000 pounds owing on their credit cards they turned to national debt line a charity that helps people in crisis they now have a repayment plan any interest is frozen but they still have to pay their creditors 180 pounds a month out of their modest take-home pay why it's nearly time looking back robert accepts that he was financially naive but he also feels his bank was equally responsible for lending him more than he could afford we spent the money that was more responsibility but I seem to be doing it with their agreement so that's how it went there's something immoral about the way that the banks are doing their business these days they're making it far too easy for people to get into debt and that's irresponsible you should be able to trust your bank you should be able to believe that you're a valued customer and not a means of deriving a a higher profit margin in a statement Lloyds TSB said we've made considerable efforts to help the Jenkins address their financial problems by consolidating their external debts and remortgaging with us we were able to reduce their outgoings by around four hundred pounds a month we've suspended all interests on their credit cards and overdraft and agreed their request for a three-month mortgage repayment holiday we have tried to contact the couple to discuss how we might offer them further assistance however they've chosen not to take us up on our offer the consequences of Britain's borrowing crisis are so serious that they're now hitting the banks themselves they're facing a mountain of bad personal debt so four of the high street banks including Lloyds TSB and our yes have launched an initiative to identify customers in trouble they'll now share information on clients income as well as their credit history to inform their lending decisions it is certainly a step in the right direction but I do remain very skeptical I I really believe the banks have had all along the information they need to to make decisions about whether individuals were at risk of falling into dangerous debt levels but this comes too late can the bank's really change a lifetime of habits of irresponsible lending at the end of the day that's what's made them their profit so I'm going shopping for some shoes anything else now you don't want me to buy anything that's unusual ask you oh mind you don't think you can carry on to start with but you have to I have to think of my children I have to think that they've got the whole life ahead of them if I'm strong they'll be strong I think he blamed himself totally I think he felt he let us down very badly he loved his family and he loved me and I think he couldn't find words to say you have let me down I've gotten to all this that have not admitted to after almost a year-and-a-half of negotiations RBS settled for a fraction of the remaining 27,000 pounds mark owed on credit cards and an overdraft since then and after we contacted the bank the debt has been written off RBS told us that this was in response to finding out that an earlier offer letter to mrs. McDonald's solicitor was never received for Marian and her family these long months of worry have been hard to bear it's uh it's destroying our life destroyed the marriage that we have destroyed the family life we had talked on but anyone who's falling rate here so Flint isn't actually here there's nothing a movie like you'd want have another on you with something to decide all with a be she that help cameras thing to the ground also Fred Goodwin wasn't there today neither was any of the other senior executives apparently I had a very long conversation with somebody from group communications by phone who's in London and tells me that she'll try and fix up an interview for me in London tomorrow is also what we can do in the noon time man we're being moved on again tomorrow came but no interview RBS didn't make it happen over-indebtedness has has become a cancer in British society it affects every one of us the banking industry is fully aware of the reasons why people are falling into severe financial difficulty and I felt that not enough was being done about it and in many cases a blind eye was being turned to these issues I would say that consumers should be very very wary of their banks panorama is making a film about the British water industry and needs your help if you know of a leak that needs fixing and what to tell us about it or any other water supply issues please contact our website where you can also comment on tonight's program if you've been affected by any of the issues in tonight's program and would like to talk to someone in confidence please call the BBC action line on Oh 8 thousand six eight oh six six one that's 8,000 six eight oh six six one the action line is open seven days a week from 7:30 a.m. until midnight all calls are free

Channel: wwwFNIBco

Views: 885,842

Rating: 4.6968093 out of 5

Keywords: Documentary, Bank, History, Bankers, Debt, The Money Trap, BBC, World Domination, Credit, 1%, 99%, injustice, Truth, Financial System, Rich

Id: Fg4VhALXgwE

Length: 39min 30sec (2370 seconds)

Published: Tue Nov 27 2012

Reddit Comments

[u/Liberalatheism]

This is a 13 year old documentary.