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Millions of Brits are now deep in debt and not ashamed of owing money. In fact, it is more of a stigma to rent and remain out of debt, or even build wealth, than it is to be hopelessly in debt and forced into bankruptcy.

Debt is now the norm in the UK. Teenagers start to build debt while still at school, and not on student loans, but on clothing and luxury items.

College students owe an average of £28,000.

Married couples owe their combined wages for four to five years to come. In many households, this debt excludes the mortgage.

The current figures claim that the UK personal debt levels increases £1,950,000 every 3.85 minutes according to Credit Action, a national money education charity.

“Our passion is to help people stay in control, rather than let money control them and disrupt their lives through over indebtedness,” says a spokesperson.

A Conservative Party poll suggested that as many as 9 million people are struggling to cope with serious debt problems. However, the Bank of England counters by claiming that 53 per cent of the people they polled expect to clear their debts by the end of 2007, excluding their mortgages.

This is hard for some watchdog groups to believe.  Currently, there are more credit cards than people.  APACS states that, in 2005, there were 74.6 million credit and charge cards compared with 60 million people.

The Financial Services Authority said that almost a third of all teens and young adults between 16-24 years old cannot manage a weekly budget.

The Authority, a statutory body set up under the Financial Services and Markets Act, said that 94 percent of all 16-year-olds believe it is important to know how to manage money, but only 53 percent are taught how to do so.

Debt Free Direct chairman Mike Blackburn, former chief executive of the Halifax, blames the increase in personal insolvencies on the banks.

“We are where we are because of excessive and imprudent lending decisions made by creditors, who end up with debtors strung up with debt they would never be able to deal with,” he said. “Why have the banks been squealing of late over their provisioning? Debtors are having credit thrown at them.”

The total number of personal insolvencies jumped in 2006, at least 45% to 67,584 cases. Debt Free Direct (DFD) estimates that 1m to 2m people are irreversibly over-indebted and will never be able to repay the capital on their loans.

The banks made £37bn in profit in 2006.  The banks have been criticised by several debt management charities for their careless lending.  Banks are deflecting the blame on individual voluntary arrangement (IVA) firms.

The banks claim that debt-management firms are selling unnecessary IVAs to consumers who do not need their services. The number of IVAs taken out last year increased from about 20,000 to 45,000 and their value increased from 15% to 30%.

HSBC raised the issue after its six months bad debt provisions increased in 2006 from £265m to £361m.

Recent reports suggest that banks are acting irresponsibly by releasing figures which states that teens are in serious debt because credit card companies have been lending unsecured loans to high school students.

Other reports have brought to light the fact that banks are issuing loans without asking clients for proof of income or referencing their consumer credit information.

The high levels of bad debt may be forcing credit card companies and banks to reconsider what they offer consumers.  Debt reached its highest level in 2006, with more than 100,000 consumers petitioning for insolvency.  This resulted in high losses for credit card companies and banks.

IVA companies have gouged into the profits of unsecured loan lenders, resulting in more losses.

Combine these with the Office of Fair Trading’s move to limit bank charges and fees on overdrafts, and the banks are reeling under the burden.

Early in 2007, credit card companies and banks were scrutinised and rebuked for not following regulations and making sure that consumers could afford to repay their unsecured loans.

This came following reports from consumer groups which stated that many borrowers were not checked for proof of income, or even had their consumer credit information report checked, before they were given unsecured loans.

Banks are not only buckling under the pressure and asking for proof of income, and running credit checks, but they are coming down harder on borrowers who have bad debts.

The move is causing mixed emotions among consumers. However, only time will tell if consumers will find other ways of borrowing personal loans.  While the move by banks and credit card companies is motivated by their determination to slow their losses, it may have a positive effect on the population.

There has already been an increase in secured loans, partly because unsecured lenders can now force the sale of a home to repay a loan, and partly because of the lower interest rates.

The Debt Counsellors released a new survey that suggests that more than 50 per cent of those seeking help with their debt problems owe more than £15,000.  This is a £5,000 increase from a similar report published only four months ago.

The Debt Counsellors Annual UK Debt Survey 2007 reveals that 57 per cent of people who are actively seeking debt help owe between £15,001 and £100,000, and 12 per cent have accumulated debts of more than £50,000.

Women, 25 to 44, lead the group at 55 per cent.

Surprisingly, 71 per cent of debtors who need professional help do not carry a mortgage.  Also, 71 per cent less than £20,000.

Credit cards still lead the way, causing the biggest problem, with 26 per cent owing between £5,001 and £15,000 on their cards.  An incredible 13 per cent carry credit card debt of £25,001-£100,000.  This is an unsecured loan that may carry interest rates as high as 20 per cent.

John Porter, a senior counsellor with The Debt Counsellors, says the new survey throws a revealing light on the causes of debt.  Porter said:

“It is clear from looking at the results of the survey and comparing the levels of debt and income, many people are building up debts that are impossible to sustain.

“However, the positive thing is that these people have shown the good sense to get professional debt help, and anyone worried about their debts should do the same.”

“There are debt solutions for even the most serious cases and legal processes such as the IVA, or Individual Voluntary Arrangement, can often help people with debts of over £15,000.

“The best way to find out more about these debt solutions is to speak to a professional debt counsellor.”

Recent changes to the insolvency laws have left many in the financial industry worried that the government has made insolvency too easy.

Louise Brittain, at the auditor firm Baker Tilly said:

“The 107,288 people who went insolvent this year wouldn’t fit into the enlarged Wembley Stadium. In 2006 there was an increase of 40,000 insolvents compared with 2005, enough to fill Stamford Bridge.

“Britain already owes more money than any other country in Europe and now we have the highest insolvency figures since records began in 1960. The extra number of individual insolvents has doubled each year since 2002. People are without doubt behaving irresponsibly with credit, blindly taking on debt without thinking how they will repay it.”

No one argues this. It is common to receive a credit card as a wedding favour with a £5000 plus limit, and the mailbox is full of applications for both unsecured and secured loans.

Vince Cable, Treasury spokesman for the Liberal Democrats, said regarding insolvencies:

“This staggering increase in personal insolvencies, alongside the equally dramatic rise in home repossessions, demonstrates the severity of Britain’s personal debt crisis.

“These are not freak figures. Sadly, they will deteriorate further once the recent increases in interest rates kick in, tipping even more people over the edge.”

Analysts are predicting a spike in insolvencies in 2007, far beyond the initial fears that 30,000 would declare insolvency in the first three months. The industry is still playing the blame game, passing blame between lending companies and the increase in the cost of living, including recent interest rate hikes.

The Office of Fair Trading reprimanded 17 IVA companies for issuing misleading adverts. Two new companies were add to the list within the last couple of weeks.  It admits that it is considering action against a number of others.

Last week, the Consumer Credit Counselling Service, said it will start putting pressure on the IVA sector.

The result of this pressure is hitting all sectors of the IVA industry. All companies have experienced a 10 per cent drop in share prices in recent weeks.  With several of the major companies issuing warnings.

The market is shaken by a recent, growing trend, that sees lenders refusing to approve IVAs. An IVA is not legal unless  75 per cent creditors approve the IVA.

Paul Carter, the chief executive of debts.co.uk, said:

“This is still a very young sector, and there’s been very strong predictions for its growth, so we’ve been well aware that as soon as anyone came out with a profits warning that it would send a shockwave through the industry. But people are viewing the industry as one, and are not looking at the individual companies. We are in our ninth year of trading. We’re not experiencing the same problems our competitors are.”

Lenders began to express concerns over the IVA sector when customers were being sold IVAs as a way of escaping debt, instead of a part of a debt management plan.

The British Bankers Association conducted a mystery shop of IVA providers last year.  The result was serious concerns about the advice given debtors.  It said IVAs should only be sold to about 5 per cent of cases, but their research suggests that the actual sales are much higher than these numbers.

The Government has finished the pilot program it started last year and is ready to take on loan sharks  who are preying on the UK’s poorest communities.  The pilots in Birmingham and Glasgow where successful at exposing and prosecuting loan sharks who charge interest rates as high at 400 per cent.

Gangs are preying on poor communities, sometimes posing as financial firms.   They offer loans at exorbitant rates then use threats of violence to extort money.

Treasury Minister Ed Balls said yesterday: “This will help more victims nationwide and send a warning that illegal and unacceptable practices will not be tolerated.”

The National Consumer Council said: “It’s vital these projects are supported by efforts to make more affordable credit widely accessible.”

Website IVA.co.uk, the host of National Debt Awareness Week, wants to draw attention to the country’s debt crisis. But, it is unsure whether they will address loan sharks and their emotional and financial impact on the community.

The problem of loan sharks hits all segments of society. The impact of suicide, insolvency, and fear creates a ripple effect all segments of societies, from the social fabric of communities, to the national debt.

A public debate in London’s Docklands, next Thursday, will be chaired by TV’s Peter Hobday with speakers Dr Vincent Cable, Lib Dem, and Mark Hoban of the Tories.

If Debt Awareness Week does open up forums for discussing the problem of loan sharks, it will empower communities to take a pro-active stance.

Consumers who are victims should seek help.  Credit Advice is an excellent place to find help.

The Office of Fair Trading criticised 17 firms for misleading advertising that did not spell out the full implications of IVAs, in a statement last week.There is concern that some firms are cohering sales people to promote IVAs to indebted adults so they can earn commissions that averages £6,500.

The Insolvency Practices Council (IPC) has reported on rogue practitioners who sell IVAs to benefits claimants.  These people rarely have any chance of meeting the required payments.  They will loose the IVA fee, and stack-up several hundreds of pounds in fees, before being forced into an inevitable bankruptcy.

Mervyn King, the Bank of England Governor, warns that the £1,200 billion debt mountain is a social problem.   Until now, many people are holding the belief that the debt is a personal problem, or limited to the lower-income sections of society.

This comes on the heels of reports that indicate the number of women bankrupts.

The accountancy firm Wilkins Kennedy, claims that the proportion of female bankrupts has risen from 32 per cent in 2000 to the current 44 per cent, and is expected to reach 50 per cent in 2009.

The firm has two classifications of women who claim bankruptcy.  Those who are overspending to sustain a lifestyle they cannot not afford, and those who suffer as single mothers or divorcees.

The CCCS reports that nearly half the people they recommend bankruptcy as a solution to their debt problems are single women. The average debt of this group is £30,293. Half of the CCCS clients blame the unexpected and emergencies for their debt problems. The most common problems are a relationship breakdown, illness and employment.

Despite the fact that Consumer watchdog groups have been warning consumers to be careful, this month will see thousands of UK consumers turning to debt management schemes that will, possibly, cost them everything in the end.

“We often see people that have taken out a consolidation loan,” Meg Van Rooyn, information officer for National Debtline, told BBC News Online in 2003.

“A major danger is that people tend to look at how much they borrow not how much they will pay back in total.”

Prior to this, in December 2001, the Office of Fair Trading (OFT) established guidelines for the debt management industry.

The OFT dictated that firms needed to conduct a thorough review of clients’ financial position, reveal their fees upfront, and not mislead consumers into thinking that repayment of their debts would improve their credit rating.

In 2003, The Consumers’ Association mystery shopped seven leading debt management firms, all failed the OFT test in one or more ways.

In one instance the charges that the management firm would impose were larger than the debt repayments.

With the introduction of IVAs, it became more difficult for consumers to find a responsible method of reducing their debts.  Many are paying exorbitant fees for a service that garnishes their money for five years, and still leaves them with no credit rating.

One word of caution is being whispered by debt consolidation and debt management firms in the UK, buyer beware.  They are warning consumers to take time to find a good firm.  Never be ‘sold’ by a fatherly or motherly salesperson who treats you like family.

Instead, the best way for consumers to avoid bankruptcy is to shop around, ask for advice, and take their time.

A new study shows that Brits who want an alternative to high interest rates are turning to Social Lending over the internet.  The report states thatt 74 per cent of UK adults may consider getting a loan or lending through a social lending community.

While it is common for consumers to lend money between friends and family, it can be dangerous to use the Internet for Social Lending.

Social Lending over the Internet, is where people lend and borrow loans, side-stepping the banks, to get earn better loan rates or returns. While it looks like a fair deal on the surface, there are many red flags.

Social Lending is not like other social networking sites like LinkedIn, YouTube and MySpace.  Borrowers and lenders could find themselves in danger from fraudsters, credit consumer damage, and theft.

The study looked at a number of Social Lending players, and used Zopa, the online marketplace, as a case study. Zopa, set up by members of the team that launched Egg, has attracted 105,000 members in the UK.

James Alexander, co-founder and CEO of Zopa, believes that not only are people looking for a better financial deal, but also for a way to make their money human again.

“People are already seeing the benefits – for example, those lending at Zopa have since launch received about a 50% better rate of return on money they’ve lent out than if they’d left their money in the best savings accounts such as ING Direct or Egg.”

However, unlike ethical lenders who operate over the internet, working as brokers for their clients, Social networking is not traceable. It is as easy for an identity theft fraudster to walk off with money as it is for them to steal money from consumers and banks.  The difference is, there are regulations to protect money stolen from banks, bank clients, and financial institutes.  These safeguards are not in place to protect a UK consumer who lends to a foreign citizen, or to someone who has simply vanished.

There is also the problem of losing the money invested if the borrower declares bankruptcy.