Bankruptcies hit highest level since 1960

Credit card companies came under fire last night as new figures showed a record number of people going bankrupt as a result of the country's growing mountain of debt.

Department of Trade and Industry figures showed a 37% jump in the number of people becoming insolvent in the second quarter of the year. The three-month total of 15,394 is the highest quarterly figure since records began in 1960.

The low interest rates of recent years pushed Britain's total personal debt levels above the £1 trillion level for the first time last year. The recent slowdown in the economy and last year's interest rate rises are being blamed for pushing some people over the edge.

The level of personal debt is equivalent to the country's entire economic output in a year and three times Britain's national public debt.

Dan Levene, a spokesman for the Citizens Advice service, said the vast bulk of the debt people were unable to cope with was on credit cards, where typical interest rates were between 20% and 40%.

"People are being given inappropriate levels of debt," Mr Levene said. "Some of the marketing devices used by some credit card companies leave a lot to be desired."

People were often lured into taking on credit at 0%, only to see the rate leap if they failed to make a single payment.

Around one in five of all the cases that Citizens Advice Bureaux handle now concern excessive debt, and that share is growing. The average debt of people coming into CABs was equivalent to 14 times their salary, said Mr Levene.

The Liberal Democrat treasury spokesman, Vince Cable, said the figures were worrying. "The government needs to stop being complacent and take action to tackle the problem of personal debt by clamping down on unsolicited mailing, reckless lending and misleading advertising," he said.

A manager at a high street bank, who declined to be identified, said debts were the biggest problem he dealt with. "I have people coming in front of me every day with £40,000 or £50,000 or more of debt. It's just amazing how much debt people have managed to run up," he said.

The insolvency practitioners Grant Thornton agreed that unsecured (non-mortgage) debts were spiralling out of control, but cautioned that debtors had a responsibility not to borrow too much.

"The UK's mountain of personal debt continues to have no peak in sight," said Mike Gerrard, a personal insolvency specialist at Grant Thornton.

"The problem rests squarely on excessive credit and store card use, personal loans, and often unsustainable 'champagne' lifestyles," he said.

The company said it had recently advised someone who had run up £312,000 of debt on 63 credit cards.

The high street banks this week admitted that customers have been having difficulties repaying credit card debts and other loans. Barclaycard, the credit card arm of Barclays, yesterday reported a 17% fall in profits to £379m after having to put £508m aside to cover problem debts - up 42% on the same time last year.

The DTI figures showed strong growth in the number of people who had elected to make what is called an individual voluntary agreement (IVA), whereby they work out a plan to repay their creditors gradually, rather than straightforwardly declare bankruptcy.

IVA numbers were up 70% in the second quarter on the same period last year while bankruptcies were up 27% to 11,195. Both are record highs and together they make up the 15,394 of total personal insolvencies during the period.