WHAT A SHOCK. Banks aggressively push plastic on consumers and suddenly more card holders fail to meet payments. Another absolute stunner is that bank profits last year benefited from the increase of cards being issued and the amount being spent as a result, despite rising default rates. So banks push the cards. More people take them up. They spend more. Banks make some attractive profits. But some people cannot meet payments any more. They default. But the pros still outweigh the cons for the bank. What is hard to swallow is the whingeing by certain banks when the defaultees file for bankruptcy. The blame of course lies with the attractiveness of a bankrupt being able to clean their slate after four years. This, banks argue, encourages consumers to spend. It's not the extra card being rammed into their faces or the attractive and tempting credit limits on offer to help, say, pay the rent after the card owner has been laid off. It's that blasted four-year discharge. Hong Kong's growing league of bankrupts are crafty, deceitful individuals who are deliberately racking up the debts to hoodwink our banks. Let's all take a moment to wipe away our tears. Then we can peruse the latest figures on bankruptcy in Hong Kong. The bad news is that should the numbers continue at the present rate, by the end of this year they may be on a par with England and Wales. Personal bankruptcies last year notched up a record 13,186. In January, the monthly figure was 2,121 - the highest ever for a single month. The following month, 1,616 petitions were filed. The figure for this month will be telling. Presumably, the January figure represents a post-Christmas jolt. Yet if we take the February figure, and assume it only continues to increase, the picture looks decidedly bleak. Even at the present rate, the year's total would be pushing 20,000. Any more monthly increases will give us figures similar to that of bankruptcy in England in Wales. Last year, for example, the number was 23,477. Now think of the different population size. The monthly figures in Hong Kong went through the 1,000 barrier in July last year and have increased steadily since. The numbers have shown no sign of bottoming out. At least debate on what to do about it seems to have shifted from the automatic discharge available after four years - it should not be forgotten that a bank can in fact object to the discharge if it desires - to the sharing of 'positive' credit card information. What is a pity is that the issue of Individual Voluntary Arrangements (IVA) has not really featured in the debate at all. This is a formal proposal made to creditors for repayment of debt and a statutory stay on enforcement of that debt. In other words, a workout between the debtor and bank. In England and Wales last year, there were 6,298 such arrangements. In 2000, the figure was 7,978. Nearly one in three people come to an understanding with their bank or creditor. Now let's look at the IVA figures for Hong Kong. There have been a grand total of 10. Ever. The options open to debt-ridden individuals are thus narrowed to either struggling with a mountain of debt, interest and debt-collector charges or filing for bankruptcy. A workout? A workhouse would probably glean more support. Financial institutions, it seems, would rather tut and disparage than get their hands dirty with the credit 'monsters' they created. And so debate moves swiftly along to the cleaner issue of credit data. Jake van der Kamp is on holiday moir@scmp.com
