RBS and the inevitability of payday loans

The headlines were about losses and bonuses, but the numbers in the Royal Bank of Scotland annual report for 2012 shone some interesting light on trends in loans and debt.

Bad debt charges were down by a third in the bank’s UK retail division, from £788million to £529 million, Credit Today reported.  The drop was driven by a “huge” reduction in bad debt levels on UK mortgages of almost a half.

In its report RBS said this was achieved by reducing risky lending, a smaller unsecured loan book, lower default rates and higher recoveries, which also drove dramatic falls in bad debt charges on personal loans and cards.

But what does this summary  mean - what actually happened  to real people?

“Risky lending” covers a multitude, but the outcome will have included a continuing drop in the number of mortgages, personal loans and overdrafts approved. 

“Lower default rates and higher recoveries” means that people who fell behind on their payments were chased harder and faster.  The bank may also have sold off debts to third parties which specialise in debt recovery. 

So if only the safest of consumers were lent money or given credit cards by RBS, what happened to the people who were rejected, or found themselves dealing with a much sterner debt recovery company? And for that matter, how did the lucky few manage to maintain their position on the bank's low-risk list?

Some pulled in their horns, trimmed their budgets and made ends meet.  No more Saturday treats from HMV, or dvd rentals from Blockbuster, or smart birthday cards from Clinton's.

Others looked elsewhere for credit – and found a warm welcome on the high street or online at their friendly neighbourhood payday lender...