Insolvency levels hitting credit card firms

In its latest trading update, Barclays said that while its credit card arm was still performing well, it was still concerned by bad credit card debt.

“The rate of growth in impairment charges continued the trend of the first half, driven by a higher level of insolvencies,” Barclays said.

However, it stated that “the flows of new arrears and levels of delinquent balances have stabilised” as Barclaycard takes action against bad debt.

Announcement that bad debt has dented profit levels is of little surprise, especially as the Insolvency Service figures show that bankruptcy cases and Individual Voluntary Arrangements (IVAs) increased in England and Wales in 2006.

Earlier this year, Barclaycard became one of the first main lenders to increase interest rates for credit card debt to recoup losses from bad debt.