MILLIONS of high-spending consumers are risking financial ruin by running up excessive debt in reckless sprees of personal borrowing, the chairman of an influential Commons committee said yesterday.

In the latest symptom of mounting fears over the threat to the economy from a runaway national borrowing binge, John McFall, chairman of the Commons Treasury Committee, said that many people’s appetite for debt was putting their futures on the line.

“Some people are tiptoeing into disaster because of the ready availability of credit from a range of sources,” Mr McFall told The Times. “The evidence has indicated that it is easy for consumers to get credit.”

Mr McFall’s warning came as his cross-party committee prepares to step up a highprofile inquiry into the way in which banks and other lenders have encouraged householders to take on ever-increasing debt through personal loans, credit cards and remortgaging.

Five of the biggest credit card providers have been summoned by the Treasury committee to face interrogation over their lending practices as the MPs pursue their investigation of the nation’s debt culture. Barclays and Royal Bank of Scotland group, the two largest credit card groups, will appear alongside HBOS, Lloyds TSB and MBNA, the American group.

After startling Bank of England figures this week revealed that consumers borrowed a record £10 billion more in June alone, pushing up personal debt at a high annual rate of 14 per cent, there were strong signs yesterday that lenders are facing a backlash, and accusations that they have irresponsibly fuelled an unsustainable rise in indebtedness.

The banks and credit card companies are bracing themselves for a rough ride from the Treasury committee.

The committee has already savaged store card providers for charging exorbitant rates of interest on purchases bought at big-name high street stores. Despite the lowest base interest rates in two generations, at just 3.5 per cent, rates on store cards are still often as high as 30 per cent — making them among the most expensive means of credit available to consumers.

Mr McFall signalled yesterday that the committee is likely to intensify its campaign against lenders accused of exploitation of consumers’ willingness to borrow, hard-sell marketing techniques and excessive charges. Criticising the use of heavy campaigns of direct marketing by credit card issuers, Mr McFall said: “The frequency of direct marketing to individuals illustrates just how easy it is to gain credit. It’s easy to get into debt — but the advice just isn't there for people to get out again.”

A Liberal Democrat member of the Treasury committee, Norman Lamb, highlighted what he said was the “scandal” that GE Consumer Finance, a subsidiary of the giant American conglomerate GE Capital, which is behind 50 per cent of store cards in the UK, had last cut its rates in April 1999. Over that time the Bank of England base rate has halved, Mr Lamb noted.

GE, the lender behind cards including those for House of Fraser and Debenhams, charges interest of between 26 per cent and 30 per cent.

Barclaycard, which has faced repeated charges of exorbitant interest rates in the past, also came under heavy fire yesterday over a complex new scheme which consumer groups said was designed to encourage people to sink deeper into debt — and to remain there. Barclaycard, still the UK’s most popular credit card provider, is offering a 2 per cent “cashback” on card spending — provided that borrowers do not clear their full balance each month. But the cashback deal is available only if card users transfer a balance of up to £5,000 to their card.

Mike Naylor, of the Consumers’ Association, said: “We are concerned that this card is encouraging people to build up debt, since they can only get the full benefit if they continue to spend, and do not clear their balance.”

Mr Naylor also argued that the Barclaycard scheme’s structure is so complicated that it is impossible for consumers to compare it with other deals — a criticism that echoes attacks on the transparency of other cards’ charging schemes.

“We know that consumers like the idea of a figure that looks very generous,” he said. “But other cashback cards do not encourage you to build up debts.”

The only other 2 per cent cashback deal in the credit card market comes from Amex Blue and its offer lasts for just three months.

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