"I feel the banks should be saying that if someone has a $3000 limit on their card then their repayments will be $150 a month as long as you can budget to that. As these limits extend out to $9000 to $10,000 or more, those repayments lift.
"But the amount they're lifting by is simply too much for those people to afford repaying. And if they don't have a financial buffer, they're in trouble.
"People get into this situation and then are so embarrassed about it so they then go and get another card to repay the first card. But the worst thing is those lending institutions allow it to happen.
"Those people with that much credit card debt might be working four cards at the same time. So the banks have re-lent, re-lent and re-lent to them. The banks are failing here, because I believe they're simply not doing enough checking."
Mr Stoneman said the problem was that it was too easy to get credit cards, because the banks wanted your business.
"You see them advertising on TV, telling people they're offering a new credit card rate and urging people to swap to them. They say they'll drop the rate to 1.99 per cent for six months so everyone moves. The biggest margins banks make is on cards, but they don't seem to care too much about the responsibility I believe should go with that," he said.
"But people get caught out so easily. It's an easy 'lend' and people spend on their cards without thinking of what they can repay. In the old days people saved, put down a deposit and paid things off. Not any more, we live in a 'want-it-now' society."
He said anyone in a debt spiral needed to seek professional advice.
"That will ground them. There are budget advisers and financial advisers around, but the key is they take stock of where they are financially now."
Mr Stoneman said one of the first things to tackle the problem is reducing credit card limit immediately.
"If they have several cards, they should cut up all of them bar one and reduce the limit to an affordable amount to pay back each month. But the difficult part is getting out of that cycle."
He said people who provided credit solutions were happy if some money was being repaid rather than nothing at all. Even if it was $100 a month rather than $180 at least the lender was receiving something.
He said debt was not a problem that found a place within one section of a community; every level of a community would be affected by this problem.
He said the other common trap was department stores offering goods on interest-free terms over a couple of years.
"But people don't realise what they're paying back is a minimum so at the end of the two years they still have a balance remaining. They know they've been paying every month, but what they don't realise is it's a reducing amount each month over that period.
"Then they get a bill, say, for Trapped in credit card debt
$500 on a $1000 item and facing significant interest rates. People get caught like that all the time," Mr Stoneman said.
The other problem was someone's ability to earn income to help them out of debt.
"A younger person has a lifetime to recover. But if you're retired and got all your finances wrapped up in that card, then your ability to repay becomes very, very difficult."
He said the options of downsizing the family home or taking out a reverse mortgage were open to question.
"If you've got children of working age - and I know this can be embarrassing - but sometimes asking them for help rather than putting your home at risk is worthwhile. It's a family asset, after all. I'd go back to the siblings and explain the situation to them."
He said there had been some changes within the mortgage market to tighten up this credit slackness with banks requiring a 20 per cent deposit before a mortgage is available.
"The banks are recognising the risk for them is higher. But in the credit card area, where banks are making so much margin, that's an area I think can be tightened. .
"You only have to look at the billions of dollars of credit card debt that's out there to ask how on Earth is this happening," he said.
"Giving large sums of money on credit cards to people who have no ability to repay is not right. It's a moral issue, and it's sad when you see it."
Mr Stoneman said most of his company's clients were fairly secure and involved in managed funds. They had a financial buffer in place.
"Generally, older people are wiser and don't get into such difficulty. Generally, with credit card problems it's the younger ones. The thing is they have recovery time. Unfortunately for many, their solution is to go see another bank to get more credit. It's not good."
Mark Stoneman's primary and secondary disclosure statements are available upon request at marks@stonemanfinancial.co.nz
