The Credit Services Association report blamed readily available credit and the lack of personal responsibility for the crisis. Spending sprees and unemployment was also blamed for the problem.

The report said debts have escalated despite years of low interest rates.

But Scott Soutar, president of the CSA, believes an increase in interest rates could make the problem worse. The CSA revealed that creditors have referred over 10 million cases to debt collectors in the past year.

The report confirmed that the number of debts referred to debt recovery services was only a small fraction of most debts and it slammed lenders for knee-jerk actions to punish delinquent borrowers, without giving them enough time for payment.

The CSA argued: 'Customers are contacted earlier and more frequently in very early stage delinquency and late payment charges are threatened.

The CSA claim arrears of around £2,000 per household.