Financial institutions have morphed from 'credit providers' to 'credit pushers,' Wealthy Barber author says in new book.

Some 22 years after writing The Wealthy Barber, which became easily the bestselling personal finance book in Canadian history, David Chilton has a dire warning in The Wealthy Barber Returns, to be released this fall. Taken from The Vancouver Sun, the full article can be found here.

"The worst thing that's happening to Canadians in the last 20 years has been lines of credit," said Chilton, speaking at a recent Canadian Pension & Benefits Institute conference in Vancouver. "If I was Prime Minister, I'd shut them down. It's unbelievable how people are abusing these things."

He helped one person establish a schedule to pay off $30,000 in credit-card debt, only to have the person take on a $150,000 line of credit from a banker, "because the man was so nice and said I needed it." The banker's explanation: "It's my job."

Chilton's summation: "That's the problem. It's a lot of people's job to get Canadians to take on debt.

"Our financial institutions, when I was young, were credit providers. Now they're credit pushers, and they are very aggressively hoisting as much debt onto the Canadian public as they possibly can. The public is taking it in, and it is not a good situation."

"In some ways, I think we came out of the recession too soon," he said. "The lessons that people were starting to learn, in some cases, were stopped."

For example, many people are still using their houses as an ATM - a tendency that is encouraged by banks and lenders, he said.

"I understand it from a financial institution's perspective: You get the mortgage, you get the security-backed line of credit and you retain the consumer. But it makes it difficult for that consumer to move away from you."

Chilton's first book, The Wealthy Barber, held as one of its tenets "pay yourself first" and sold more than two million copies. In the followup, the message shifts from saving to not spending so much.

"One thing we're seeing that we never saw 20 years ago is that all sorts of people who built up their RRSP through 'pay yourself first,' have simultaneously built up their credit line through the back end and their net worth has changed modestly if at all," Chilton said.

"And the worst combination in the country is a line of credit and a home renovation -once they renovate one room, the other rooms pale by comparison, so they go on to the next room and it's a never-ending cycle of renovation as they get deeper and deeper and deeper in debt.

"The four most expensive words in the English language are 'while we're at it.'"

The Home Renovation Tax Credit fuelled the phenomenon and sent the wrong signal after a credit crisis that was prompted by too much private debt, particularly in the U.S., Chilton said.

"That's like starting an alcoholic's rehab by taking him on a pub crawl. The problem with governments is they want to get re-elected."