Calls have been made for a change in banking laws after a mentally ill man who thought he was a millionaire built up debts of £70,000 by travelling the country and handing out money to complete strangers.
Debt advisers criticised Lloyds TSB bank for allowing the man, who suffered from a bipolar disorder, to fall so heavily into debt.
And the Citizens Advice Bureau called for Scottish law governing banking practice to be adopted in England to prevent similar cases.
The 39-year-old, who comes from Burton on Trent, Staffordshire, was allowed a series of loans over two years totalling nearly £40,000 by Lloyds TSB.
The rest of his debt was built up using credit cards taken out with several banks.
His disorder, which causes manic depression, had left him so deluded he would forget where the money had come from.
Believing he was a philanthropic millionaire, he would travel to cities such as Liverpool and Manchester and hand out bundles of cash to Big Issue sellers and homeless people.
His condition only came to light when he caused a commotion at a Burton on Trent bank and the police were called.
He was sectioned under the Mental Health Act and has now been given treatment for his disorder. He has since been declared bankrupt.
Financial advisers at CAB said more stringent checks should have been made prior to the man being allowed to fall so heavily into debt.
Suman Antcliffe, from CAB, said: "The man was so ill he can't even remember what happened.
"He still managed to hold down a job, but in his head he believed he was someone different. Although he was on a decent wage, the bank should not be handing out these sorts of sums without doing more checks. He was not a homeowner and had already run up other debts."
Highlighting the Scottish practice, a CAB spokesman said they wanted to see it applied to the whole of the UK.
"In Scottish law a contract is not binding if one party has a mental deficiency. There is no evidence to suggest that this Scottish practice does not work well," he said.
"We would like to see to this apply to the whole of the UK.
"Currently people with mental health problems are excluded payment protection on loans. The banks can't have it both ways."
Neil Tinning, patron of the Manic Depression Fellowship, said: "It's all too common a problem. Banks should shoulder responsibility and understand that someone in a manic phase is not responsible for what they do.
"Banks should write off debts for those who borrow whilst in a manic phase. When a sufferer is in that frame of mind they don't feel or necessarily appear ill.
"They may appear totally confident and aware of themselves - most people in a manic phase seem reasonable when borrowing money. The flip side of this is that debt then harms recovery. It's something that banks are not sympathetic to. Banks should have a more responsible lending policy."
A spokesman for Lloyds TSB said they were waiting for further information on the case. "We take these allegations very seriously. If there is a problem then we would want to investigate the matter fully," he said.
"Lloyds TSB is committed to being a responsible lender. It is clearly not in our interests to lend money to people who cannot afford to pay us back.
"We have stringent rules and controls in place. We strive for very high standards in this area and are constantly monitoring our practices.
"As a result of our focus on responsible lending, we have introduced a number of industry-leading initiatives which go above and beyond the minimum requirements of the banking code and exceed the standards of many of our competitors."