Past Articles for March, 2007

However, the Office of Fair Trading (OFT) has disappointed some of those consumers facing debt management concerns by indicating the process will not be complete until towards the end of 2007.

Pricing and charging practices among British banks are seen as part of the reason behind the extent of the country’s debt management worries by some observers and a number of areas of concern were revealed by the OFT during an initial review.

Chief executive of the OFT John Fingleton remarked: “The issue of bank current account charges is a matter of real concern to the banks’ customers, and raises wider questions about competition and transparency of pricing.”

“A quick-fix solution is not the answer as this might be of limited long-term benefit and could have unintended and far-reaching consequences across the whole sector and on consumers as a whole,” he added.

The OFT has been established since 1973 and the organisation operates a non-ministerial department of government.

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Ill-informed decisions about which financial packages to take out and how to handle a debt management problem can often make a bad situation worse, Derek Oakley, from Debt Free Direct, suggests.

The personal finance expert also claims that there are instances of advertising actively encouraging people who are already facing serious debt management trouble to continue to borrow more money.

“What is an issue is people making ill-informed decisions involving money,” said Mr Oakley.

“The situation I’ve come across most frequently is the poor decision making: [consumers] thinking you can borrow your way out of a problem.”

According to a study from the accountancy firm KPGM concluded that the number of people entering into an Individual Voluntary Arrangement in the UK is increasing at a “breathtaking pace”.

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And the ongoing efforts by the organisation to stress the need for such a service have been backed up today by a work and pensions select committee report presented to the government.

In its latest report, the committee suggests the government will need to create a national financial advice service or face the possibility of failure regarding its reforms of the pension system, further evidence, the Resolution Foundation claims, that its position is well founded.

Patrick South, director of external affairs at the Resolution Foundation, said: “This is the third consecutive select committee report to stress the need for generic financial advice to support personal accounts.

“This is one of the issues being looked at by the Thoresen Review and should also be an early priority for the new Personal Accounts Board when it is set up.”

Meanwhile, the government recently revealed that council tax demands around the UK are set to increase, which is likely to intensify the financial pressure on those facing debt management difficulties.

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Insolvency director at Debt Free Direct Derek Oakley suggests that consumers should be made more aware of the kind of debt advice available to them and stop trying to ignore the reality of their financial circumstance.

“There’s a lot of places out there where people can get help and as soon as they start talking about it and acknowledging they’ve got a problem, they’ll start dealing with it,” said Mr Oakley.

“It’s the denial that is the problem,” he made clear.

Mr Oakley did go on to say that more and more people throughout the UK are turning to the sources of advice on becoming debt free which are increasingly available.

According to a study from Engage Mutual, financial constraints are impacting on millions of the UK’s single parents more acutely than married parents.

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The work and pensions select committee suggests in its latest report that the personal accounts system, which was proposed in a government white paper last December, would need a national financial advice service to ensure its success.

However, with millions of people facing debt management troubles across the country, the government has no idea how much a financial advice service would cost to establish, warned the recent report.

“The provision of generic financial advice and well-signposted routes to individualised personal financial advice will be key to making personal accounts a success,” the select committee report read.

“Government, industry and the financial sector should work together to ensure that we do not inadvertently create a generation of non-savers.”

A recent study by the Consumer Credit Counselling Service suggested that the UK’s debt management burden is increasingly shifting on to older generations.

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“Urgent action” is required to reduce the number of people in the UK for whom bank accounts, low-interest loans and credit cards are difficult or impossible to access, according to the University of St Andrews’ Professor John Wilson.

“Financial exclusion now affects over four million people in the UK, over eight per cent of the population,” comments the personal finance expert.

“This, unfortunately, puts the UK some way behind the likes of France, Germany and Canada in per capita access to banking facilities.”

Professor Wilson went on to suggest that if the largest banking groups in the UK were serious about tackling the problems relating to financial exclusion they would be able to do so.

Meanwhile, six million British adults opted to take a debt consolidation loan during the last ten years, according to figures from the MoneyExpert.

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A recent poll carried out by Ciao covered 1,000 British adults and revealed that around 83 per cent of those asked suggested they were worried that their children would eventually find themselves facing debt management trouble.

The findings have been revealed to coincide with the Department for Education and Skills’ (DfES) launch of the ‘Talking Money initiative, which aims to improve the level of financial literacy among British families.

Bill Rammell, minister for higher education, said: “While parents are happy to talk with their offspring about socialising, boyfriends and girlfriends or getting a job, it would appear that in many families money remains the last taboo subject.”

It was revealed earlier this week by government statistics that the number of children in the UK living below the poverty line increased for the first time in three years.

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Saving money for their children is proving increasingly difficult for the growing number of single parents across the country, the financial services provider makes clear.

And in comparison with married parents, lone mothers or fathers are able to put away much less for their children, with the average British single parent saving £67 less per child under the age of 16 than their coupled counterparts.

Karl Elliott, from Engage Mutual, commented: “Rising childcare and education costs, along with increases in the cost of living, mean that today’s parents are feeling growing financial pressures in bringing up children.

“For lone parents, living on a single income, these pressures may be especially hard to deal with.”

Many people in the UK are coming to accept dealing with debt management as a “way of life” Helen Saxon from the Finance and Leasing Association suggested last week.

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Debt management problems among millions of consumers have seen banks losing profits to bad debt in recent years and the so-called crackdown is seen as a direct response.

Over the course of the last six months, more than 2.8 million Brits have been refused access to a credit card deal, which equates to a full six per cent of the population, the financial comparison service reports.

Sean Gardner, chief executive of MoneyExpert, said: “Credit card companies have been badly burnt with bad debts and are putting the shutters up in response by turning down more and more applications.

“Anyone with debt problems who is hoping for an easy way out by taking out another credit card is liable to find that they’ll be turned down.”

Enough people to fill the new Wembley Stadium applied for an Individual Voluntary Arrangement during 2006, a report from accountancy firm KPMG revealed recently.

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Plans have been outlined in a newly published white paper in the wake of recent figures from the Consumer Credit Counselling Service (CCCS) suggesting that the country’s debt management burden is increasingly being shifted to older generations.

The numbers in need of a debt solution rose quicker among those aged over 60 than in any other age bracket last year, the CCCS warned as the government’s pension reform efforts go on.

Minister for pensions reform James Purnell remarked that: “The International Monetary Fund recently welcomed our reform package, saying it would help to ensure both adequate saving for retirement and fiscal sustainability.”

A report form the CCCS published in January of this year claimed there are thousands of females across the UK not going bankrupt, despite “best advice”, for fear of the social stigma associated with taking such as decision.

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