Past Articles for August, 2007

Millions of British adults would fail a personal finance exam asking questions of the same difficulty as GCSEs, according to a recent study carried out by Abbey.

The research saw more than 1,000 people answer “simple” questions about their banking services and around ten per cent performed so poorly that they would have failed if it were a real exam, Abbey explains.

Indeed, with credit consumers across the country struggling to become debt free, the financial services firm shows that around 4.7 million British adults would be likely to fail a GCSE in personal finance studies.

“Abbey certainly welcomes the government’s plans to introduce a much-needed personal finance element into the curriculum,” said Steve Shore, head of banking at Abbey.

“We would also urge anyone who doesn’t understand something on their bank statement to contact their branch or a financial adviser.”

Debt management problems forced close to 27,000 UK consumers to enter insolvency during the second quarter of this year, according to figures from the Insolvency Service.

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Consumers need to be made more aware of the terms under which they agree to take on credit offered by high street retailers, according to one expert.

Rory Taylor, a spokesperson for the Competition Commission, makes clear that a full understanding of store card lending details could help UK consumers avoid resulting debt management problems.

“You can sign up for direct debit agreements and make sure you don’t get any late payment fees, you can cancel insurance, those sorts of things,” Mr Taylor explained.

“We just want to make sure people know what they are entitled to do after they sign up for the store card and what will happen depending on whether they choose to pay off the minimum payment or pay it off in full,” he added.

Research by the Competition Commission showed that there was a full £2,500 million worth of debt owed on store cards by the UK’s 14 million card holders at the end of 2004.

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British consumers have been urged not to overspend while on holiday and leave themselves with a debt management headache when they return home.

Frances Walker from the Consumer Credit Counselling Service suggests that if holidaymakers save and budget effectively, there should be no cause for consumers to accumulate serious and difficult-to-pay-off debts.

Indeed, Ms Walker insists that for many British consumers, serious debts resulting from holiday spending tends to reflect more significant and long-term financial problems.

She said: “The times we spend on our credit card a lot tend to be holidays and Christmas but unless you’ve got an underlying issue in either case it shouldn’t cause you to become over-indebted.

“You just need to plan to repay your credit cards back and not go on using them.”

Figures from CreditExpert.co.uk showed recently that close to 12 million British consumers face debt management concerns as a result of their holiday spending habits.

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Nationwide debt charity Credit Action has suggested that some store card lenders are enabling their customers to run up significant amounts of debt.

The charity is convinced that there are retailers in the UK that have taken steps to tighten up their lending practices, but makes clear that there is still much that needs to be done to help shoppers avoid adding to their debt management problems.

Credit Action insists that there are certain steps, such as not allowing consumers to spend money on a store card immediately after receiving it, which should be brought in to protect shoppers.

“I think stores could do a lot more… through lending responsibly but also in encouraging people to borrow responsibly,” said deputy editor of Credit Action, Chris Tapp.

“While stores have got a lot better, there is an awful lot more they could do in helping people think through their borrowing,” he added.

According to figures from Credit Action, the UK’s debt management mountain increases by around £1 million every four minutes.

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As debt management problems spiral out of control for an increasing number of UK consumers, a new report has forecast that the number of Britons being refused credit will rise in years to come.

Research by Datamonitor estimated that around seven million Britons were systematically refused credit during 2006 and this figure is now expected to increase by around 1.6 million by 2011.

The research firm notes that this marks a reversal of the trend in recent years, which has seen the number of British consumers systematically refused credit fall consistently on an annual basis.

Datamonitor refers to consumers who are unable to gain credit from mainstream lenders as “non-standard” and is convinced that there numbers are set to rise as a result of “interest rates going up” and the assumption that “high levels of consumer indebtedness [are] here to stay”.

The financial pressures have increased on many British borrowers facing debt management issues in the wake of five rises in the base rate of interest since August of last year.

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Debt collection companies in the UK took on three-times more debt last year than was the case six years ago, according to reports.

Figures from the Credit Services Association (CSA) show that around £21 billion worth of debt has been passed to collectors over the past 12 months and this equates to around 20 million separate cases of personal indebtedness among UK consumers.

And as more and more people around the country struggle to deal with their debt management problems, the CSA suggests that some credit consumers are resorting to moving house as a way to avoid paying off their debts.

In fact, research by the organisation indicates that of the 20 million or so cases handed to debt collectors, “at least one million were ‘gone-aways’”, Godfrey Lancashire, CSA president, told the Times.

The total amount owed by UK consumers currently stands at around £1,345 billion, according to figures from Credit Action.

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The Consumer Credit Counselling Service (CCCS) has suggested that young British homeowners are facing serious debt management difficulties as they attempt to maintain control of their finances.

Figures from the charity organisation show that debt levels among British consumers aged under 25 are around two-thirds higher for those who have taken on a mortgage, compared to those in the same age group who rent their homes.

And the CCCS also reports that the average amount owed by Britons aged under 25 who use its services in search of debt advice stands at more £16,000.

“There is a danger in young people getting on the housing ladder before they are ready financially,” said the chairman of CCCS Malcolm Hurlston.

“Before taking out a mortgage the under-25s should make sure they can still afford to live and not rely on credit to plug the gaps.”

Earlier this year, the same charity predicted that British homeowners of all ages would struggle to meet financial demands throughout 2007.

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With thousands of young Britons preparing to start university life, students have been warned that they should take steps to ensure their debt management problems do not spiral out of control.

Financial comparison firm MoneyExpert.com reports that that the average charge levied by banks against students exceeding their overdraft limit stands at £32.75 and suggests that young consumers need to decide carefully how best to borrow money.

Indeed, MoneyExpert.com claims that banks around the country are keen to attract students to their money lending services and that in many cases offers from financial service providers amount to nothing more than gimmicks.

Sean Gardner, chief executive of MoneyExpert.com, said: “The big banks are desperate to sign up students in the hope that they’ll either remain with them long-term or will borrow lots of money, or both.”

“But choosing the right bank is a bit of a minefield. It often depends on your financial circumstances as the offers do vary. Making a comparison is a must.”

A report from Moneyfacts.co.uk recently warned that credit card debt can cause long-term financial difficulties for students borrowing money in this way.

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Thousands of young British consumers are unaware of how much debt they have accumulated, according to the latest figures from Unbiased.co.uk.

Research by the financial services firm shows that around 41 per cent of UK consumers aged between 18 and 24 cannot say to within £500 how much money they owe.

This makes young consumers the most unaware of their debt management circumstances, but a total of 15.4 million Britons cannot accurately put a figure on how much money they owe.

David Elms, chief executive of Unbiased.co.uk said: “This research shows how little the UK consumer is budgeting and preparing for every eventuality.”

“‘Generation Spend’ is allowing debt to dictate behaviour, rather than taking financial control and keeping a check on debts,” he added.

Data compiled by Scottish Widows recently showed that millions of retirees in the UK are still searching for a debt solution.

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Calls made to broadband internet technical support helplines are costing British consumers millions of pounds each year, according to recent research.

Figures compiled by uSwitch.com suggest that these phonelines now account for £31 million spent by UK consumers each year and could be adding to many people’s debt management difficulties.

Problems with broadband services often take numerous helpline calls to resolve and the resulting charges are on top of the £2.8 billion paid out by Britons each year for basic broadband supply, uSwitch.com reports.

Head of communications at the price comparison firm Steve Weller said: “It’s disheartening that broadband companies are not content with the £2.8 billion already being channeled in by customers who are simply paying to receive a service that works.

“To rake in an additional £31 million just for helping customers to resolve technical hitches is just wrong. It’s interesting that sales lines are free to call.”

Meanwhile, president of the Association of Business Recovery Professionals Patricia Godfrey recently described the extent of debt problems among young people in the UK as “very worrying”.

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