Past Articles for November, 2007

Britain has developed a credit culture that has left millions of people struggling to become debt free, one expert has asserted.

In earlier decades consumers would save before making any significant purchase, but in recent years easy access to loans and credit cards has seen many people borrow more and more money, according to Alistair Mathews from education charity pfeg.

Mr Mathews went on to suggest that debt management has become an increasingly common problem for British adults to deal with.

“We have almost officially built debt in to the system now,” he said.

“The availability is there and the banks and other organisations are very keen to sell these services to people, including easy loans and easy credit.”

Figures from the Credit Action charity show that the total amount lend to individuals in the UK was 5.8 per cent greater in September of this year than the same month in 2006.

Share This

A report from the accountancy firm PricewaterhouseCoopers has predicted that the number of people entering an Individual Voluntary Arrangement (IVA) will increase next year.

“Over-borrowing” and increased rates of interest will see debt management problems spiral out of control for more and more people over the course of next year, the organisation insists.

“There are tough times ahead for both consumers and credit card companies,” said Richard Thompson, partner at PricewaterhouseCoopers.

“Banks are continuing to take action in response to the rise in consumer debt by tightening their credit acceptance policies.”

Recent research by the accountancy firm also shows that the typical British adult now has around £33,000 worth of debts, which is almost double to corresponding figure in 2000.

Earlier this year, the KPMG accountancy firm predicted that more than 130,000 people in the UK would enter an IVA over the course of 2007.

Share This

December has not yet arrived, but British consumers are already thought to have spent billions of pounds in preparation for Christmas.

Millions of people around the UK are dealing with debt management issues, but almost eight per cent of adults told Sainsbury’s Bank researchers that they had so far spent more than £500 on items for the festive season.

In fact, according to the latest figures from the financial services firm, there has already been around £6.29 billion worth of Christmas spending around the country.

Donald MacLeod, head of Sainsbury’s Cards, commented: “Christmas is one of the most expensive times of the year so it’s encouraging to see that a large number of shoppers are spreading the cost.

“With so many outgoings it makes sense to look for a credit card that gives you something back in return, people using cards this festive season should check that their spend is being rewarded.”

Soon after Christmas 2006, the Citizens Advice charity urged UK consumers to reassess their finances and resolve to become debt free.

Share This

The Financial Services Authority (FSA) has singled out a number of mortgage lenders from around the UK whose practices it deemed to be sub-standard, it has been revealed.

Many British consumers have found themselves facing serious debt management difficulties after borrowing money to buy a home and the FSA suggests that in some cases lenders were aware of the financial risks posed to their customers.

Indeed, a recent investigation by the authority concluded that measures used to assess the affordability of particular mortgage deals need to be improved across the mortgage sector.

“We found some firms willing to offer mortgages they know to be unaffordable,” Stephen Bland, the FSA’s retail intermediary sector leader, made clear.

“Overall there is a need for a big improvement in senior management’s use of management information to help achieve the fair treatment of their customers to achieve the progress we and the industry as a whole want to see,” he added.

The Council of Mortgage Lenders recently predicted that the number of house repossessions resulting from debt management problems will increase next year.

Share This

The majority of people approaching Citizens Advice bureaux (CAB) in and around Nottingham were in search of help with their debt management problems, it has been revealed.

Millions of people across the country are struggling to become debt free and around 56 per cent of all the requests for help at the Nottingham CAB have been debt-related in recent months.

A year ago debt advice was being sought by around 42 per cent of the CAB’s clients and the bureaux is now aiming to raise awareness of financial responsibility in the local area, the Nottingham Evening Post reports.

Trish Eaton, manager of Nottingham and District CAB, told the paper: “We’ve seen a significant increase in these types of cases since last year and have launched a campaign focusing on debt because we believe that we can play a key role.”

“We will collect evidence of our clients’ problems and use the results to campaign,” she added.

Citizens Advice operates as a nationwide charity and the organisation recently called on business and regulators to take the steps necessary to “stop soaring debt” in the UK.

Share This

British consumers have been urged to budget more effectively to avoid financial struggles at the end of each month.

Research by Abbey shows that the majority of adults in the UK face a financial squeeze in the few days before being paid and the banking group is keen to see consumers avoid these kinds of difficulties.

Around ten per cent of Britons borrow money from their family to make it through to payday, while around a quarter add to their credit card debts to survive as the cash in their current account dwindles.

Steve Shore, head of banking at Abbey, said: “A staggeringly high number of people regularly fail to budget effectively each month and end up running out of cash before their next pay cheque.

“With Christmas almost upon us, it’s especially important that people budget carefully during December’s party season to ensure they don’t run out of cash this party season.”

The UK’s payments association recently predicted that two-thirds of the country’s Christmas spending will be carried out using plastic cards.

Share This

Credit consumers across the UK are cutting back on the amounts of money they borrow from high-street lenders, according to the most recent data from the British Bankers Association (BBA).

Millions of people in the UK are struggling to become
debt free and the association reports that the growth in gross lending nationwide was slower last month than has been the case of late.

Consumer credit lending grew by around £300 million last month, which was a considerably slower rate of increase than the previous month when Britain’s unsecured borrowing grew by around £600 million.

“October’s data provide evidence of a rapidly slowing mortgage market and of consumers limiting their personal borrowing,” said the BBA’s statistics director David Dooks.

“Pressure on household finances, the cumulative impact of interest rate rises over the last year and the consequential impact of the credit crunch may well all have a part to play in suppressing current demand and supply.”

Including mortgage arrears, the overall debt management burden of the typical UK household is worth more than £55,000, according to data compiled by the Credit Action charity.

Share This

The Citizens Advice charity has warned that the banking practice of increasing credit limits without proper solicitation is contributing to the debt management woes of many UK consumers.

With this in mind the charity, which offers debt advice to thousands of Britons each month, has expressed its disappointment that the newly-established banking code of practice does not address these issues and concerns.

Teresa Perchard, Citizens Advice’s director of public policy, said: “We are disappointed that the opportunity has not been taken by the code reviewer, or the banks, to end the practices of unsolicited increases in credit limits and unsolicited issuing of credit card cheques.

“Such practices do not sit easily, in our view, with the commitment in the code to lend responsibly and may have contributed to a culture of consumers sleepwalking into higher levels of debt.”

Figures released by Citizens Advice in September showed that the number of Britons approaching its staff for debt advice had doubled since 1997.

Share This

A number of members of parliament (MPs) have come out in favour of providing British teenagers with personal finance lessons in their schools.

Kitty Ussher, economic secretary to the treasury, told the House of Commons recently that teaching young Britons debt management skills and about how to handle money could have significant benefits nationwide.

“I have listened to 15 and 16-year-olds at Burnley college explaining with great maturity how they would decide what type of credit card to have, if any,” said Ms Ussher.

Opposition MPs also suggested that if the UK’s young consumers are to avoid a future of debt management woes, they ought to be taught basic financial skills in schools.

Liberal democrat economic spokesperson Julia Goldsworthy said: “Young people’s financial education should be relevant, not cornered off into a maths lesson in which they might not want to engage.”

Meanwhile, the UK’s payment association Apacs recently launched a guide designed to help parents ensure their children avoid unmanageable credit card debt.

Share This

A new banking code has been drawn up and is promising to ensure that British consumers who are facing financial difficulties are given more help from the service providers.

The changes to the way banks aim to operate in the UK are set to be introduced in March of next year and the British Bankers Association (BBA) is convinced that the measures will help customers, many of whom are struggling to become debt free.

Under the terms of the new code, banks in the UK will pledge to offer more information about the details of a particular financial arrangement and to “enhance responsible lending”.

“These revisions to the code reflect the need to keep up with a changing world,” said Angela Knight, chief executive of the BBA.

However, the Financial Services Consumer Panel, is keen to see banks in the UK be forced by regulations to treat their customers, including those with debt management problems, more fairly.

Share This