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Parties plan to extend breathing space scheme as debt fears rise
Manifestos from the major parties have pledged further protection for those in debt from bailiffs, charges and interest. This comes at a time when there are increasing concerns about rising personal debt levels in the UK.
The Financial Conduct Authority (FCA) and Bank of England have both recently spoken of their concerns over the significant rise in consumer borrowing through overdrafts, loans, credit cards and car finance. Recent figures show that the current total of consumer debt is over £1.5 trillion; although much of this is tied up in mortgages, it is still a worrying figure.
The FCA is currently conducting its own inquiry into door-to-door lending, overdrafts and other forms of loans including car finance, which is a big focus for many debt charities as well. For charities such as Stepchange, they are worried that households are using their income to fund increasing debt or that credit is being used to make every day purchases.
Chief executive of Stepchange, Mike O’Connor, said; “the next government should commit to action to prevent the 8.8 million people currently showing signs of financial difficulty from falling into serious hardship. It should work to ensure better alternatives to dangerous forms of high-cost credit, and it should act to help families build up savings to insulate them from problem debt.”
The Conservatives and Labour have vowed to extend the ‘breathing space’ scheme which is currently used in Scotland allowing people the time to organise repayments. While the Liberal Democrats have pledged to give more regulation to the debt sector in an attempt to protect consumers.
The breathing space scheme allows borrowers to apply for more time, up to six weeks, to set up a repayment plan and not incur any visits from debt collectors or interest and charges on the debt. The FCA have proposed that credit card companies cancel interest and/or charges in extreme debt cases while political parties are planning on tackling the debt industry head on.
Although these proposals have been widely welcomed by many, Stepchange have said that the six weeks of breathing space should be extended to a year. They feel that this will help debtors deal with issues, rebuild their income and prepare a way to repay what they have borrowed.
Regardless of which party makes it into government after June’s election, there will be a lot of attention put on their policies and what they deliver surrounding personal and consumer debt levels and the debt industry as a whole.
5 key points to be aware of:
- Secured debt is when you are borrowing against an asset such as a house or car whereas unsecured debt is borrowing on credit via loans, overdrafts or credit cards.
- Unsecured debt has risen significantly since December 2008 with the average household now owing just under £13,000. These high numbers have worried many organisations and debt charities who are concerned about how households will be able to afford to repay this when inflation rises.
- Creditors who are owed money can apply for a CCJ or statutory demand to send bailiffs to your property to chase the debt. The way bailiffs work has come under scrutiny recently after the case of a courier who committed suicide after visits from bailiffs. You can find out what your rights are and how to handle bailiffs in this article.
- As inflation is starting to rise, household budgets are being squeezed and it is more important than ever to try to deal with any debts where you can. We have some great tips to help you with debt repayment and money saving.
- If you are struggling with debt, get in touch with us on 0800 901 2488 and we will discuss your situation to point you in the right direction for dealing with your debts.