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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.”

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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.

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