Debt Issue Heightened by Cost of Living Crisis

GRANTHAM, England, May 10, 2011 /PRNewswire/ -- The leader of the opposition in the UK, Ed Miliband, has said he believes that the rising cost of living is causing Britain to head towards a "crisis". With the coalition government rolling out its programme of cuts to public services, many people face an ever-increasing struggle to pay off their personal debts in the age of austerity - a struggle that is laden with dangers and pitfalls.

In a speech earlier this year, Labour leader Ed Miliband spoke out against the severity of the government's ongoing cuts, warning that too many families were being "forced to borrow to finance their living standards."

He told an audience in London: "We should be in no doubt that the global financial crisis was the product of huge irresponsibility in the banking sector, as governments around the world failed to regulate as they should have done.

"But why was there such a demand for cheap credit? Because wages weren't keeping up with the pressures on families too many were forced to borrow to finance their living standards. So the squeeze on living standards did not just unfairly impact on those on low and middle incomes, it also built instability into the economy."

While many people have vastly reduced their borrowing rates since credit crunch panic first gripped the nation a few years ago, the average level of personal debt in the UK still stands at a frighteningly high GBP8,428, according to figures from the Bank of England. The picture is even worse if you factor in unsecured personal loans, which take the average personal debt figure up to GBP16,207.

The total amount of consumer credit lending to UK individuals at the end of February 2011 was a staggering GBP212 billion, with the growth rate of consumer credit having grown 0.3 per cent in the previous year to 1.1 per cent.

With a current average of 337 people going bankrupt or being declared insolvent per day, debt management and debt repayment could not be a more pertinent issue. So what are the options on the table for those people facing seemingly insurmountable debt problems?

The proposed solution to debt problems that seems to get the most publicity on television and in newspaper and magazine adverts is put forward by debt management companies that charge a fee for their services. It's hard to find a TV advert break that doesn't feature a company peddling their debt relief scheme these days, but research by various groups has revealed a disturbing trend of companies adopting a high-pressure sales pitch, offering poor advice and charging high rates for their services.

In March, the Daily Mirror newspaper launched a campaign ( http://www.mirror.co.uk/advice/money/2011/03/30/stop-the-debt-rogues-sign-out-petition-to-get-the-debt-industry-regulated-115875-23024970/) that aimed to "stop the debt rogues" by calling for more regulation of the debt industry.

The campaign's leading statement read: "Last year the industry charged consumers GBP250 million with many fee-charging firms ripping off their customers - often promising to pay creditors but keeping the money for themselves.

"Enough is enough. The economic downturn is driving the most vulnerable people towards debt management firms in ever increasing numbers. We can't let those that abuse the trust placed in them by consumers to get away with it any longer."

This campaign was backed by the likes of Payplan - a company that offers free debt solutions, debt consolidation, (http://www.payplan.com/) advice and budgeting assistance for people in difficult financial situations.

Payplan's approach to debt problems is to work with people in financial difficulty to forge viable debt management plans and Individual Voluntary Arrangements (IVAs) that are designed to address the very specific problems of each person.

In the company's own words: "Being in debt and experiencing financial problems can be stressful. Talking it through with friends, family or colleagues may not be easy. We're impartial and non-judgemental: most of all, we are committed to finding a realistic solution that is right for you, your family and your home."

The Daily Mirror's campaign statement concluded with a decisive call for a shift away from the unregulated growth of the debt management industry - a shift that would make the role of companies like Payplan all the more crucial.

The statement said: "It's time for action to be taken. Proper regulation will cost very little to enforce but will save some of the most vulnerable people in society millions of pounds each year.

"That is why we urge action to properly regulate the industry once and for all."

Sources: http://www.newstatesman.com/economy/2011/02/economy-government-tax-living http://www.moneybasics.co.uk/en/resources/money_information.html http://www.creditaction.org.uk/assets/PDF/statistics/2011/april-2011.pdf http://www.mirror.co.uk/advice/money/2011/03/30/stop-the-debt-rogues-sign-out-petition-to-get-the-debt-industry-regulated-115875-23024970/

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SOURCE Payplan