Citizens Advice reports upsurge in serious debt

Citizens Advice reports upsurge in serious debt

The Citizens Advice Bureau (CAB) reported that it had advised on 1.4m debt problems in 2005-06, an 11% increase on the previous year.

The charity offers help with legal, employment, housing and financial problems. In 2005-06, one fifth of those people turning to CAB for advice were seeking help with debt problems.

The report comes days after official figures showed a jump of 55% in the number of people becoming insolvent in the UK. The Insolvency Service said on Friday that there had been 12,228 individual voluntary arrangements (an alternative to bankruptcy) in the second quarter of 2006, a rise of 117.9% on the same quarter last year.

CAB said that credit continued to be the largest problem for consumers, including credit cards, store cards, unsecured personal loans, mail order debts and overdrafts. Some 824,000 people sought advice for problems in the same period, a figure that has doubled over the past eight years.

However, the charity said that housing debt, which includes trouble repaying mortgages, secured loans and rent arrears, had seen an increase of 20% since the previous year. Some 10,000 people needed help with threatened repossession, and 2,000 were facing actual repossession or eviction.

Problems with council tax debt also rose by 46% to 89,000 enquiries, and the number of people calling about utility debts rose.....continued below

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Citizens Advice chief executive, David Harker, said: "Our debt enquiry figures are deeply worrying. They suggest that a growing number of people are getting deeper into unmanageable debt it will be difficult to recover from."

A report published by the charity in May showed that many of its clients would be repaying their debts for on average 77 years if they were to do so at a rate they could afford.

Harker said: "We are particularly concerned by the sharp rise in enquiries from people getting behind with mortgage payments and having trouble paying council tax, gas and electricity bills, at a time when court action that can lead to repossession is on the increase, and fuel prices are rising steeply.

"This is likely to lead to more people than ever experiencing the sort of serious debt problems our advisers are already seeing day in day out," he added.

Mr Harker also called for a greater level of responsibility within the financial services industry. "Our evidence shows a clear need for more responsible lending. There are still too many cases where clients should not have been given the levels of credit they have received.

"Lenders need to do more to ensure every person's circumstances and their ability to sustain payments are fully taken on board when lending. We also want to see all creditors taking steps to help people manage their debt problems."

His calls were echoed by financial comparison website uSwitch, which today accused lenders of failing to carry out adequate income checks before agreeing personal loans.

The firm carried out a survey of almost 4,500 people. It said that seven out of 10 successful applicants for personal loans were not asked for proof of the income they had declared when they applied. Some 83% said they were not asked for proof of monthly outgoings, and one third were not asked to list other forms of credit when they applied.