Policy
23 June, 2009
Government needs to act to prevent London debt crisis
Creditors more aggressive in recovering debts, says Debt Advice Partnership
London's Debt Advice Partnership claims that the government needs to act to prevent Londoners facing a crisis as debt increases and creditors adopt more aggressive recovery methods during the recession.
In, Up to our neck in it, a new report launched at the UK's first debt summit organised by Capitalise and the Mayor of London, the partnership identifies the major trends regarding the changes in personal debt and the demands on face-to-face advice over the last three years and finds that 'personal debt is deeper, more widespread, more complex and more urgent since the recession, and creditors are being more aggressive in recovering payment'.
Graham Fisher, chief executive of Toynbee Hall, the organisation leading the partnership said -
'Our advisors report that creditors are reacting to the debt crisis by passing on more cases to debt collection agencies and resorting to court actions and bailiffs.'
The report highlights a number of main findings relating to both changes in the profile of clients approaching debt advice agencies and the demand and need for services. These include -
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the average level of debt of those seeking advice has increased by 16% since January 2007 to £18,131 per person;
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demand for free face-to-face debt advice at Citizens Advice Bureaux has increased by 35% since April 2008;
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people with two or more debt issues has increased by 16% since 2006;
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self employed people seeking advice have seen a 300% increase in their debts from £10,000 to nearly £44,000 since 2006;
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creditors are putting more pressure on debtors, making it harder for them and advisers to negotiate repayment agreements as more cases are passed to debt collection agencies or pursued through the courts compared to 2007.
Based on the findings of the report the Debt Advice Partnership makes a number of recommendations that it suggests could provide a range of solutions to the ongoing debt issue in London. These include -
- establishing a London Debt Strategy Group for a period of 18 months to implement short term solutions to the current debt crisis and to ensure sustainability of debt advice services post-2011;
- adopting a co-ordinated approach to meeting demand including increasing the capacity of services, ongoing sharing of statistical information, promoting non face-to-face services and working with creditors and regulators to ensure guidelines and good practice are being followed;
- liaising with decision makers within central and London government to improve targeting of planned services and ongoing funding; and
- exploring preventative solutions to debt issues with business leaders and employers as part of a strategy to prepare people for changes in their circumstances and to enable them to manage their debt effectively.
The Capitalise report Up to our neck in it is available here.
