Credit, collections & insolvency news
Over 620,000 families in England and Wales are spending more on overdue bills than on food, new research published by The Children’s Society has found. Families behind on bills are spending 18% of their income on paying back arrears. The Children’s Society is warning that huge bills can force families to cut back on food and other essentials.
Just one unexpected cost can push families into problem debt, and today’s research reveals that 46% of families who had their car, central heating or appliances break down in the last 12 months had to borrow money to pay for a repair or replacement. Two out of five (38%) of UK families say they will have to borrow money to pay for family essentials simply if the costs of living increase. Some families, the charity found, are spending more than £1000 a month on arrears. The figures come from polls of 2,004 UK adults commissioned by The Children’s Society from Opinium.
Many families trapped in debt find themselves in a desperate struggle to keep up with repayments, facing spiralling costs and pursued by creditors. The Children’s Society is calling for the government to give legal protection to families who fall into problem debt, with a 12 month ‘Breathing Space’ from mounting interest, charges and creditors chasing them for payment, so they can get their finances in order and set up a plan to affordably repay what they owe.
Matthew Reed, Chief Executive of The Children’s Society, said: “The stress and worry of falling into problem debt takes a heavy toll on both parents and children alike. We know that in some cases children are going without basics such as food, clothing or heating, as well as suffering from worry, anxiety and bullying as parents struggle to keep up with repayments. No family should have to struggle to afford food because of the cost of problem debt; but this is a day-to-day reality for far too many across the country, as they find themselves facing spiralling charges and under intense pressure from lenders. These families need better protection from government to help them back on their feet and in charge of their finances.”
Peter Tutton, Head of Policy at StepChange Debt Charity, said “No one should ever be in a position where the pressure to repay debts risks causing harm to them or their family. The evidence is clear; households are not getting the protection they need against spiralling debts and the hardship that can result.
“There is a major gap in the protections available to people struggling with debt. People who are in difficulty, but who have a reasonable chance of recovering their finances and reaching a position where they can repay their debts, need a guarantee of protections from additional interest, charges and enforcement action. ’Breathing Space’ is the missing piece of the puzzle when it comes to debt solutions and already has widespread support. As levels of personal borrowing approach their 2008 peak, we need a set of policy measures that will better protect those who will inevitably fall into difficulty.”
Caroline Siarkiewicz, Head of debt advice for the Money Advice Service said “It is worrying to see that so many families are falling behind on their bills which is impacting on their ability to manage day to day. Our own research found that four in ten adults have less than £500 in savings available to cover unexpected costs which can contribute to these spiralling debts. Breathing space is vital for people who are trying to resolve their debts. We recognise the importance of this within the UK Financial Capability Strategy and we continue to work with HM Treasury, the Insolvency Service and organisations across the debt sector to ensure people in debt, across the UK, have the support they need.”
