Renewed calls for ‘breathing space’ scheme to help people struggling with debt

News Article

Research by the debt charity, StepChange, has found that poor and inconsistent treatment of those struggling with debt is escalating their financial difficulties.

In a survey of 1,800 of its users, StepChange discovered that:

  • 68% felt default charges made their debt problems harder to deal with
  • 62% said creditors and debt collectors continued to add fees and charges despite knowing the person was in financial difficulty
  • 52% said creditors and debt collectors continued to add fees and charges even after they knew the person was seeking debt advice
  • 65% of clients have experienced some level of bad debt-collection practice in the past two years
  • 41% have received intimidating or threatening phone calls in the past two years
  • 15% said they’d felt forced to take out more credit

The findings also highlighted how aggressive enforcement and demands for sky-high repayments can lead to a vicious cycle of deepening debt and comes after founder Martin Lewis and StepChange Debt Charity chief executive Mike O’Connor issued a joint statement calling for the Government to use its review of the rules surrounding debt administration to consult on proposals for a ‘breathing space scheme’.

The scheme would see people who seek advice for debt problems given a period of six months to a year, during which time interest and charges are frozen and enforcement action halted, allowing them an opportunity to seek advice and sort out their finances. Where people are able to begin repaying their debts at an affordable rate and within a reasonable time, this ‘breathing space’ would then be extended. However, the protections would only be accessible when recommended by a regulated debt advice agency.

Andrew Skinner, a legal expert on debt recovery with Palmers, said: “This latest survey underlines the fact that people with debt problems routinely have their situation made worse still by the actions of creditors.

“Although some banks and credit providers take a sensible approach and work with individuals to consolidate debt, sadly this is not the case across the board and this variance leads to a great deal of confusion.

“The ‘breathing space’ scheme would certainly help people in financial difficulties and hopefully the government will give this serious consideration. In the meantime, anyone who finds themselves in financial difficulties should seek advice at the earliest opportunity to mitigate the debt.”

For more information regarding debt advice, please contact us.