Debt & Bankruptcy UK

Scotland to Abolish Fees in Spite of Debts

2007-07-06T02:38:00.000-07:00

Scotland will be abolishing student fees while graduates in England are facing debts of £30,000 because of the new £3,000 annual top-up fees according to a recent announcement.

Scotland's education minister, Fiona Hyslop, says the fees prevent young people who come from poor families from going on to college because they fear getting into debt. Scottish students attending universities in Scotland will be able to obtain undergraduate degrees free, however, students from England and Wales will pay £1,700 a year for Scottish studies except medical courses, which will cost £2,700 annually. Degrees from the more prestigious universities such as Edinburgh and St. Andrews will be free for students within the European Union and must be treated the same as students from the local area. Under European law, only a variation within nations is allowed but not between them. Approximately 15,000 students from other parts of the United Kingdom are attending universities in Scotland. Scottish students who choose to study outside of Scotland will have to pay the entire £3,000 top-up fee.
The Scottish Executive's budget will finance the move and comes on the heels of a warning from student leaders in England that new graduates will be faced with debts of £30,000 because of the new fees that began in September of last year. The Student Loans Company reported a sharp rise in student loans -- £3.4 billion through last April compared to £2.8 billion in the previous year.

Scottish students currently pay a much smaller contribution to the cost of their education than students in England. Scottish students pay an "endowment" of £2,289 in the April after they graduate. The purpose of the endowment is to provide grants for the poorest students. This support will continue, and financing for the £15 million cost will be paid by taxpayers.

As part of the abolishment of a fee structure, Scottish Parliament was told that current and future students will no longer have to pay the endowment fee. New legislation is in the process of drafting for the fall with hopes of implementing the change by April. During the three years that the program has run, only about a third of students paid the fee directly; the rest added it to their student loan. The money from the endowment fees was used to provide support for the poorest students, but the Ms. Hyslop sees that it is an inefficient way to generate money for student support. She says education should be contingent upon the ability to learn rather than the ability to pay. She also says that it is wrong for graduates to begin their new careers with financial pressures hanging over their heads, thus preventing them from contributing to a wealthier and fairer Scotland.

Another thing that is changing according to Ms. Hyslop is that student loans for living costs are being eliminated in favour of a grants system that will pay off all accumulated debt of Scottish students, which is estimated to be between £1 billion and £2 billion. Both policies are long-term Scottish National Party election pledges and will be reviewed at the next spending review in the autumn when the Scottish Executive's £30 billion annual budget is determined.

The National Union of Students says that Westminster must adapt the same policy as Scotland regarding free higher education. British students are feeling twinges of jealousy over the Scottish Executive's proposals to eliminate the graduate endowment scheme according to NUS president, Gemma Tumelty. She states they have campaigned for a long time for publicly funded higher education, and they support the SNP's commitment toward that goal.

The NUS feels that decision-makers at Westminster have underestimated the impact of student debt and their long-term capacity to save and buy a home. They are pleased that concerns over student debt levels have contributed to the SNP's recent decision to do away from the graduate endowment.

Student debt in England increased by 4.8 per cent in 2005-2006, the year prior to top-up fees being introduced. The highest debt level was at Imperial College in London where students graduated with an average debt of £16,100, followed by University College, London at £13,400, and London School of Economics, £13,100.

Personal Debt Is on the Increase

2007-07-03T03:56:00.000-07:00

Personal debt for UK citizens is on the rise, with current figures showing an alarming growth pattern for 2006 and 2007. Reports from Credit Action indicate that consumer debt as a whole increased 10.4 per cent through April 2007, and at the present time stands at £1.325 trillion. Of that figure, £1.1 trillion is secured lending such as mortgages, making the total increase 11.4 per cent compared to the previous year's figures.

In addition, a 5.4 per cent in credit lending was reported, and stands at £213 billion based on reports by Money High Street.

Currently, the average debt per household is over £8,800 not including mortgages. The figure rises to £54,771 when mortgages are included in the figure. This means nine per cent of all take home pay goes into debt repayments, an amount that poses serious financial pressure in many households.

Figures from the Insolvency Service indicate that 46 per cent more borrowers entered into individual voluntary arrangements during the first three months of 2007 than during the same period a year ago. According to QCK, 15,356 people filed bankruptcy during the first quarter and 11,299 entered into IVAs.

Ten Year High In Debt Judgments

2007-06-19T00:59:00.000-07:00

Recent figures show that the number of County Court Judgments (CCJs) has reached a level that is the higher than it has been in almost ten years. During the first three months of 2007, almost 250,000 CCJs were issued in England and Wales, an increase of 9.5 per cent over the same period a year ago. The total of 247,187 CCJs that were issued during the first quarter of this year is the highest since the summer of 1997. If you include business judgments, the total then becomes 296,841, an increase of 9.1 per cent.

According to the Registry Trust, lenders are relying more heavily on the court system in order to deal with unsecured debts. According to experts, an increase in the number of households who are struggling financially is also reflected in the data.

Approximately 70 per cent of consumer CCJs were the result of debts according to estimates that were compiled by the Registry Trust. Other organisations such as the HM Revenue & Customs, water firms, and the Driver and Vehicle Licensing Agency comprise the other thirty per cent of CCJs.

Debtors who fail to comply with the repayment schedule determined by the judgement are placed on a CCJ register for six years, thus making it harder to borrow money or buy a home.

The trend seems to be headed in the direction of more consumer judgements, and with this quarter's record, numbers, consumers who have unsecured debts are receiving the warning that their failure to pay will put their credit rating at risk and legal action is only a step away.

In the 1990s when the economy improved, judgments declined as lenders turned away from the courts.

The most recent data also showed a 12 per cent increase in the number of CCJ register searches.

IVA Providers in Meeting with Banks

2007-06-11T00:40:00.000-07:00

A meeting was held earlier in the week between insolvency practitioners and the banks in an effort geared toward the formulation of an agreement on certain key areas of individual voluntary arrangements (IVAs). IVAs have gained popularity as a way of managing debt problems that have escalated because of grown in UK personal debt. These agreements are legal contracts between the debtors and lenders that allow the borrowers to write off a portion of their debts while repaying the remainder over several years.

IVA companies make their profits by charging a fee to the banks for handling the repayment plan, and these fees can range from £4,000 to £8,000. Some banks feel these fees are exorbitant and are asking the insolvency practitioners to review them.

Both banks and IVA companies are anxious to provide the details that will resolve the issues once and for all.

Eric Leenders of the British Bankers Association spoke on BBC Radio Five Live and stated that he wanted to see the implementation of some proposals that will be equitable for both sides. Part of that would mean to process efficiencies, which would help consumers since the paperwork would be simpler and much more accessible.

Nick O'Reilly, vice president of the Association of Business Recovery Professionals had previously stated that he welcomed the opportunity offered by the meeting and felt a lot of progress had been made in the months preceding the meeting. His feeling was that the banks don't realize all of the work that goes into putting together an insolvency package for a debtor.

O'Reilly felt that developing a system where the insolvency practitioner receives a portion of the fee upfront and the remainder later was a system that would prove the most helpful to all involved.

Highlighting Debt Problems Through Awareness

2007-05-24T01:08:00.000-07:00

Credit Awareness Week, an event that ran in the UK from May 14-20 highlighted the fact that half of Britons admit they make serious errors in financial judgement and have debt problems due to poor control of their finances. According to Credit Expert, more than 80% of people overspend on a regular basis, while millions of others are in so much debt that they seriously consider some form of debt relief such as bankruptcy.
Some of the financial errors that people make that are main contributors to overspending are taking out consolidation loans with long repayment terms and "therapy spending." In addition, research revealed that 5 per cent of people have either taken out an individual voluntary agreement(IVA) or filed bankruptcy because of too much debt. Almost 10 per cent admitted to taking out a credit card in order to pay off another credit card while another 10 per cent say they have missed payments on credit cards, loans, or mortgages because of their debt problems.
Credit Today Magazine along with an expert group of partner organisations that included Experian, the British Bankers Association, and the Consumer Credit Counselling Service organised Credit Awareness Week with the intention of helping the people in the UK learn how to gain better control over the financial decisions they make and thus, eliminate their debt problems.

Jim Hodgkins, managing director of Credit Expert states that the number of people who are making basic financial errors in judgement and even looking for quick fix solutions to debt problems such as filing IVAs is worrisome. What their research proved is that people in the UK have a serious lack of understanding about the long-term effects of financial judgement errors and how problems with debt can affect their credit rating and thus impact their financial future.

Britain Comfortable With Rising Debts

2007-05-08T01:03:00.000-07:00

In spite of recent announcements of record insolvency figures, Britain is become a comfortable nation, a report states.

Research conducted by Credit Expert says that six million people in Britain would be unconcerned about their unsecured debt unless it reached £15,000 while another 1.4 million would only worry when it reached £50,000. Even with recent threats of interest-rate increases before the end of the month, the quarterly "credit pulse" survey indicates that people feel comfortable with the amount of debt they have accumulated on their credit cards and in unsecured bank loans. The report also shows that 54 per cent of adults are comfortable with the amount of debt they are carrying while 41 per cent are very comfortable with it, both substantial increases over the 29 per cent that was reported in January.

According to Jim Hodgkins from CreditExpert, the credit comfy generation that currently exists in Britain is numb when it comes to the real effects of increasing debt. Many people in Britain find it difficult to recognize the signs of an unmanageable debt load. With the rise in interest rates, many will suddenly find that their debt is in danger of reaching uncontrollable levels.

The survey was conducted on 2,000 people and also revealed that 30 per cent of people would be unhappy with only £1,000 of debt. According to money charity Credit Action, the average adult in Britain has £4,500 in unsecured loans.

A spokesperson for the National Debtline says it is difficult to say what level of borrowing should cause concern for an individual. Unmanageable debt is difficult to define as it is relative to a person's ability to pay. In addition, even with the levels of consumer borrowing on the rise, many people simply view their debt level as an unavoidable part of life and do not find it as an issue about which they should become concerned.

Recent research recently released by Scottish Widows reveals that the cost of running a household in Britain requires more than one breadwinner to maintain an acceptable living standard in 44 per cent of homes. In addition, 50 per cent of families with children find it increasingly difficult to make ends meet without both partners working. The average household with two children is £100,600 in debt, including the mortgage, £19,100 more than a household without children.

Richard Jones from Scottish Widows stated that the increased need for two-income households might be the result of a rise in consumer credit. Relatively low interest rates combined with high job security have made borrowing an attractive option for many households in recent years.

The report also revealed that 27 per cent of adults have no money in savings with another 25 per cent have less than £3,000.

Debtors at Risk Under New Law

2007-03-23T00:36:00.000-07:00

New laws in England and Wales may put debtors into the hands of unscrupulous bailiffs according to a warning issued by the Citizens Advice consumer charity. Under the new law, bailiffs could be granted legal permission to break into the homes of debtors in those areas. Citizens Advice feels the law will increase the number of cases of system abuse, but the government states that it plans to help protect vulnerable people by simplifying the laws that govern bailiffs.
The proposed changes are part of the Tribunals, Courts and Enforcement bill, which is in the midst of its second reading in the House of Commons. Presently only enforcement officers who deal with magistrates' court fines have the legal right to forcibly enter people's homes. The concern of Citizens Advice is that this bill will give bailiffs the right to do so in cases where a debtor owes on a credit card. The charity wants the provisions of the bill to indicate that it should be a last resort and one that will not be used on a vulnerable person. It also wants the bill to reflect that the power should only be used on those persons whose non-payment is the result of wilful neglect and not those who are financially unable to pay.

Because intimidation, harassment, and the charging of exorbitant fees are already abundant problems, Citizens Advice is also pushing for the legislation to include provisions for independent regulation of bailiffs. The charity analyzed 500 cases, which showed that two thirds of bailiffs were guilty of harassing and intimidating debtors, while forty per cent misrepresented their powers regarding entry into the debtor's home. In addition, nearly half of the bailiffs levied fees that were unfair and a quarter threatened to put the debtor into jail if he or she didn't pay.

Research shows that a minority of bailiffs have a long history of abusing their powers against vulnerable people, are often abusive and aggressive, and make threats of violence or prison terms in order to pressure people into paying large sums of money that they cannot afford.

"Instead it gives bailiffs greater powers without any proper regulation - a recipe for abuse on an unprecedented scale."

But the government says the bill will simplify the laws governing bailiffs, and will help protect vulnerable people by creating a framework for regulation.
It says it will be able to introduce a certification scheme for enforcement agents, which will cover issues like proper training, criminal records checks and references.

Club Members Responsible for Debts

2007-03-19T02:10:00.000-07:00

Make certain you know the reputation and stability of the clubs you join, or if they go out of business, you may find yourself shouldering some of their debt. The reason for this is because many of these clubs are unincorporated and as such, there is no legal entity to shoulder the cost. What this means for members is if the club closes owing money, a creditor can legally go to the individual members and not just the assets of the club itself.

Both the Working Men's Club and Institute Union have written to over 1,000 clubs urging them to incorporate so that their members cannot be personally sued in the event of a default. Individual members of the clubs are also working on their own, contacting their clubs and asking them to change their status. Whether it seems to be just or not, the truth is that if you join a club that is not incorporated, you and the other members can be held legally responsible for its debts. If you are an officer, as in the case of one woman who was treasurer and signatory on the loan, you can lose your home or part of its value to cover the club's debts.

The problem with this kind of arrangement is that unless the clubs choose to incorporate, they stand to lose their membership, and people will become very fearful of joining any club that is not incorporated. They wish to protect their own personal assets, and if that means not joining unincorporated clubs, that is the route they will take. It's important for a club operator to understand that unless he incorporates, he runs the risk of holding his entire membership personally responsible for any debt that the club incurs that it is unable to pay or in the event of closure.

People are beginning to understand what this means, and are urging their clubs to change its status so that members are not taking any risks when they join. Whether it's a sports club or a social club, it's important that the founders or owners set its status so that the club shoulders the responsibility of its debts and not its members. Members do not join clubs to go into debt for something they did not create, so it's unfair of any club operator to operate his or her club in such a way that it could jeopardize the financial and credit standing or its membership.

In order to protect your assets, make sure that the club you join, social or sports, is incorporated. Even if it has been in operation for many years, there is always the possibility of something happening, such as the owner becoming too ill to run it. If the club you are considering is not incorporated, find a club that is. If you own a club and aren't sure how to incorporate, check with your accountant or your lawyer for the proper paperwork and procedures for changing the status of your club.

Bank Profits Rise in Spite of Bad Debts

2007-03-02T01:52:00.000-08:00

In spite of an increase in the cost of unpaid loans by consumers trying to escape from their increasing debt loads, projections are that Britain's banks will announce profits of more than £40 billion. The announcement is expected to come with reports soon to be released.

Early projections are that HSBC, Britain's largest bank and the third largest in the world may exceed last year's record of £20.9 billion in profit in spite of problems within its United States division that is causing analysts to consider decreasing as much as 10% off their forecasts.

It is probable that Barclays will make profits of more than £7 billion even though it has been hit hard by the failure of customers to make credit card payments. There is a possibility that the country's third largest bank is looking at the possibility of reducing losses from riskier loans, and recently reported that it may sell its Monument operation, which targets those customers with lower incomes.

Banks reported a combined profit of £20 billion for the first half of 2006, which set the scene for their record tally of profits. The profits were in spite of them absorbing charges in excess of £2.5 billion as they covered the cost of customers who were struggling to repay loans.

Although bad debts will continue to be watched closely, it is believed that the end of "free" banking is very close at hand. With intervention by the competitive authorities into various areas that range from credit cards to payment protection, and most recently, the voluntary banking code itself, early forecasts are that banks will soon charge for even the basic bank services. First Direct, HSBC's phone bank, is beginning to charge for some services and others may follow later according to some sources.

The amount of bad debts is of the greatest concern for investors. Lloyds TSB and Barclays have felt the most pain in these areas, with Lloyds being the country’s largest unsecured lender. In spite of their concerns, reports issued before the reporting season closed are indicative of a trend toward stabilization. Forecasters will be watching for any new information that shows the impact of individual voluntary arrangements (IVA's) on bad debts. Analysts at Merrill Lynch believe the numbers are going to go up but then stabilize, but at the present time, there is no indication of the beginning of that trend.

Banking experts believe that most of the rapid growth in profits will come from outside of the United Kingdom. This will be shown as an increase in pedestrian growth in comparison to an increased expansion in the areas of investment banking, corporate markets, and investment management.

Some banks are even being scrutinized about their strategies concerning acquisitions and disposals. Some analysts question whether Barclays is considering a deal in the United States after it took out a £400 million sponsorship deal. There is also speculation that Standard Chartered may be planning some acquisitions.
All of the banks are facing scrutiny over their operations as more face an increase in bad debts while still increasing profits. Of course, it standards to reason that banks, like any other business, are there to make a profit, and if it means raising costs to customers in order to offset an increase in bad debt write-offs, then that is what they will be. It isn't much different than a department store raising the price of its goods in order to offset the cost of shoplifting incidents, but consumers are just more likely to feel directly affected by an increase in bank fees, especially interest rates and credit card annual fees. After all, consumers are more likely to give up credit cards than shopping in their favourite store, no matter what the cost may be.

It's too early to determine what the increase in bank fees may mean for the consumer, but if you base it on past performance, it's safe to assume that business will decline at first as consumers complain about an increase in fees but will stabilize as they realize there is little they can do but accept the inevitable.

Citizens Advice speaks out against irresponsible lending

2007-02-07T03:34:00.000-08:00

An advisor for Citizens Advice UK has spoken out against banks lending money to people who unlikely to be able repay their debts. Suman Antcliffe, who works as at the East Staffordshire Citizens Advice in Burton upon Trent, says that she seen a number of cases locally where local banks are issuing loans to people who have little prospect of being able to pay them back.

Ms Antcliffe cited an example of a married couple who approached a bank when the husband lost his job and they could no longer afford to pay off their debts. When the wife approached the bank she was told she could take out a loan to use to meet the repayments. After 5 such loans they had amassed a debt of £30,000, which they were unable to repay. Another client on a net income of £1080 a month was given a loan with monthly repayments of £736, despite having verified his salary with his employer.

Ms Antcliffe gave similar example of what some might call irresponsible lending and said that for some of her clients she had been able to get their debt written off.

She said that Lloyds TSB had been particularly helpful, writing off 6 loans for her clients. In fact Lloyds TSB said that they had dismissed two of their staff.

Citizens Advice argued that the priorities of the high street banks were changing in the 21st century. Most people still saw their bank manager as a father-figure, and trusted that borrowing more money was the best solution to their debt problems instead of instead of re-negotiating their debt. Much of the UK debt is caused by reckless overspending, but Citizen’s Advice argue that some banks are lending irresponsibly too.

Women hit hard by bankruptcy

2007-01-30T03:12:00.000-08:00

Women seemed to be hit harder by the prospect of bankruptcy according to a study by the Consumer Credit Counselling Service(CCCS).

According to CCCS figures, women account for 61% of the people seeking debt advice in the UK and who are advised to go bankrupt and three quarters of them are single. The problem is that over half of the women recommended to file for bankruptcy refuse to do so because they are ashamed by the prospect of being bankrupt. The CCCS say that their refusal to cross the line and declare themselves bankrupt is adding to their debt problems as well as straining their relationships with their family members. Others choose to take out an IVA rather than face bankruptcy.

The CCCS report that many of these women find themselves in a debt crisis after a break-up, illness or job loss, but that there are others who have overspent on credit cards for clothes and holidays and can't afford to pay back their unsecured borrowing.

The CCCS reported that the average level of debt faced by people who were recommended to go bankrupt was over £30,000, most of that as unsecured borrowing in the form of credit cards, loans or overdrafts. The same group of people had an average income of £10,000 a year - and many couldn't afford the £475 needed to file for bankruptcy.

Christmas spending increases consumer debt

2007-01-12T02:27:00.000-08:00

According to a recent report by accountants Grant Thornton, some 10,000 people in the UK have overspent during the Christmas period and face the prospect of insolvency or bankruptcy.

Grant Thornton predict that some 30,000 people will face insolvency during the first three months, 10,000 of these having pushed themselves over the edge by running up debts in the period before Christmas. Mike Gerrard, Head of Grant Thornton's personal insolvency practice said; "Since last Christmas, several developments such as interest rate rises, sky high utility bills and increases in unemployment, have contributed to pushing more people into financial trouble".

Other figures from the Bank of England suggest that nearly 8% of homeowners with a Mortgage are struggling to meet their debt repayments after recent rate hikes, utility prices increases and other inflationary pressures.

Christmas spending was generally higher in 2006 than in the previous year, despite the pressures on many UK households due to a diminished disposable income.

Grant Thornton suggested that many individuals used credit cards to fund their festive spending, rather than tightening their belts, and could find themselves with severe debt problems or even face bankruptcy.

Free balance transfers offered by credit providers decline

2007-01-03T05:07:00.000-08:00

The days of rate tarts may be numbered as free balance transfers become a thing of the past.

Increasingly UK credit card providers are charging consumers for transferring a balance from one card to another.

The amount that is being charged for balance transfers is rising as well, according to recent research by Moneyexpert.com.

Customers can now be charged up to £300 for transferring their balance.
MoneyExpert chief executive Sean Gardner said: "Playing your cards right is becoming more and more difficult as credit card providers raise the stakes on balance transfers.

"The days of easy credit and companies falling over themselves to allow customers to switch between cards are over. Rate tarts are being forced to raise their game as providers take a tougher line."

Looking for a long-term low rate on balance transfers can end up being a better option that constantly switching, Mr Gardner added.

Fees for balance transfers now run as high as three per cent, with the average fee currently standing at 2.1 per cent.

Meanwhile, it has been discovered that two out of five Brits carry a credit card which does not garner them or any charity any cash.

A full 86 per cent of UK credit card users said that they wanted to do more for charity, according to a survey carried out by American Express.

New Web Site helps Over Spenders “Confess” and Control Debt

2006-12-12T00:10:00.000-08:00

A new web site, sort-it.co.uk, was just launched and is dedicated to helping people confess to outrageous purchases that have made. A spokesman from the site said that the “provocative language” on the site was used to "help get the message of personal debt across".

Visitors on the site can make anonymous posts of when they made an unaffordable “stupid” purchase. The site may have just launched, but is already filling up with confessions. One user said, "I was really drunk, and bought two bottles of Cristal on my credit card to show off. Cost me like £200. Soooo stupid..."

The site is targeted to a UK audience and shows that most over-spenders are in Northern Ireland or eastern England.

The site also helps people control their debt and spending by providing a cash planner and information on debt and people who can help you manage your debt.

A Conservative spokesman said: "Sometimes it's necessary to use provocative language to grab people's attention and get them thinking about important issues. If our direct approach helps get the message of personal debt across and offers people some tips on how to manage their situation the initiative will have been well worthwhile."

In a piece for the Guardian, Tory leader David Cameron said: "These are new approaches for a new age, but ones that will continue to demonstrate the Conservatives' commitment to confronting the problems our society faces today. There is an old Chinese proverb: 'Tell me and I will forget. Show me, and I will remember. Right now, the Conservatives are doing a little less of the telling, and a lot more of the showing."

Predicted price fall may help those in debt get on property ladder

2006-12-11T00:49:00.000-08:00

Research by PricewaterhouseCoopers (PwC) has suggested there is a one in three chance of house prices are set to fall between now and 2010. Although PwC says house prices are likely to rise again after that period, the short-term news may come as those struggling to get onto the property market due to debt problems.

People who are struggling to get on the market because of debt problems may get a helping hand according to a new report.

Research published by PricewaterhouseCoopers (PwC) on November 2nd has suggested there is a 33 per cent chance house prices will fall between now and 2010.

PwC economist John Raven said: "Despite the recent relative robustness of the UK housing market, potential home-buyers and investors should not underestimate its volatility in the medium term."

By using the Monte Carlo Simulation, PwC compared to house prices to earnings - and predicted that consistently rising house prices are set for a short-term decrease for the next four years.

However, he added that by 2020 there was an 87 per cent chance of property prices being higher than they currently are now.

News of the report comes as people continue to struggle on the property market due to debt problems.

A survey by the Abbey, also released on October 30th, reported around 7.4 million people cannot afford house prices in their area because of debt.

Meanwhile, a Bank of England report on October 30th indicated increased debt problems across the country as credit card borrowing rose to £365 million. The bank indicated its mortgage approvals were at their highest rate for over two years, while Halifax and Nationwide both reported house price increases.

Debt Summit Announced

2006-12-08T08:28:00.000-08:00

“Banks are calling for a halt to irresponsible selling of debt relief products, chief executive of the British Bankers' Association (BBA),” Ian Mullen said today after he issued invitations to various debt “write-off” companies and banks to discuss the current state of the financial services industry. According to Mullen, the key issues which will be discussed are the manner in which debt management products are promoted, the advice that consumers receive when they call for help, and the relative costs of different management solutions

Mr Mullen said:
"Banks lend responsibly and assess a customer's ability to make repayments before lending to them. Sadly for a small proportion of people, personal problems can get in the way and some find themselves in financial difficulties. The answer, in the first instance, should always be to contact your lender or to seek independent advice. However, individual voluntary arrangements can be appropriate in some cases, but we are concerned that young, inexperienced and vulnerable people are being targeted by adverts and mail shots which lead them to believe they will be able to walk away from their responsibilities.

The results for their long term financial position could be disastrous as they may find in years to come that they can't get a mortgage or raise a loan to start a business. This would not just be bad news for them but bad news for the whole of the UK economy. Accordingly I have invited the companies involved in debt resolutions to meet the banks to discuss a way forward."

One of the major problems is that banks are not clear about the terms of agreement and will approve just about anybody. Recent market research has shows that “eight out of ten firms did not provide adequate information about their service, costs and the consequences of entering into different arrangements and nine out of ten firms failed to clearly explain available options and their consequences - most only focused on the advantages of an individual voluntary arrangement (IVA) .”

More women eating up business opportunities despite "bingeing" on debt

2006-12-06T00:36:00.000-08:00

Numbers of female-owned businesses rose to 38,100 in the first half of 2006 due to increased opportunities. However, an ICM report shows women with consistently higher levels of debt than men.

Female-owned small businesses are on the up according to Barclays.

In its report, released on October 23rd, the bank showed women started 38,100 businesses in the first half of 2006, a rise of nine per cent from the same period in 2005.

John Davis, marketing director for Barclays Local Business, said: "Start-ups remain buoyant this year and it's clear that in many areas women are taking the lead and demonstrating how much they can contribute towards the business sector, and the UK economy as a whole."

"There are fewer barriers to entry for women and they are taking advantage. In many areas, women are taking the lead and demonstrating how much they can contribute to the UK economy," he added.

Research also showed growth of women starting businesses outweighed men in London, Yorkshire and the east Midlands.

Across England and Wales, the number of businesses set up by both sexes in the first half of the year increased to 205,000 – a ten per cent rise on the same period in 2005.

However, a survey by research company ICM showed that women are "bingeing on debt" – reported UK Personal Loan Store on October 30th.

According to the research, the attitude of many women towards their debt situation is as dangerous as those suffering from binge drinking or eating.

The report showed British women owed an average £8,219 in unsecured debt, whereas the average man owed £3,436.

Women had higher levels of personal credit card and loan debt than men.

Although the report revealed the reasons for this higher debt were varied, it indicated women were trying to make repayments with marginally or significantly less earnings then men.

Insolvencies hit new record

2006-12-04T02:11:00.000-08:00

In official data that was released today, it was shown that the number of insolvencies in England and Wales has increased by more than 55% over the three month period from July – September which amounts to 27,644 insolvencies. This is just the latest in a number of reports that have been issued by private firms and government organizations stressing the dire financial condition of many residents in the UK and Wales.

The Insolvency Service reported that between July and September, 15,416 people went bankrupt and 12,228 more took out an individual voluntary arrangement (IVA). IVAs let those in debt reach an agreement with their lenders where they will repay and agreed amount of money over a period of time and get creditors to freeze interest payments so that the debt can more easily be paid off. According to the Insolvency Service, “20,293 people in the UK took IVAs in 2005 while almost the same amount did so in the first half of this year alone.”

The number of bankruptcies is 26.6% more than it was last year while the number of insolvencies taken out during this period is an astounding 117.9% increase over last year.

Steve Treharne, head of personal insolvency at financial services group KPMG, said, “The number of people entering IVAs was rising at an astonishing pace” and that the, “average debt owed by someone entering an IVA is almost £50,000” He went on to say that over 1000 people who were issued IVAs sometime in the last quarter had a debt in excess of £100,000 in the last quarter.

Malcolm Hurlston, chairman of the charity the Consumer Credit Counseling Service, said: 'We are concerned by the narrowing gap between the number of bankruptcies and IVAs. If the current trend continues the number of IVAs will overtake the number of bankruptcies next year and that is an indication that the IVA solution is becoming more popular than is good for people.'

Frances Walker, also from the CCCS, said on the BBC Lunchtime News that although IVAs seem attractive, many people who are taking IVAs would be better off filing for bankruptcies.

IVA companies have been earning great profits due to the rise in the popularity of these IVAs as many of these companies can earn anywhere from £1,000 to more than £5,000 for each IVA they help arrange. Yesterday, one of the largest and most popular IVA providers, Debt Free Direct, reported that it has seen a “101% rise in turnover compared with the same six months a year ago.” Other IVA companies, such as Accuma who reported that they have grown over 250% over the last year, are also doing quite well.Coronation Street actor Chris Walker a co-founder of Regional Money Helpline, said: 'Personal debt in the UK is rising by £1m every four minutes, and currently stands at a staggering total of £1.3 trillion.

Mortgage repossession orders soar

Another issue of concern is a new report issued today that said the rising number of home repossession orders as more and more people overspend and accumulate massive debts.

'The report stated : “Millions of UK consumers find themselves either in serious financial difficulties, or on the borderline of falling behind with their regular payments. Despite this, far too many people are unsure where to turn to for sound advice, help, or financial education.”

Steve Treharne at KPMG, told reporters that over the 12 month time span since the end of September last year to the end of September this year, more than 98,000 people have become insolvent through a bankruptcy or an IVA. “The increase in the number of people entering IVAs is causing concern,” he said. “Several leading institutions have raised concerns at these record levels and have commented on the limited extent to which the advice sector is regulated.”

And he added: 'The Government has made it clear that it has no plans at this stage to strengthen regulation. It is therefore essential that all involved have an open dialogue about the solutions which are to be offered to the increasing number of consumers struggling to manage their debts.' Mike Gerrard, head of personal insolvency at financial services group Grant Thornton said, “The number of IVAs was going through the roof” and added: “Individuals with credit card debts in excess of £50/60,000 are not at all uncommon, while the overall age of those affected appears to be on the decrease with a larger proportion of women also noticeable. “

If you are in debt and do not know what to do, below are a few tips to help you get on the road to financial freedom. It was found that the main reason why so many people were going into debt is because they simply ignored any bills and refused to pay them. As a result they found them selves owing more and more and often had to file for Insolvency or give up their assets. As a result, it is very important that you are aware of your financial conditions and you pay off all bills as soon as possible. Higher interest rates are a big problem, so you do not want to get behind on any payments that you must make. You should also be wary of how much you spend using credit cards and to make sure that you “have what you spend”.

If you are in debt, making all payments you owe is your best option, and if your are not in debt, follow the tips above to insure that you will not go into debt.

Gerrard said that he believes due to a variety of factors that will lead many more people into debt over the past few years, more people than expected will file for insolvency and / or lost their assets. “Based on our analysis of Council of Mortgage Lenders statistics for 2006 so far, we believe that upwards of 12,000 homes will be repossessed this year.”

Interest rate increase "hits" debt-laden UK

2006-12-01T01:27:00.000-08:00

[Following the Bank of England's decision to increase interest rates by 0.25 per cent, numerous debt charities have claimed Britain's financial problems are to increase as homeowners set to pay an additional £35.92 on average every month.]

The Bank of England's decision to increase interest rates for the second time in three months has been met with criticism that it will force more people in debt.

On November 9th, the bank announced interest would go increase by 0.25 percentage points, up to five per cent – the highest figure since the aftermath of the September 11th bombings.

However, it is has been claimed a number of debt charities that the move could further increase Britain's debt problems, as costs are expected to be reflected in further increases in house prices.

A new study published by Egg on November 10th suggested that homeowners would have to pay an additional £35.92 on average each month - a total figure of £292 million.

Sue Edwards, debt officer for the Citizens Advice Bureaux said: "Any increase in mortgage interest rates could spell disaster for people whose finances are balanced on the very edge of affordability."

A report by the charity, on November 7th, revealed the number of people with housing debt to have increased by 20 per cent over the past year.

British Retail Consortium director Kevin Hawkins also said: "The bank should have waited until early next year to see the full impact of August's rate rise.

"By piling another rise on top the Bank has made it more likely economic activity will be depressed over the next six months."

Christmas credit card spending to go up by 35%

2006-11-30T07:41:00.000-08:00

A survey by credit card company Morgan Stanley claims Britain's credit card spending in the last three months of 2006 is to go up by 35 per cent.

Despite credit card debt increasing through Britain, Morgan Stanley states people are increasingly making repayments – giving spending confidence to the public and retailers alike.

Britain's credit card spending is set to go up by over a third this Christmas, according to a new survey.

A report by credit company Morgan Stanley, released on November 6th, claims that Britons are planning to spend an average of £1,270 on their cards between October and December – an increase of 35 per cent compared to the £940 spent in the same period last year.

Marketing director Patrick Muir said: "People are increasingly comfortable with using their credit cards to buy everyday items such as groceries, as well as for larger purchases like their Christmas gifts."

The survey claimed the majority of people's credit card transactions will be spent on the home, car and grocery shopping.

Morgan Stanley is also expecting men are to put £1,417 on plastic over Christmas – around 20 per cent more than the £1,131 women are predicted to spend.

Although research released by Credit Action on November 1st showed Britain's credit card debt was standing at £55.6 billion, Morgan Stanley indicated regular repayments on credit cards are increasing.

"The findings of our research are the first to give an impression of an increase in confidence for Christmas 2006 – a time when credit card spending traditionally rises. With repayment figures steadily increasing, this is a good sign for both consumers and retailers alike," added Mr Muir.

According to the survey, people in London are to spend the most as Christmas approaches, putting £1,467 on their card.

People in the north are predicted to spend £1,037 - the least in the country.

Bradford's debt problems "worst in West Yorkshire"

2006-11-29T06:47:00.000-08:00

[Figures released by the Department for Constitutional Affairs show Bradford to have the worst debt problems in West Yorkshire, as numbers of people claiming bankruptcy through the entire region increase. Bradford West MP Marsha Singh has claimed financial companies should be more responsible when lending money.]

A Bradford MP has argued financial companies should be more responsible when lending money, as a new report claims the city has the worst debt problems in West Yorkshire.

Figures released by the Department for Constitutional Affairs on November 10th, show 125 individual bankruptcy petitions were filed in Bradford between July and September – an increase of 238 per cent from the same time last year.

Bradford West MP Marsha Singh told the Bradford Telegraph and Argus: "People have got themselves into debt but at the same time the financial institutions are not blameless for continually allowing people to have credit when it is not appropriate.

"It is about time they woke up to their responsibilities they have in the community."

A report by the newspaper blamed the county's problems on "rising utility bills and credit card debt".

The total amount of bankruptcies in the region rose from 256 to 416.

Leeds was shown as having the second - worst individual debt problems in West Yorkshire, with bankruptcy claims rising to 108 from 74 over the three-month period.

However, bankruptcy claims fell to 21 in Halifax – it was the only town in the area to report a decrease.

The news follows a report released by Citizens Advice on November 7th, which claims the number of people it advised on debt problems has risen by 11 per cent to 1.4 million.

Banks 'hurt those in debt'

2006-11-28T06:23:00.000-08:00

[A report by the Treasury select committee has claimed Britain's poorest people are "financially excluded" and risk getting themselves into further debt to get bank accounts and loans.]

Britain's poorest consumers are at increased risk of getting into debt, a new report has warned.

According to a study released by the Treasury select committee on November 16th, increasing amounts of people are financially excluded from bank accounts, credit cards and mortgage loans.

Chairman of the Treasury select committee John McFall said: "Many of the financial services that most people take for granted are either not available to many of the most vulnerable in our society, or are only available at a premium.

"The burden of debt blights the lives of far too many people in our society."

As a result, these people are often faced with higher charges for loans and other financial services, the report claimed.

The news follows an announcement by First Direct on November 14th that it will charge current account customers £10 a month unless they earn at least £25,000 a year.

ClearDebt chief executive David Mond claimed: "If banks start to refuse to provide free accounts for people paying in less than £1,500 a month, more people will end up in the arms of unethical lenders.

"This is likely to make debt an even bigger issue for some."

IVA Providers

2006-11-27T05:19:00.000-08:00

Individual Voluntary Arrangements are very popular today with more an more people acquiring them and as comes with increased demand, there a number of companies that have begun to offer IVAs. These arrangements allow those in debt to get a deal with their lenders where they will pay off part of the remaining debt on a fixed schedule as negotiated by the lender and the one in debt. As a result, those in debt only have to pay off part of the debt they owe and creditors will know when to expect loan repayments.

IVAs have gained popularity over the past year and already there have been dozens of new companies that have entered and found success in providing IVAs with many of these companies listed in the stock exchange.

However, this is bad news for banks who earn from bankruptcies and they have been lobbying against IVAs for the last few months in an attempt to curtail their growth. Government reports that will be released this Friday show that there has been another surge in the number of IVAs filed in recent weeks.

Leading IVA provider firm Accuma is one of the fastest growing and most successful firms offering IVAs. Yesterday, they reported a 250% surge in turnover leading to a profit of £1.7m. This is especially amazing considering they did not make a cent in profit in 2005.

Chief executive Charles Howson said, “The market is very buoyant because of the huge increase in consumer debt. Even with some lenders tightening their lending criteria now, frankly moving forward the damage is done. A lot of people are on a knife edge, which is why we are growing.”

Accuma and other IVA providers such as rival Debt Free Direct are saying that banks are getting what they deserve and it is the bank’s fault that they allowed anyone who wanted a loan to get one, without taking the proper steps to determine whether the one taking a loan would be able to pay it back.

One of the main reasons IVAs are so popular is because it allows people to keep their assets such as their house and / or car and those who get the best arrangements can end up paying just 37 cents for every pound of debt allowing them to be debt-free in about five years after starting IVA payments.

KPMG partner Steve Treharne, says that people are getting to personally involved as they have much to gain from suggesting IVAs and are looking out for themselves, not those whom they are advising.
'There is an issue over the quality of the advice being given. The providers do have a vested interest in pushing people down the IVA route,' he says. 'The banks are sitting up and taking notice.'

Still, many expect the message that IVAs are sending, “spend now and reduce your debt later” will lead to major problems in the economy. This combined with the fact that the Bank of England is planning on raising interest rates to rates to 5% next month could prove problematic. It will be interesting to see how this plats out over the next few months and what banks do if more and more people begin to take out IVAs.

IVAs increase as insolvency hits peak

2006-11-24T04:56:00.000-08:00

Record numbers of people have claimed insolvency over the past three months, new figures have shown.

In a report released on November 3rd, the government's Insolvency Service said a total of 27,644 people went either bankrupt or entered individual voluntary arrangements (IVA) in the period between July and September.

The government claimed 15,416 people went bankrupt during this time, an increase of 27 per cent from the same period last year.

Numbers of people opting for an IVA leapt to 12,228 - a rise of over 117 per cent from 2005.

Chairman of Consumer Credit Counselling Service Malcolm Hurlston said: "If the current trend continues, the number of IVAs will overtake the number of bankruptcy next year and that is an indication that the IVA solution is becoming more popular than is good for people."

The news follows reports by two debt companies that they have made significant increases in turnover.

Figures released by Accuma on October 31st show the group's turnover leapt to £9.98 million, an increase of 250 per cent from their 2005 figures.

The numbers of IVAs the company handled increased from 734 to 2,537 in the year up until July 31st – a rise of 245 per cent.

Debt Free Direct reported similar figures, as the company reported first-half turnover of £12.2 million, while issuing an average of 536 IVAs every month.

It also predicted 100,000 people will claim IVAs by 2010.

Creditors get tough on IVAs

2006-11-23T04:17:00.000-08:00

[A debt counsellor has claimed creditors are putting stricter budgets on people claiming individual voluntary arrangements (IVAs) following suggestions that around 20 per cent fail before the end of their five year tenancy.]

Creditors are becoming stricter with debtors entering individual voluntary arrangements (IVAs), a debt counsellor has reported.

James Falla from Thomas Charles has claimed credit companies have imposed tougher budgets on people over the past 12 months.

He said: "Often the creditors will look at the income and expenditure of the individual and they will really tighten down on the amount that they will allow people for housekeeping and things like that.

"They will not allow them any room for manoeuvre at all and I think that this situation is going to cause a problem."

He added this could lead to an increasing amount of people becoming bankrupt.

A Thomas Charles survey, published on November 2nd, suggested one in five adults - or 8.4 million people – had unsecured debts of over £10,000 during October.

The report claimed around 1.4 million felt they were 'likely' or 'certain' to declare themselves bankrupt or take out an IVA.

Mr Falla warned people thinking of IVAs that: "You have to stick to pretty strict budgets and that's not something that should be taken lightly by anybody."

His comments follow suggestions from Debt Free Direct that between 20 and 30 per cent of IVAs fail before the end of their five year tenancy.