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You can find the current article at its original source at https://www.theguardian.com/money/2023/apr/28/uk-households-facing-debt-timebomb-warns-citizens-advice
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| UK households facing ‘debt timebomb’, warns Citizens Advice | UK households facing ‘debt timebomb’, warns Citizens Advice |
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| Charity also warns debt advice is fast becoming a ‘wild west’ sector much like payday loans industry 10 years ago | Charity also warns debt advice is fast becoming a ‘wild west’ sector much like payday loans industry 10 years ago |
| UK households are facing a “debt timebomb”, according to Citizens Advice, which compared the “wild west” debt advice industry to the payday loan sector of a decade ago. | |
| The charity said it is helping increasing numbers of people with a negative budget, where their income is not enough to cover the essential expenses, making debt “unavoidable” for millions of people during the cost of living crisis. | The charity said it is helping increasing numbers of people with a negative budget, where their income is not enough to cover the essential expenses, making debt “unavoidable” for millions of people during the cost of living crisis. |
| According to its latest statistics, 51% of those it helps with debt are in a negative budget, compared with 36% in 2019. The average debt client now has £0 left over each month, compared with more than £15 in 2019. | |
| “The maths speaks for itself – a household debt crisis is coming and we have a choice about whether to prepare,” said Matthew Upton, the director of policy at Citizens Advice. | |
| “You would hope that what greets them here is a system and set of solutions that will help them get back on their feet, or at worst, not make things actively harder for them,” he said. | |
| “The reality is very different. The most apt description is a wild west – search online for options to pay off debts, and you’ll be bombarded by profit-seeking firms offering misleading advice about debt solutions which won’t help. Fall behind on bills and you could find unregulated bailiffs knocking at the door.” | |
| The use of Individual Voluntary Arrangements– where people make monthly payments for five to six years before their debts are wiped – has soared over the last 20 years to make them the most common debt solution, according to the charity. | The use of Individual Voluntary Arrangements– where people make monthly payments for five to six years before their debts are wiped – has soared over the last 20 years to make them the most common debt solution, according to the charity. |
| However, consumers are being “misled” by firms into agreeing IVAs that they can’t afford, Upton said. | However, consumers are being “misled” by firms into agreeing IVAs that they can’t afford, Upton said. |
| According to Citizens Advice research, 73% of people who are, or have been, in an IVA struggled to make repayments and 46% had to cut back on everyday essentials such as food and heating to make their payments. | According to Citizens Advice research, 73% of people who are, or have been, in an IVA struggled to make repayments and 46% had to cut back on everyday essentials such as food and heating to make their payments. |
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| The statistics also showed 39% said their IVA has had a negative impact on their debt levels and 32% said they had to borrow money to make their payments. | The statistics also showed 39% said their IVA has had a negative impact on their debt levels and 32% said they had to borrow money to make their payments. |
| “When they inevitably fail to make their monthly payments, the individual is back at square one, while the firm has often pocketed £1,000s in front-loaded fees,” Upton said. | “When they inevitably fail to make their monthly payments, the individual is back at square one, while the firm has often pocketed £1,000s in front-loaded fees,” Upton said. |
| “Why is this happening? There are parallels here with the growth of the payday loan industry 10 years ago – a lot of money to be made, and lax or absent regulation.” | “Why is this happening? There are parallels here with the growth of the payday loan industry 10 years ago – a lot of money to be made, and lax or absent regulation.” |