Debt statistics reveal the "new penury"

Chris Wheal

Mar 14th 2010

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Consumer Credit Counselling Service (CCCS) figures suggest people are seeking help earlier with lower levels of debts. Traditionally those seeking help owed more than 20 times net monthly income. In 2009, nearly three in four (56.9%) owed less than 20 times their take home pay.

But there has been a steep rise in the numbers unable to start repaying their debts. Only one in four people coming for help had the means to go on a repayment plan (Debt Management Plan or Individual Voluntary Arrangement). More than ever were unable to meet basic living costs.

Nearly one in three clients counselled had neither the budget for a repayment plan, nor qualified for any kind of insolvency. The CCS called them "in the grip of the new penury."

Yearbook

The CCCS stats yearbook is culled from the charity's unique data warehouse which is widely used by researchers and academics. It contains the details of more than eleven million phone calls, one million clients and cumulative debts of over £36.2bn.

The yearbook discloses that:

The CCCS helpline received a record number of calls in 2009, with 335,323 calls, a 25% increase on 2008. Over 150,000 people sought help online via CCCS Debt Remedy, almost two-thirds more than in 2008 and over double the number using this service in 2007.
There is no evidence that the recession is pressing disproportionately on families as the number of households with dependent children has remained stable but an increasing number of men are seeking help. In 2007, 44% of clients were men, rising to 48% in 2009.
The number of CCCS Debt Management Plans exceeded 100,000 in 2009, accounting for over £3.3bn of unsecured debt, of which £251bn was repaid to creditors in 2009.
Credit cards accounted for the highest proportion of debt (46.3%) followed by personal loans (39.0%)
Homeowners owe almost twice as much as renters.
There was a slight increase in the proportion of clients under 25, reflecting the employment problems of the young.
Calls to the CCCS Mortgage Counselling and Welfare Benefits Centres increased by 23% and 8% respectively.
CCCS Chairman Malcolm Hurlston said: "It is rare for an annual review to reflect such rapid change. The new penury has struck many people who would ordinarily not have fallen into debt on the basis of their borrowings alone.

"We are determined to put in place a new charter to help these "can't pays" through a difficult but perhaps temporary period.

Come unstuck

"For many 2009 has been a tale of pain deferred but if unemployment rises we can expect many more households to come unstuck this year, irrespective of whatever is happening in the greater economy.

"The medium term is more promising, but in the meantime, the charitable sources of debt advice will be at full stretch.

"However, troubled borrowers should not rush off and pay thousands of pounds for the help of companies who charge excessive fees. We have vast capacity on the internet and we have geared up to offer more telephone capacity too this year."

Can't pay, don't pay

And that is key. People in debt are often preyed upon by unscrupulous companies to sign up to payment plans they cannot meet but which pay the organising firm a commission.