Significant rise in legal remedies to deal with debt across the UK

Nov 6 2013 Today financial capability charity The Money Charity (formerly Credit Action) releases its Debt Statistics, giving an overview of the financial situation in the UK.

 

The new data published by The Money Charity shows there has been a significant increase in creditors and consumers using formal legal arrangement to deal with debts. It also confirms that consumer credit has escalated over the past six months.

In the UK, the latest Debt Statistics reveal that creditors using legal channels to collect their debts are on the rise, with County Court Judgements (CCJs) up considerably over the last two quarters. Historically there is usually an increase in CCJs in the months between July and September (Q3), but even taking that into consideration these figures are still significantly higher.
 

Taking a legal form of action to deal with debts is also mirrored in consumer’s behaviour, with a 5.7% increase in Individual Voluntary Arrangements (IVA) year on year. A form of insolvency, the number of IVAs has shown an obvious incline since the beginning of the year.

The Money Charity data also reveals that the amount consumers are borrowing is going up noticeably. Consumer credit increased by 0.9bn in September, compared to the average monthly increase of £0.6bn over the previous 6 months.

Commenting on the findings, Michelle Highman, CEO of The Money Charity said:

“Unfortunately the Debt Stats this month don’t paint a particularly promising picture of the current situation. However, we mustn’t forget there are some encouraging figures to takeaway, bankruptcies continue to fall and the cost of petrol is the lowest it has been for a while - with the largest monthly fall in price since November 2008.

It is important though not to ignore the increase in consumer borrowing, which is always a great cause for concern. As we are seeing no significant rise in wages, this increase could reflect that people are borrowing out of necessity, for essential purchases for them and their family, rather than it being due to a growing consumer confidence.

It is vital that anyone borrowing money is clear about the costs and exactly how much they have to pay back, so they can make an informed choice. We would always caution people to think twice before they purchase something on credit, but if they are going to, we would suggest they evaluate what their options are.

For further information click on The Money Charity