The Consumer Credit Counselling Service in the UK is a charity which gives free advice to those with debt problems. It is subsidized in part by the main lenders and the bulk of their clients are referred to them by their creditors. Their purpose is to “assist people in financial difficulties by providing free, impartial and realistic advice.” It helps people to learn how to understand their finances better and gives advice on getting out of debt without being exploited by debt management companies charging fees.
The CCS has released its annual report for the latest debt figures. It shows that in 2009 the highest number of debtors ever called for advice with a total of over 300,000 clients. Of this number 30% were not in a position to be helped by debt management plans as their budget was in deficit below living requirements, leaving no surplus funds to put towards paying down debt. The only solution offered was to raise their income level.
The CCS reports that of all debt from their clients over 46% was owed on credit cards and over 39% on personal loans. Despite this Malcolm Hurlston, Chairman of the CCS states that only 15% of their clients are in debt due to overspending and says that debtors are “ordinary households, by no means profligate.”
Despite that the average credit card and loan debt is £13,000 and excludes mortgages. Homeowners are far more in debt than renters and owe on average £9,000 more than renters on credit card debt. This points to the higher availability of credit to homeowners than renters. Most of the clients with the highest debt were over age forty, and statistics show that whilst couples owe the most single men are more highly indebted than single women.
Mr Hurlston outlines the main reasons for increased debt as being due to redundancy, reduced working hours, illness and relationship breakdowns, rather than overspending. However this slightly contradicts the information which the CCCS uses to explain why people are in debt with their statement that debt is usually caused by reduced income or over use of credit cards. As their own statistics show a high level of credit card debt it would suggest that mismanagement of credit card debt is a major contributor to consumer debt.
The CCCS is of course by no means the only organization dealing with consumer debt. The Citizens Advice Bureau regularly sees debtors and there are a host of debt management companies charging debtors a fee to help them to try and make sense of their budgets and debts. Due to the high level of consumers needing advice on how to clear debts the UK’s proposed idea to introduce financial literacy tests appears to be an increasingly good idea.