Breathing space campaign: how have your debts affected you?

I work for a credit union (not-for-profit, member-owned community bank). I'm not commenting on behalf of all or even my own CU, but I want to make some observations on the final question and to be transparent about my viewpoint.

Member feedback consistently identifies our approach to borrower difficulty as one of the strengths of the sector. Providing borrowers communicate with us, we will do what we can to assist. This might mean rescheduling loans to reduce payments, reducing interest, accepting payments aren't going to made temporarily or allowing them to use any savings. Obviously this hits our bottom line, like any lender, but we see this as part of our long-term aim, which is to improve our members' financial position.

How do you think a breathing space would make a difference to your circumstances/ability to get out of debt?
One of the obvious dangers of problem debt is that the person is under so much pressure to keep up repayments that they lose perspective.

Bills keep coming in and people can't see the woods for the trees, they may not know how to prioritise their debts and pay non-priority creditors because they're shouting the loudest, or have continual payment authorities, or (in the case of banks) take their money as it comes in to the account.

Too often, because they don't have this time to consider the best options, the only 'solution' they can see is to borrow more, either to serve existing debt or because life goes on, cars break down, children need new clothes, etc. etc.

We've seen an increase in people trying to borrow for rent arrears or to pay day-to-day bills. They often have an unsupportable proportion of their income already servicing other debt and we usually have no option but to decline their application, as it would not be in their best interests to add to their debt.

Leaving aside consolidation loans, (getting a loan to repay other debt, which may be a solution for some people in particular situations) my fear is that some lenders are not as responsible and they are lending more or putting up existing credit limits, merely putting off the problem for another day, when the level of debt is even higher.

Our approach is simple, if someone can't pay, we do what we can to assist, discussing it with them and keeping communications open. Often it is only necessary for a short period, but sometimes it can be longer.

It is incredibly frustrating when we are the only ones to do this and are often forced to write debt off that we can ill afford, because members feel forced into an arrangement to make other creditors back off, when if they were willing to support their customers earlier in the process, a long-term solution could be found to suit everyone, without adding to the distress of the borrower.

I dealt recently with a woman who had a catalogue debt (catalogues are notorious for giving no quarter) and had got into arrears because of their 28-day payment schedule. Her job had changed with a reduction in income and she was worried she'd never pay the balance off, even paying £200 a month. She'd asked them for a pause in the interest to get back on track. Their response? 'We won't freeze or reduce interest for anyone unless they're in an IVA - pay up' (followed up by lots of texts about IVA schemes).

I've signposted the person to further advice, but imagine, you've finally got to the point where you have to swallow your pride and call up your creditor and beg them to help you, and that's your response. 'Get an IVA', which might not be appropriate or necessary. Unless you want to take it to the Ombudsman, there's nothing more you can do.

A breathing space would mean that people had the time to consider the best options for them without the pressure of knowing that interest and charges are building up faster than they can pay it off. Reasonable lenders should welcome this.

In my view, the debtor should not be allowed to borrow more as a condition of the respite period, similar to other formal debt solutions. They should also be required to seek advice from a debt charity on their whole financial situation (this should not be seen as a 'quick fix').

In an ideal world, we would be able to do this without compulsion, which will hit the good lenders with the bad, but sadly, experience teaches us that compulsion is the only way to get the measures in place that help people quickly enough to make a difference.

Hi, sorry, my subscription notifications were going into 'junk'! Absolutely fine, if it's not too late.

If you'd like a wider perspective from the sector, I'm sure our trade body ABCUL would be happy to give you an 'official' view or canvas for opinions. Likewise, Responsible Finance, the trade body for CDFIs.

Happy to provide contacts if it would help.