MSE News: Plans for six-week debt 'breathing space'

Former_MSE_Callum

People struggling with serious debt could be given up to six-week's grace from further interest, charges and enforcement action, under plans unveiled today....

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'Plans for six-week debt 'breathing space''

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EssexHebridean

This could be fantastic news as a starting point to work from but only so long as it's done on the right basis. It MUST be mandatory for the people applying for this breathing space to get IMMEDIATE help - from Stepchange or another of the free debt charities, otherwise it simply won't help long term. A lot of the problem is that so many folk simply don't know how to budget - let's face it we see it here, people arrive in absolute desperation but a few shorts steps later - showing them how to fill in the SOA, then going through it with them, and they find out that actually, their situation is nowhere near as bad as they thought - they simply didn't know how to put things right.

robin58

Strange it matches the same period of 6 weeks of delays in getting paid Universal Credit.

Me cynical, what makes you think that?

sourcrates

6 weeks is not long enough.

It takes more than that to process a debt relief order.

It should be six months minimum.

fatbelly

I'm pretty underwhelmed by this. I see it as a case of 'what can we do that sounds sympathetic, but doesn't cost much?'

It's not going to make any difference to me in my work as a debt adviser at CitA or to my clients.

I find myself starting to agree with Gillian Guy (which is unusual) in her press release

https://www.citizensadvice.org.uk/about-us/how-citizens-advice-works/media/press-releases/citizens-advice-responds-to-government-announcement-to-provide-six-weeks-breathing-space-for-people-in-debt/

'Providing breathing space is one way to help people get back on track, but action must be taken to stop them getting in problem debt in the first place.'

which I agree with, but she then moves on to irresponsible credit card lending, which is really a long way down my wish list.

A national Council Tax Benefit scheme with everyone on IS, JSA, ESA or the UC equivalent getting 100% relief would be my wish but that would cost.

EssexHebridean

To me the root of solving the problem still lies in the education thing - people need to be taught far, far more about personal finance. Also how many people are taught to budget. and to budget properly? If the basic knowledge isn't there, it's impossible to prevent the problem in a lot of cases.

sourcrates

You can leave school, and within a very short space of time, be offered credit far in excess of any salary you are likely to attain.

No one has prepared you for Dealing with this, some people don’t even realise you have to pay it back.

Dealing with credit should be a apart of the curriculum.

D_M_E

Another example of political meddling which will not actually do anything.

I predict that Stepchange and the like will be overwhelmed in the 6-week term and as a result nothing will get done - once the 6 weeks is up creditors will, as usual, just carry on applying punitive interest and charges.

What's needed is for the government to set the interest which can be charged to a more reasonable level - with base rates next to zero, why are credit card interest rates over 30% in some cases, and over 18% in most cases?

As for payday loans, were these not banned in the USA and the companies offering them simply moved shop over here as a result? These have punitive interest charges and these most definately need banning, either that or the current 100% cap on interest and charges should be drastically reduced.

StopIt

Without targeted help, and more funding for free debt charities and support services, this will be useless.


6 weeks is not a long time in the grand scheme of things. Lots of people have spent years, or even decades digging themselves a hole in debt and 6 weeks grace is going to be a drop in the ocean.


The grace period needs to be a freeze, contingent to the person in debt being referred to a debt charity and only once a proper solution is reached, can things move forward. 6 Weeks is not enough time to process a DRO, it is not long enough for a debtor to save up an emergency fund and enter a DMP where their access to credit will be annihilated. It isn't really enough time to enter BR or an IVA.


Aside from the issues EH has raised, some people are simply too proud to admit their debt problems, and lenders just love people like this because they'll gladly borrow more, if it means not facing up to the scale of their debt crisis they find themselves in. We have a CRA system, why not use to flag people in unsustainable debts and rather than being pushed into the arms of PDL sharks, push them towards help instead? The nudge theory works, why can't the successful advertising tactics of lenders be used by the people who are here to help, not hurt.

fatbelly

StopIt wrote: »

Without targeted help, and more funding for free debt charities and support services, this will be useless.

The Money Advice Service, itself funded by a government levy on the financial services industry, funds debt advice through England and Wales, a lot of this through Citizens Advice.

The Government is scrapping it in April and saying it will be replaced with something slimmer, more efficient and merged with Pensionwise and The Pensions Advisory Service.

Still no sign of what it will look like or what it will fund, and MAS-funded debt advice staff will be handed their redundancy notices in about 9 weeks.

MiserlyMartin

sourcrates wrote: »

You can leave school, and within a very short space of time, be offered credit far in excess of any salary you are likely to attain.

No one has prepared you for Dealing with this, some people don’t even realise you have to pay it back.

Dealing with credit should be a apart of the curriculum.

Oh come on how stupid do you have to be? We are now making excuses for the financially irresponsible. I'm one of the few free thinking people who heard this annoucement about the 6 weeks and instead of thinking this is good... thought great just another stupid government meddling to put off the inevitable pay back day even further. OK its interest free whoo hoo but it does nothing to solve the problem in the UK and that is too many people hooked on easy credit. When this goes again its going to be 2007 on steroids.