Skip navigation | Skip to footer
 

Citizens Advice Bureaux report steep rise in debt problems

7 November 2006

Citizens Advice Bureaux are reporting a sharp rise in the number of serious debt problems being brought to them. Figures released today by national umbrella charity Citizens Advice show that their bureau network in England and Wales advised on 1.4 million debt problems in the year 2005/06, an increase of 11% on the previous year.

One in five of all CAB clients needed advice on debt problems. The Citizens Advice Bureau network is already the largest single provider of free, independent and expert debt advice in the UK.

Consumer credit debt - including problems with credit cards, store cards and charge cards, unsecured personal loans, bank and building society overdrafts. catalogue and mail order debts - remains the biggest problem area, accounting for 824,000 enquiries.  The number of consumer credit debt enquiries has more than doubled in the last eight years.

But housing debt, including problems with mortgage, secured loans and rent arrears, was one of the fastest growing problem areas, up by 20% on the previous year.  Of the 127,000 housing debt problems brought to Citizens Advice Bureaux nearly 10,000 concerned threatened repossession and 2,000 concerned actual repossession or eviction. These figures bear out the findings of an NOP survey for Citizens Advice published in September showing that some 770,000 people had missed at least one mortgage payment in the previous twelve months.

Council tax debt problems handled by bureaux went up by almost half (46%) to 89,000, and utilities debt problems (gas, electricity, telephone and water) were up by 19% to 90,000.  Recent big hikes in fuel prices make it likely that these problems will continue to grow.

Bankruptcy accounted for 65,000 of the debt problems handled by Citizens Advice Bureaux.

Citizens Advice Chief Executive David Harker said:

"Our debt enquiry figures are deeply worrying. They suggest that a growing number of people are getting deeper into unmanageable debt it will be difficult to recover from. Many of our clients already face a lifetime of debt and research we published in May found it will take them an average of 77 years to pay off the money they owe at a rate they can afford.

"We are particularly concerned by the sharp rise in enquiries from people getting behind with mortgage payments and having trouble paying council tax, gas and electricity bills, at a time when court action that can lead to repossession is on the increase, and fuel prices are rising steeply.  This is likely to lead to more people than ever experiencing the sort of serious debt problems our advisers are already seeing day in day out.”

Citizens Advice received £33 million of DTI-administered funding from the Financial Inclusion Fund in April 2006 to increase the availability of face-to-face debt advice to financially excluded clients in deprived communities.  This involves recruiting and training 370 new debt advisers within an 18-month period. At the start of October 2006 there were 233 new debt advisers already recruited.

David Harker said, Having more debt advisers will enable local bureaux to see people quickly and act at an earlier stage to stop their debts from increasing. However, our evidence shows a clear need for more responsible lending. There are still too many cases where clients should not have been given the levels of credit they have received. Lenders need to do more to ensure every person’s circumstances and their ability to sustain payments are fully taken on board when lending. We also want to see all creditors taking steps to help people manage their debt problems.”

Case studies

A Gloucestershire CAB client, a 70 year old man, quite reasonably believed that his prepayment meter covered his electricity usage. However, in April 2006 he received a letter from the fuel company saying that he owed them £650 for electricity, urging him to pay this amount in full and pointing out that failure to do so could result in disconnection of his electricity supply and would lead them to report him to a credit reference agency.  This was the first time that the client had been informed that he owed any money.  The client was very upset by these threats, and paid the outstanding amount in full immediately.  The debt had arisen because the fuel company had not reset the client’s pre-payment meter for increases in the price of electricity.

A CAB in the South West reported that a couple had many debts, including a £15,000 secured loan with a secured loan company.  The clients failed to make four consecutive payments on the secured loan, so the company took possession action.  The company offered the clients the option of agreeing to pay an additional £100 per month so that they would not have to appear in court.  However, the clients visited the bureau who explained the importance of attending court and making an affordable offer towards the arrears.

A CAB in Hampshire saw a client in receipt of means-tested benefits with council tax arrears. Although the client had been trying to make arrangements with the council to pay off their arrears, the council insisted that they had to wait for the case to go to court before they would come to an arrangement. This would add further costs to the client’s arrears and meanwhile the arrears would continue to accumulate.

A CAB in Surrey reported the case of a 61-year-old woman who was in receipt of an occupational pension.  Following the death of her husband she developed severe mental health problems and began spending heavily.  Over a ten year period she acquired a total of 25 personal loans and credit card debts totalling to £135,000.  There appeared to have been no checks on her ability to repay and the more she borrowed the more was offered to her.  The burden of all the debt became too much for her and she tried to commit suicide.

Notes to editors

  1. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more information in England and Wales see www.citizensadvice.org.uk
  2. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality. For online advice and information see New windowwww.adviceguide.org.uk
  3. Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 7.1 million problems from April 2010 to March 2011. For full 2010/2011 service statistics see: www.citizensadvice.org.uk/press_statistics
  4. Out of 22 national charities, the Citizens Advice service is ranked by the general public as being the most helpful, approachable, professional, informative, effective / cost effective, reputable and accountable. (nfpSynergy’s Brand Attributes survey, May 2010).
  5. Most Citizens Advice service staff are trained volunteers, working at around 3,300 service outlets across England and Wales.