Govt Is Taking Actions To Target Debt Problems
The government has recently published a new consumer White Paper with the rather lengthy title “A Better Deal for Consumers: Delivering Real Help Now and Change for the Future”.
Get a debt advice who also provide service for business debt in England, Wales, Scotland and Northern Ireland.
The measures it sets out aim to help people in financial difficulty. Some of the objectives are to keep people in their homes, offer advice to people in debt, deal with sharp business practice and help vulnerable people cope with essential bills.
Some of the proposed changes show that the government is determined to raise standards and cut out dodgy practices. There is likely to be a complete ban on credit card cheques which card providers had been sending out to customers. Such cheques were often unsolicited and they were generally a more expensive form of credit than just using a credit card and they offered less protection to the consumer.
Increases in credit card spending limits without the express permission of the consumer may also be banned. Up to 20% of credit card users had their credit limits increased without their consent in the last year. The government sees this sort of practice as contributing to irresponsible lending and borrowing.
The White Paper suggests that there should be restrictions on card providers’ ability to raise interest rates on existing debt. It suggests that repayments to a credit card account should be allocated more fairly and that the practice of repayments being used to pay off the least expensive debt while the high interest bearing debt is left unpaid is unfair to the consumer.
The government promises to consider introducing a statutory Debt Repayment Plan (DRP) and is to commence consultations shortly. This would be a strengthened alternative to the voluntary Debt Management Plan (DMP) currently operating. A DMP is an informal and flexible agreement set up by a provider, who re-negotiates repayment terms for a debtor with creditors, so that all payments are consolidated into one affordable monthly payment, which the provider collects and distributes. The DRP scheme being considered would have regulatory teeth. Operators would have to be approved. Interest and charges would cease and court permission would be necessary for enforcement. Creditors could be compelled to participate in such a DRP and debts might have to be partially written off. Balance between the interests of creditors and those of debtors would have to be struck.
Until such legislation is introduced insolvent debtors in the UK have quite a wide choice of financial solutions available to them These range from Administration Orders (debts of less than £5,000), Debt Relief Orders (debts of less than £15,000), Debt Management Plans (DMP), Individual Voluntary Arrangements (IVA) and of course Bankruptcy. Each of these has its own pros and cons. If you have financial problems and particularly if you may be insolvent, you should acquaint yourself with the full range of financial solutions before opting for any of them. The CAB, CCCS and reputable providers of financial services provide free initial consultation and advice. Don’t commit to any of solution until you are satisfied it is right for you.
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