Problem debt on the up

27 March 2006

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According to The Consumer Credit Counselling Service, the level of problem debt is increasing faster than the level of normal, unsecured debt.

The charity said that the number of people on their debt management plan increased by over 10% to £29,400 last year. Over the same period, total unsecured debt in the UK grew by 5.9%.

This superior increase in DMP debt suggests that a greater proportion of the money being lent by banks and credit card companies became "problem debt" in 2005 than would be expected. This is in line with recent retail banking results which show a rise in the percentage of lending which has been written off as bad debt.

With the rise in the levels of problem debt, CCCS also saw a rise in demand for debt counselling – in 2005, over 200,000 people were counselled about their debt problems on the helpline. In the same period, 52,000 clients repaid £99.2 million to their lenders on 420,000 accounts through CCCS.

Commenting on the findings, chairman Malcolm Hurlston said: "Although it is bad news that problem debt has increased over and above the rate of unsecured debt growth, more people are finding their way to CCCS to find solutions for their financial difficulties.

"There were signs from our data over the course of 2005 that debtors are waking up to their financial situations and seeking help earlier for their debts. We hope that consumers prove themselves even more prudent in 20"

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