In These New Times

24Dash.com

26th February, 2009

It would take an average of 93 years for people contacting a debt charity for help to repay their borrowings at an affordable rate, research showed today.

Citizens Advice said the average person who came to it for advice owed £16,971, two-thirds more than the average debt accumulated by its clients in 2001.

It said the sum was the equivalent of nearly 18 times its clients’ total monthly income and it would take people an average of 93 years to pay off the debt at a rate they could afford.

Nearly half of homeowners who contacted it for help were behind on their mortgage or secured loan repayments, one in five of whom were also in negative equity, while a quarter of people were in council tax arrears.

More than half of the 1,400 debt clients whose details were analysed, were in debt on at least four essential household bills, and the amount they owed on these was 38% higher than when similar research was carried out in 2004.

The group also found that one in 10 people had at least 10 different debts, owing money through credit cards, loans, overdrafts and hire purchase agreements, but 58% of these had no available income to pay back what they owed.

David Harker, chief executive of Citizens Advice, said: “These findings make sobering reading, especially as they are based on data collected just before the worst of the credit crunch began to bite.

“Low income, combined with irresponsible lending, unreasonable debt collection practices and badly informed financial decisions are at the root of many of our clients’ debt problems.

“For many there is little prospect of their income increasing or their circumstances changing. The reality is that they are condemned to a lifetime of poverty overshadowed by an inescapable burden of unpayable debt.”

He added that since the research was carried out in July, the charity had seen an “enormous rise” in the number of people contacting it for help because they had lost their job.

Debt is now the main issue bureaux staff offer advice on, accounting for one in three of all enquiries received, after the number of people contacting it for help with debt doubled during the past 10 years.

The charity’s advisers are currently dealing with an average of 7,241 new debt problems every working day.

The group said the most common reasons that people were in debt were that they were on low incomes, they had over-committed themselves, they had an illness or a disability or that they had lost their job.

But it added that irresponsible lending, poor financial skills and big increases in the cost of living, such as hikes in food, petrol utility bills and council tax had also played a significant part in people’s debt problems.

People who contacted the group for help tended to be poorer than the rest of the population, with an average net monthly household income of £1,021 – less than two-thirds the national average.

Citizens Advice estimates that nearly a third of its debt clients could be eligible for a debt relief order – a new low-cost alternative to bankruptcy for people who owe less than £15,000 and have assets worth less than £300 – when it comes into force in April 2009.

The research was based on an in-depth analysis of 1,407 new debt clients seen in 52 Citizens Advice Bureaux in England and Wales in July