One in three struggle to meet bills or credit commitments – charity


The number of people struggling to meet bills and credit commitments has doubled since the start of the pandemic to nearly one in three people, according to a study by a charity.

Almost one in three UK adults – 30% or 15 million people – say they now struggle to meet their financial commitments compared to 15% or 7.5 million people in March 2020, according to a survey for StepChange

The findings are part of a new report from the charity – Falling Behind to Keep Up: The Credit Safety Net and Problem Debt – which finds the pandemic has further boosted the reliance on consumer credit to make ends meet. .

Around 8.6million people in financial difficulty borrowed £26billion to cover their basic needs in the last year, including 3.5million people who used the credit to pay essential bills, according to the study.

The sharp increase in the number of people struggling to meet their financial commitments should raise alarm bells in government, banks and regulators

Stage change

Two-thirds of those in difficulty (65%) had kept pace with credit repayments by missing bills, borrowing from family and friends or cutting back to the point of difficulty.

Fewer than one in four people struggling with credit repayments were in contact with their bank or credit company despite rules designed to ensure those in financial difficulty receive support.

Half of respondents (53%) said they would be hesitant to seek help with financial difficulties from a bank or credit company due to concerns about credit reports and debt. anxiety and stigma associated with this issue.

Among StepChange customers who responded to an online survey, 26% were offered additional credit after previously experiencing financial hardship, 35% experienced a payment they could not afford, and 51% had interest added to a debt.

StepChange said the cost of living crisis is expected to increase the number of people using credit to cover essential household needs in the coming months and warned that “urgent action” was needed to help households to meet essential costs without resorting to credit.

The findings, based on a national survey of UK adults and an online survey of StepChange customers, revealed “bad practices” in the credit market, such as ineffective affordability checks and raises automatic credit limits that have driven financially vulnerable households into unmanageable debt, the charity said. .

It is asking the Financial Conduct Authority (FCA) to ensure its proposed consumer bond raises lending standards and addresses unaffordable credit limit increases and forces businesses to step in when customers are unable to deal with refunds.

StepChange is also urging the government and the FCA to do more to provide alternatives to borrowing for households struggling to meet unexpected expenses, through grants and an interest-free loan scheme backed by the government.

StepChange chief executive Phil Andrew said: “The sharp increase in the number of people struggling to meet their financial commitments should be alarm bells ringing across government, banks and regulators.

“Those tasked with guiding us through these choppy financial waters need to be aware of the harm many credit products available to people on the brink of financial difficulty can cause.

“The new Consumer Duty is a crucial opportunity for businesses to rethink their products and change their practices to ensure that credit does not exploit financial hardship and that people in difficulty get effective help quickly. To resist action is to risk a rapidly worsening debt crisis, especially among low-income households.

YouGov surveyed 5,028 adults in October and StepChange surveyed 550 online customers who contacted the association for the first time in 2021.

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