Wednesday, 1 August 2012

Who pays for debt help?

UK debt professionals have four months to come up with a workable plan to provide a consistent standard of debt help – specifically for Debt Management Plans. One of the main reasons we hear so little about developments like this, is that many of us still believe that debtors should simply knuckle down and pay back what they owe. They’ve done the crime, must do the time. It’s as simple as that.

Since the 2008 crunch, personal borrowing has stood at around £1.5 trillion. Its victims are increasingly ordinary people so embarrassed by their debts that they suffer in silence: small businesses on dodgy swap rates, those in broken relationships, or mis-sold PPI, the jobless, injured and sick. Repayment plus penalties and charges creates a never-ending story, yet credit was bought “subject to status” – surely, the lenders calculated risk and included this in their costs?

Every now and then, we see headlines that people owe less than they did, that bankruptcies are falling and delivering an upbeat take on recovery. Yet four years and two opposing governments later, personal borrowing has not budged, and our economy continues to limp either side of a persistently precarious flat line.

Stuff the party political blame game and the media, marketing an elevator pitch. We all know that recovery requires spending, but trapped by an unpaid bill, this will not happen. The solvent may switch to an ethical provider or preferential rate, the politicians may print money, but what happens when a growing body of no-credit check numpties can no longer repay? It does not help to marginalise the desperate.

Like it or not, our finances are interdependent, all needing somebody, somewhere to pay on time. We share a vested interest in the availability of credit and debt help, because defaults and arrears affect the solvency of us all. With financial services under scrutiny for all manner of dodgy dealings, we simply cannot afford to look away. We need to find the bad apples and deal with them fast.

“Who pays for debt help?” is an essential question because in handing responsibility for debt advice signposting to the Money Advice Service, the government has effected a creditor funded resource. Perhaps you agree that lenders should bear the cost of unsustainable credit, or maybe you question their impartiality. Either way, “Who pays for debt help?” is a complex issue that demands our attention.

We’ll be blogging more on funding for debt help and the Debt Management Protocol over the coming weeks and welcome your comments.