Debt is a growing problem, an issue further highlighted earlier today when we revealed that the average credit card APR has hit a record high. Many borrowers find themselves trapped in a cycle of debt they can't escape from, which is why new plans announced by the Government to give debt sufferers breathing space couldn't have come at a better time.
The plans mean those struggling with serious debt could soon be able to benefit from 'breathing space' from their bills, which would leave them free from further interest, charges and enforcement action for up to six weeks, giving them time to seek financial advice and start tackling their debts.
This advice aspect could be key, with it helping people to access a range of solutions to get back on their feet, such as repayment plans and even debt write-off options, which they may not be able to arrange or even consider on their own.
However, the plans could also be extended to include legal protections that would "shield individuals from further creditor action once a plan to repay their debts is in place," offering longer-term support over and above the six-week exemption period.
"For many people in the UK problem debt seems impossible to escape," said Economic Secretary to the Treasury Stephen Barclay. "Its effects can be far-reaching, impacting all aspects of a person's life and leaving them feeling helpless. That is why we are working to give people who are overwhelmed by debt more time to seek advice, find a workable solution, and help get their lives back on track."
The move has been largely welcomed by the industry, with Mike O'Connor of StepChange Debt Charity saying that this kind of protection "is crucial to helping people who are overwhelmed by debt to recover control of their finances and move on with their lives". However, there are suggestions that even more could be done, as Gillian Guy, chief executive of Citizens Advice, explains:
"It's good to see the Government taking action on problem debt. Providing breathing space is one way to help people get back on track, but action must be taken to stop them getting in problem debt in the first place.
"That's why we're calling for an end to irresponsible lending from credit card companies. For example, no-one should have their credit limit raised without them requesting it – something which risks pushing them further into debt. The FCA should step in to protect borrowers by banning credit card companies from automatically raising credit card limits and making lenders support customers who are starting to struggle."
Whether or not such a ban comes to fruition, the latest proposals should at least go some way to helping those stuck in the cycle of debt. As yet the plans are still in the consultation phase, with the Government currently seeking views from interested parties, but it's expected to become law by 2019.
In the meantime, don't suffer in silence – if you're struggling with debt, speak to your lenders and seek debt advice from places like Citizens Advice or StepChange, and from there you can start looking for ways to tackle it.
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