As consumer debt levels in the U.K. are on the rise and debt collection groups are reportedly not paying voluntary contributions, providers of debt advice say they don’t have enough resources to keep up with demand. Official figures are suggesting that more than two million people each year will need help by 2022, while two of the country’s largest providers helped only approximately 750,000 people last year, the Financial Times reported.
“We’ve alerted the Treasury to the risk of stimulating demand for debt advice without first ensuring that funding is sufficient for providers to accommodate it,” PayPlan executive director John Fairhurst told FT.
Fairhurst told the paper that the organization’s demand for services has risen 50 percent as of January. Should that trend continue, Fairhurst is projecting a 200 percent rise in inquires by the beginning of 2020. Several factors are expected to increase the need for advice on how to manage debt such as higher interest rates and a breathing space strategy by the government to help debtors in trouble.
The news comes while banks in the United Kingdom are dialing back their credit underwriting and other extensions of unsecured debt as concerns are mounting that rising household debt could destabilize the financial system, it was reported in January.
Data from the Bank of England indicated that loans are declining and credit card applications are increasingly being denied as banks are shifting their efforts toward prime customers. The move came after a warning by economist Mark Carney that annual growth of 10pc in lending could leave borrowers overextended and banks exposed.
Banks have responded by dialing back — 12 percent more banks are reporting falling access to funds as opposed to greater access to funds, a strong indication the consumer credit market is slowing down. Consumer groups were pleased, generally, with the choice — but would prefer to see consumers limiting themselves rather than financial institutions being relied upon to tap the breaks.