RESEARCH BY WHICH
According to research by Which 6% of UK households missed at least one payment towards housing, credit cards, loans or bill payments in October 2020.
This equates to approximately 800,000 people which it is estimated has risen from an estimate of 370,000 in September 20.
EFFECT OF COVID ON INDIVIDUALS FINANCES
According to the Office for National Statistics “ONS” labour market data shows in August that the number of employees on UK payrolls had reduced by 673,000 since March 20.
On Thursday 31 October 20 the Financial Conduct Authority (FCA) issued its strongest Covid Call to Action yet imploring consumers to ask for help from their lenders and also seek debt advice. This follows a nationwide survey that shows 31% of adults – around 12 million – had experienced a drop in income as a result of Covid. Those most affected are under 35’s plus black, Asian or minority ethnic people (BAME) individuals.
The government funded organisation, Money and Pensions Service “MAPS” have estimated that the need for debt advice will grow by 60% over the next 18 months.
CALL FOR REVIEW OF DEBT OPTIONS FOR THOSE STRUGGLING
The Money Advice Trust are calling on the government to carry out an urgent review of debt options for those in financial difficulty including:-
- Waiving fees for Debt Relief Orders (DROs) and Bankruptcy for those on income-related benefits, and reducing fees for other applicants
- Making further amendments to the Individual Voluntary Arrangement (IVA) Protocol to help people in existing IVAs continue with their existing solutions
- Reviewing debt and asset limits across statutory insolvency solutions
- Considering the role of ‘low and grow’ Debt Management Plans (DMPs)
LOW AND GROW DEBT MANAGEMENT PLANS
Debt Management Plans are informal payment plans managed by FCA regulated DMP Providers. The plan is based on the individual making affordable monthly payments to the DMP provider who manages the plan, makes payments to creditors and liaises with creditors to freeze interest and charges.
The DMP provider needs to ensure that the DMP is appropriate and demonstrate why other debt solutions including IVA, DRO or Bankruptcy may not be more relevant.
A low and grow DMP would allow the payments to start lower and then increase as the individuals affordability improves. At present DMP providers are reluctant to take on DMP’s which demonstrate that repayment would take longer than 10 years unless the individual’s circumstances are likely to change.
The Debt Advisor’s Low and Grow plans
We have already put in place a Debt Management Plan that starts with monthly payments as low as £40 per month and have accordingly also reduced our minimum fee from £25 to £15. This is available for individuals who are keen to avoid formal solutions and believe that their affordability will improve once the affects of Covid decline.
Our low and grow IVA’s are similar and based on contributions starting lower and then increasing if there is evidence that affordability will improve within the first 8 months of an IVA. This may be relevant for individuals on furlough and who are confident they will be able to increase their payments after 6 to 8 months from approval of the IVA.
We are not keen, however, for individuals to sign up to an IVA and are not confident that they will be able to meet the proposed terms of the IVA. A DMP would perhaps be more appropriate until income and affordability are more sustainable.
Who can you talk to about debt Issues?
Knowing you owe money that you cannot afford to repay can be very scary. The problem will not go away and will only get worse if you ignore the problem. Don’t panic, it’s important that you look after yourself and keep calm.
The Debt Advisor has been in existence for 21 years and we have gained a reputation as the “go to” practice for debt advice and debt solutions and most importantly, we are authorised and regulated by The Financial Conduct Authority “FCA”.
The FCA register will let you know if the organisation has permission to provide debt advice and are able to help with debt adjusting which is the ability to negotiate with your creditors.
Get Debt Advice Today
For full debt advice and whether any of our available debt solutions would be the best option for you to get out of debt, you can speak to one of our advisors directly on 0800 085 1825 or arrange a callback.
The Debt Advisor Ltd is regulated by the Financial Conduct Authority. This means we are able to offer debt advice and deliver both formal and informal solutions. All debt solutions need to be carefully considered and you must take independent debt advice. We hope that the information and debt advice on this site including Frequently Asked Questions, will help inform you.
There are sources of free debt advice and services. You can find out more by contacting the Money Advice Service on 0800 138 7777 or by visiting their website.