Sunday, 27 May 2007

Dood Reveals 'Debt Tax' on Poorest Households

Debt on our Doorstep today released an analysis of household debt in the UK showing that one third of the U.K’s poorest households are paying over 11% of their annual incomes servicing unsecured credit debts.

The move comes prior to the start of the ‘UK Credit Options’ Conference, organised by Citizens Advice Scotland and Debt on our Doorstep for 28 /29th May 2007, which will bring together over 100 delegates per day to discuss the need for responsibility in lending.

Our analysis shows that whilst poorer households are less likely to get access credit (37%) than their richer counterparts (60%) – they take on a greater level of debt relative to their income. This translates into higher debt repayments as a % of their income for poorer households, making debt act as a form of taxtion on the poor.

Damon Gibbons, Chair of Debt on our Doorstep, commented:

“Repaying a growing debt burden reduces the disposable incomes of the poorest households more than it does those of their richer counterparts. For the poorest 20% of households with debts, the growth in debt repayments will completely offset any growth in their income as a result of tax and benefit changes that have been made in the past 6 years and pull households back under the Government’s poverty line.”

“Because debt is not spread evenly across households, it acts like a form of regressive taxation, magnifying existing inequalities in the income distribution. Further investigation by the Government is urgently required. To date, none of their official reports on indebtedness have looked at this issue”.

A full copy of the paper, which was presented to a conference on Responsible Credit at the University of Trento, Italy, earlier this week is available here.

Monday, 21 May 2007

EU Directive Threatens to Sweep Away Consumer Protection

Consumers could lose vital protections against irresponsible and high cost credit if proposals for a new Consumer Credit Directive are ratified by the European Council of Ministers today.
The proposed EU Directive aims to create a single €800 billion-a-year EU consumer loans market by allowing cross border selling of credit, including internet credit. However, no significant consumer protections have been built into the Directive, and consumers face the prospect of taking out loans with terms and conditions set by the courts in the home country of the lender.

The EU Directive, which has not been debated in national parliaments, fails to introduce a requirement that lenders behave ‘responsibly’ and there is no common agreement across Europe as to which cost elements should form part of the APR on a loan. Many European consumers, for example in France and Germany, could see existing protections such as national interest rate ceilings undermined, whilst in the UK our consumer credit licensing requirements – recently tightened by last year’s Consumer Credit Act – can be ignored by lenders operating from the new EU states.

Professor Reifner of the Hamburg based Institute for Financial Services (IFF) and Chair of the European Coalition for Responsible Credit called on the Council of Ministers to reject the Directive at Monday’s meeting and prepare the way for national Parliaments to debate the Directive openly.

“This Directive fundamentally undermines consumer protection in all EU countries by reducing it to the lowest common denominator. Protections built up through national legislation and years of court rulings are about to be swept aside in the name of the free market. What appals us most is that Ministers have failed to demonstrate even the basic courtesy of openly debating these proposals in their national Parliaments.”

Damon Gibbons, from UK debt campaign Debt on our Doorstep, commented:

“The Secretary of State for Trade & Industry should bring an urgent debate on these proposals to the House of Commons. Consumer awareness of these changes in the UK is next to nil, and there is no mandate for the Government to sign up to this proposal on Monday.”

Sunday, 20 May 2007

Motion Laid in Scottish Parliament Welcoming Conference

Jackie Baillie, MSP, has put down a motion in the Scottish Parliament welcoming the Debt on our Doorstep/ Citizens Advice Scotland conference taking place in Edinburgh on 29th and 30th May.

The conference, which is now fully booked, will debate the critical issues of responsible credit and fair financial services at a crucial time with banks facing what amounts to a popular rebellion over default charges and increasing concern over extortionate lending and the lack of affordable financial services for low income communities. The motion (see below) goes onto underline the importance of cross part collaboration in Holyrood and Westminster to tackle these concerns.

Activity is also increasing on the European and Global stage, with the European Coalition for Responsible Credit gearing up for a conference in Brussels in September (see for details); and contacts made by the Global Fair Finance initiative in Japan, Mexico and South Africa.

The motion reads:

*S3M-30 Jackie Baillie: UK Credit Options Conference; ;That the Parliament recognises the crucial importance of fair and affordable credit for all in Scotland; welcomes delegates to the second UK credit options conference in Edinburgh on 29 and 30 May 2007, hosted by citizens advice Scotland and Debt on our Doorstep, and acknowledges the importance of the Cross-Parliamentary Cross-Party Group on Tackling Debt in contributing to full debate of the issues surrounding credit and debt.

Saturday, 19 May 2007

ITV Need You!

Problems with debt?
ITV is making a programme about debt and its affect on families.

Are you struggling to make the repayments on the credit you owe?
Have you got the debt collectors at the door?
Are you tired, angry, upset and feel you have nowhere else to turn for help?

We would like to hear from you.

020 7737

Wednesday, 16 May 2007

Graham Norton Snubs Home Credit

Following Debt on our Doorstep's intervention, TV presenter Graham Norton has confirmed that he will refuse to make an award to home credit lenders at tomorrow's Credit Today Magazine Awards Ceremony, due to take place in London's Grosvenor Hotel.

Today Graham's agent, Dylan Hearn, said that having been made aware of the issues, Norton did not wish to be associated with such an award - although he will continue to host the overall event.

Damon Gibbons, Chair of Debt on our Doorstep said: "We're delighted that Graham has agreed to sit out that part of the ceremony, and send out such a message. These lenders crave recognition as part of the mainstream credit industry but they only further reduce the incomes of low income borrowers. They cannot be part of the solution to poverty in the U.K."

Tuesday, 15 May 2007

Government Remains Complacent about Debt Problems

The Government's latest report on household debt levels retains its complacent attitude to Britain's credit problems. In line with the approach taken in previous reports, no analysis of the extent of debt problems by income group is undertaken, and only general remarks concerning average debt levels is provided.

As debt levels have risen, the Government argues, so too has wealth - in the form of house prices. Additionally, the DTI report stresses that, on average, the ratio of savings to debt has remained constant - so people have the ability to use savings to cover immediate problems in debt repayments.

However, this ignores the fact that for the poorest the position with mortgages, house prices and saving is irrelevant - they rent their homes and half of them have no savings at all. For this group, the growth in their unsecured debt burden in recent years now represents a form of additional taxation that must be paid from their future incomes, deepening effective child poverty levels. Although the general level of unsecured debt has not increased in the last six months, this is unlikely to be evenly distributed across the income scale, with a greater increase in the debt burden of the poorest entirely possible even though the average has remained static. This is borne out by an earlier Bank of England report (based on data from the NMG survey in 2006), which reported that the unsecured debt burden for renters was continuing to increase.

Whilst the Bank of England dismissed this increase as largely irrelevant in terms of its impact on the macro-economy due to the relatively small level of total debt owed by renters compared to mortgagors, it is still extremely relevant to the Government's achievement of its child poverty targets and should not be ignored by the DTI report which is published as part of the Government's broader over-indebtedness action plan.

In relation to mortgage lending, the report fails to note that effective interest rates are at their highest level since 1991, due to the fact that secured lending has outstripped both retail price inflation and the growth in wages. As a result, relatively small increases in interest rates now have a greater impact on those mortgage holders that cannot afford to move themselves onto fixed rates.

In response to the situation, Debt on our Doorstep have today written to the DTI requesting that they provide an analysis of household debt by income level in all future reports and explain why effective interest rates are not reported.

Monday, 14 May 2007

Don't do it Graham!

It may be something he won't be proud to tell his viewers about, but TV and radio personality Graham Norton, pictured, could find himself presenting an award to lenders charging over 1,000% interest this week.

The Irish comedian is due to host Credit Today magazine's annual awards ceremony at London's prestigious Grosvenor Hotel, Park Lane on Thursday night. But some of the lenders that he could be shaking hands with include extortionate home credit providers Bristol Finance and Credit Services Ltd, which charges £40 interest on a £100 loan given over just 14 weeks. That's a whopper of a rip off Graham - an APR of 1068.5%!

The Home Credit or door to door lending market was recently found by the Competition Commission inquiry to be making excessive profits amounting to over £75 million per year. A range of measures are due to be implemented next year to address this, but in the meantime lenders like Bristol Finance and Credit are able to continue to rip off low income customers.

Other lenders up for an award in the category of 'Home Credit Lender of the Year' (we kid you not!), include Shoppacheck, the subject of previous TV undercover reporting, and last year's winner SD Taylor -a subsidiary of S&U plc in which ex-Tory M.P Derek Coombs, holds a £30 million stake.

If you think Graham is doing the wrong thing by presenting an award to these lenders, then contact him via his website ( and let him know what you think.

Friday, 4 May 2007

Personal Insolvencies Rise Again

The first quarter of 2007 saw 30,075 people go bust, an increase in personal insolvencies of 23.9% on the same period one year ago, according to figures released today by the Insolvency Service. Whilst bankruptcies rose 10% to 16,842, Individual Voluntary Arrangements accelerated by 47.6% over the past 12 months to 13,233.

Commenting on the figures, Damon Gibbons - Chair of Debt on our Doorstep - said:

"That over 30,000 households in a single three month period have had to resort to extreme measures and declare themselves insolvent reflects a severe indebtedness problem in this country. We should remember that every county court judgment, insolvency, and respossession increases the market for high cost credit as people are excluded from mainstream financial services. The challenge for Government is to ensure that people going insolvent are given a way back into the financial services mainstream as soon as possible. In that respect, the growth of IVA's as opposed to full bankruptcy is perhaps the only good news in these figures."