Hounslow Residents Rack Up £19,898 Debts Before Seeking Help

According to new report published by debt advice charity Capitalise


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A report out this week by Capitalise, London’s Debt Advice Partnership, shows that Hounslow would be one of the worst affected boroughs if free debt advice was no longer available.

People seeking advice from the charity Capitalise in Hounslow have an average debt of £19,898, which they have to manage on an average monthly income of £866 – around a third of the UK average, and just over a quarter of the London average income.

Across London, the highest number of debt enquiries came from Bromley, Lewisham, Greenwich, Bexley and Hillingdon. The ‘Up to Our Necks in it’ report finds that personal debt in London is deeper, more widespread, more complex and more urgent since the recession, and creditors are being more aggressive in recovering payment.

Creditors less willing to negotiate

Capitalise’s debt advisors report that creditors are getting more aggressive and less willing to negotiate a solution. Between 2007 and 2008, repossessions of assets increased by 40%. “Our advisors report that creditors are reacting to the debt crisis by passing on more cases to debt collection agencies and resorting to court actions or bailiffs,” explains Graham Fisher, CEO, Toynbee Hall, the charity leading the Capitalise partnership.

“We’re calling for an integrated approach between local and central government and the voluntary sector in order to tackle the increase in personal debt caused by the recession, and more intervention where creditors are acting unreasonably. Employers also have an important role to play in preparing their workforce for potential redundancy and helping them to take preventative measures to stop them sliding into debt.”

London’s Debt Summit, organised by Capitalise and the Mayor of London takes place today at City Hall. It will look at the changing levels of debt facing Londoners, and the impact this is having on free face-to-face debt advice services.

Deputy Mayor of London, Richard Barnes, said, "This report shows the real impact of the recession on the lives of ordinary Londoners, with many now facing high levels of debt. The Mayor launched his Economic Recovery Action Plan to support the capital's businesses and Londoners through these tough times. Many of the actions he is taking will help people and companies in debt, such as the Economic Recovery Investment Fund and the Access to Finance Programme, which offers advice to business so they are better equipped to secure debt and loan finance."

London’s debt advice services are struggling to meet demand

The report finds that since April 2008 there has been a 35% increase in debt inquiries.[ii] The average amount of debt of those seeking help from Capitalise’s debt advisors has increased by 16% since January 2007 to £18,131.

An increase in the volume and complexity of cases seen by Capitalise’s advisors means that people now have to wait up to 7 weeks for advice, leaving many Londoners suffering alone. While debt advisors are only able to see the most urgent cases, the number of urgent cases has increased.

The average amount of debts which put people at risk of arrest or repossession has risen by 320% since 2006. More people are presenting with more issues; there has been an increase in people with two or more different debt issues, making cases more complex and longer to deal with.

New type of clients seeking debt advice ‘crowding out’ traditional ones

Capitalise’s debt advisors have also noticed a trend in increasing numbers of wage earners and home owners coming to them for advice – and as advisors only have a fixed amount of time, at the expense of less affluent clients. Since 2006 to 2009, Capitalise advisers have seen 13% more home owners and 10% fewer social tenants.

Self employed people seeking advice from Capitalise, although fewer in number, have seen a 300% increase in their debts from £10,000 to nearly £44,000 since 2006. Debt advisors have seen an increase in clients earning 6 – 20K, and over 20K, concerned about redundancy or reduced working hours making their debt unmanageable.

Capitalise’s debt advisors are funded by the Department for Business, Enterprise & Regulatory Reform through the Government’s Financial Inclusion Fund, with current funding ending in 2011.

Commenting on the report Mark Allan, Head of Programs, Capitalise, says, “Free debt advice is a lifeline to those in trouble. If it is withdrawn when funding runs out in March 2011, we could be facing a huge cliff where debt advisors are no longer providing services to an ongoing demand from over-stretched Londoners in debt crises.

If more people are left unable to manage their debt, it will have a knock-on effect on other public services, including social housing and the NHS. Our report shows the desperate need for more debt advisors in the short term and a joined up approach between government and the voluntary sector to tackle the problem of consumer debt in the long term.”

June 24, 2009