Families’ debt levels are at their worst in at least 2 1/2 years, with 1 in 20 families ‘reliant on payday lending’, according to the Daily Telegraph today: All the more reason for supporting the High Cost Credit Bill being debated in Parliament this Friday.
- Less than half of families managing to make monthly debt repayments
- Household debt, excluding mortgages, highest since January 2011
- Household budgets “increasingly fragile”
- High Cost Credit Bill being due for Second Reading on Friday
Around one in 20 households are “relying” payday loans to get by, according to the Aviva Family Finance report, published today. The finding comes less than two weeks after the Office of Fair Trading referred the £2bn industry to the Competition Commission after uncovering evidence of “widespread irresponsible lending”.
The report also revealed that household debt, not including mortgages, had risen to almost £13,000 – the largest sum since the study began tracking it in January 2011.
Average household debt has jumped from just over £9,000 a year ago to £12,834, including around £2,011 borrowed from friends and family, £2,006 piled onto credit cards and £1,959 in personal loans.
Less than half (45pc) of families said they are managing to make monthly debt repayments, falling back from 57pc one year ago.
Peter Tutton, head of policy at debt charity StepChange, said the report showed the “increasingly fragile nature” of many household budgets.
“That 5% of families now rely on payday loans highlights how for a substantial proportion of the population simply meeting essential living costs is becoming increasingly unaffordable. While the increase in average incomes should provide some respite for families’ finances, the reality remains that we are seeing increasing numbers of people falling behind on essential bills like rent, gas and electricity and council tax.”
High Cost Credit Bill
That is why Paul Blomfield MP’s Private Members Bill on High Cost Credit is so timely. The Bill, due to be given its Second Reading in the House of Commons on Friday, includes important measures to ensure that the new regulator, the Financial Conduct Authority (FCA), acts in the interests of low income consumers when it takes on responsibility for consumer credit in April next year. The Bill would make the FCA take action to restrict advertising; require lenders to undertake affordability checks and limit excessive charges; it would enable the FCA to establish a single, real-time database of high cost loans and provide the FCA with the power to cap the amount of high cost lending to a reasonable proportion of the borrower’s income. Importantly, those identified as over-indebted would also be identified and properly referred to support services including debt advice.