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Debt Management (Commercial & Consumer) Market Report 2010
Key Note Publications Ltd, Dec 2010, Pages: 132
As of the end of 2009, the total amount of UK bank and building society lending outstanding to individuals and businesses stood at £2,452.09bn, a rise of 2.8% on 2008. Between 2005 and 2009, the total amount of UK bank and building society lending outstanding to individuals and businesses rose by 48.5%.
This Market Report covers lending to individuals, including consumer credit and loans secured on dwellings; and corporate bodies, including other financial corporations, non-financial corporations, unincorporated businesses and non-profit-making organisations (NPOs). In 2009, the largest sector of the market was loans to other financial institutions. Loans to other financial institutions was also the fastest-growing sector between 2005 and 2009.
In September 2010, the Office of Fair Trading (OFT) informed 129 debt management firms that they faced losing their consumer credit licences unless they took immediate action regarding compliance with OFT debt management guidance. These formal warnings followed an OFT review examining the debt management sector which found widespread problems, including the failure of companies to disclose the extent of their fees to clients and the employment by some debt management companies of incompetent ‘frontline’ advisers, who offered poor advice to customers. Misleading advertising campaigns by some debt management companies were also of concern.
The Department for Business, Innovation and Skills (BIS) supports debt advice services for consumers in England and Wales who have problems with debt. The support provided by the BIS covers both free face-to-face advice, delivered exclusively through a project working with third sector providers, such as Citizens Advice; and National Debtline, a telephone advice line funded by both the Government and the private sector. Following the economic downturn, capacity has not kept pace with demand and the providers of the free face-to-face debt advice service have reported large increases in the number of clients contacting them. This has resulted in some of the individual advice agencies being unable to take new clients on, while others had waiting times of 4 weeks or more.
With levels of unemployment currently extremely high in the UK in 2010 and further increases forecast in 2011, demand for the services offered by debt-management companies should also remain high. In addition, the possibility of higher interest rates and the impact of such rises on heavily indebted consumers is expected to lead to increases in consumers seeking debt management assistance. The authors forecast that the total amount of bank and building society lending outstanding to individuals and businesses will increase further in 2010, thus maintaining the UK’s position as one of Europe’s most heavily indebted countries.
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