The Continued Growth of Personal Debt

Personal debt in the UK stood at £1,451bn at the end of May according to The Credit Action Group. This figure has continued to expand at just less than 1% for a number of years now, with the average adult owing £29,839 when mortgages are included. This is not only 124% of average earnings but also costs on average £2,500 a year to just service the debt.
While the amount of debt shouldered by individuals has continually risen, their ability to pay and keep up with payments has fallen.  As wages have stagnated and the cost of living has risen, this has lead not only to growth within the debt collections industry, but a new breed of debtor who wants to pay, however, currently they’re unable to. In many cases these debtors are in this situation for the first time and it’s no fault of their own.

This has lead to much needed change within the debt collections and trace market, debt collectors are now treating people they are owed money by as customers rather than debtors. This has been done through system improvement, staff training and better customer data.     

“UK banks and building societies wrote off £9.5bn of loans to individuals in the 4 quarters to end Q1 2011.” (The Credit Action Group)

Such large figures being written off are never a good thing for an economy, with debtor’s credit ratings being destroyed and in some cases bankruptcy, while the banks and debt collections firms lose out on money they’re owned. Therefore, treating customers fairly makes since for both parties; as if debts go unpaid everyone stands to lose out.