In the red – the UK’s debt culture Print E-mail
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This generally involves writing to creditors and may lead to setting up a Debt Management Plan (DMP). Under this scheme, the client makes one payment per month to the DMP administrator who then sends each creditor an agreed share. If a DMP is in operation, creditors often agree to more favourable terms - like freezing interest - and also stop hassling the client.

Via a free helpline, clients receive expert advice backed up by a comprehensive self-help pack, Dealing with your debts. Supplementary fact sheets are also available covering a range of issues such as mortgage shortfalls, negative equity, hire purchase debts, bailiffs and avoiding debt at Christmas. As clients work through the self-help solutions, they can seek further advice by telephone or email. In about five per cent of cases, the NDL refers clients on - perhaps to the CAB or CCCS - for face-to-face support.

For its part, the CCCS also offers in-depth advice over the telephone and sends out a self-help pack; in addition it has ten regional centres for personal consultations.

The service given by all three of these agencies is confidential, free and non-judgemental - they are not in the business of making people feel bad about debt. People who seek their help are probably feeling bad about it already.

The In too deep report indicated the extent of debt's negative impact: cutting back on essentials such as food and heat, family arguments, relationship breakdown, feelings of isolation as well as stress, anxiety and depression.

The tragedy of debt-related depression was highlighted last year when a 37-year-old family man committed suicide because he had amassed debts of £70,000 on more than a dozen credit cards. Commenting on this case, a debt counsellor confirmed the dangers of multiple card use, citing clients owing money on as many as 39 cards.

Easy credit

Given that prevention is better than cure, how can the UK put the brakes on borrowing? Most financial experts agree that part of the solution lies with the lenders. Their annual advertising budgets are a giveaway: around £200 million for personal loans, nearer £300 million for credit cards, show that credit is big business. They make it frighteningly easy to obtain and, with the emphasis on 'instantly', there is no encouragement for consumers to read the small print and ask questions.

The daily deluge of junk mail invariably includes invitations to switch credit cards or take out a loan - and the application form comes half-completed. Credit card spending limits are set enticingly high, minimum payments deceptively low. Store cards are routinely promoted by staff whose expertise in women's fashions or home furnishings does not qualify them to explain terms and conditions. Overdraft limits can be a fiction - exceed them and your bank comes up with a loan to cover the overspend.

Apart from urging lenders to act more responsibly, there is a view that interest rates should be capped. In Germany, for instance, credit cannot cost more than 20 per cent. In the UK, several store cards, and a few credit cards, charge as much as 30 per cent. Loan sharks demand extortionate rates, occasionally 150 per cent or more.

The solution also involves consumers and their level of financial literacy.

A recent survey found that 60 per cent of adults were not confident about managing their finances. To ensure that future generations are better informed about money matters, personal finance is now part of the National Curriculum, but there are demands for it to be given greater prominence - even its own GCSE.

This should be particularly useful now that young people are destined to leave university owing at least £10,000. The inevitability of this situation fosters a relaxed attitude to borrowing and, without sound money management skills, graduates risk becoming key players in the UK's debt culture.

If consumers of all ages improve their financial literacy, and if lenders act more responsibly, we could grow out of our "live now, pay later" habit. Meantime, debt advice agencies are busy recruiting more counsellors.

Further information

For free advice on debt, contact:

CAB - check the Phone Book for your local branch

NDL - tel: 0808 808 4000; www.nationaldebtline.co.uk

CCCS - tel: 0800 138 1111; www.cccs.co.uk

The Office of Fair Trading has produced In Debt? Help Yourself Out, a pocket-sized leaflet available free from tel: 0845 722 4499

The report In too deep is published by Citizens' Advice, £7.00, details tel: 020 7833 2181

Price comparison websites that cover gas, electricity and telephone, visit www.saveonyourbills.co.uk or www.uswitch.com
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