Consumers given “breathing space” to repay loans under manifesto promises

Blog Debt

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Individuals burdened with debt can expect more legal protections from bailiffs, charges, and interest under Labour and Conservative governments, it has emerged.

The two major political parties promised to give consumers “breathing space”, comparable to a scheme already rolled out in Scotland.

The new scheme would give people more time to organise and pay the debt they owe.

Both parties said they would give consumers a legal right to apply to have six weeks free from further interest, charges, or debt collection to get advice and set up a repayment plan.

Other proposals include credit card companies cancelling interest or charges in extreme cases, and a review of car finance deals to counteract “irresponsible lending” in the motor finance industry.

It follows warnings that consumer borrowing, fuelled by loans, overdrafts, credit card debt, and car finance, is growing at an accelerated pace.

Research shows that consumer debt has grown to some £1.5 trillion, although this figure includes mortgage borrowing.

The Financial Conduct Authority (FCA) said it is conducting an investigation into overdrafts, door-to-door lending and similar loans. It says an estimated 3.3 million people are in persistent credit card debt.

Mike O’Connor, chief executive of debt charity StepChange, said: “In addition to better protections for people in debt, the next government should commit to action to prevent the 8.8 million people currently showing signs of financial difficulty from falling into serious hardship.

“It should work to ensure better alternatives to dangerous forms of high-cost credit, and it should act to help families build up savings to insulate them from problem debt.”