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UK Debt Management

Debt Management

The UK debt management industry is similar to that in the United States but much younger: the first UK debt management companies only appeared in 1997. Despite this, it is one of the fastest growing sectors of the financial services industry.

Initially UK debt management companies were unregulated and licenses to operate were easy to obtain. Consequently, Britain has seen all the problems with dodgy debt consolidation companies and loan sharks; the heavy advertising on mid-afternoon cable TV; and the increasing use of the Web to lure potential customers. However, mounting complaints from consumers forced the Office of Fair Trade (OFT) to crack down on the cowboy operators. Strict regulations were enforced in 2001 and according to OFT's own statistics, complaints had fallen by 70% by 2003. The UK banking industry also has a voluntary code of good practice to regulate the granting and repayment of credit. However, many banks continue to make big bucks from their customer's lack of budgeting skills.


The average British householder has a typical credit card debt of £2500 ($4,700) and some householders spread their debts over a whopping 10-12 credit cards. Total personal debts, including mortgages, are typically £25,000 ($47,000). When you take into account that 20% of British debtors borrow more money to service existing loans, the record numbers of personal bankruptcies recorded in the UK in 2004 are hardly surprising.

One of the real concerns in the UK however, is that four fifths of debt is secured against property. With an overheated property market and uncertainty over interest rates, many fear that conditions are ripe for a market crash that could result in negative equity for many householders.

Unlike the US , the most popular form of debt advice in the UK is the free service run by local authorities. Over 2000 Citizens Advice Bureaus funded by local councils offer a holistic debt management service that takes into account both the client's financial and social position. Although the services are completely free, incredibly popular and totally unbiased, a lack of resources means that offices are often only open on a part-time basis and it can take up to three weeks to get an appointment.

The British government also runs a free National Debtline, a telephone advice service that offers help with UK debt management and free benefit checks to see that you are receiving the correct welfare entitlements. The helpline normally receives far more calls than it can handle and is also seriously under-resourced. Separate helplines exist for Wales , Scotland and Northern Ireland where legalities differ slightly from those in England .

Regulations regarding UK debt management and collection are similar to those in the States. If a creditor gains a county court judgment against you the bailiffs (debt collectors) can enter your home and take your possessions. Before falling into such a predicament many British people seek the help of a charitable foundation funded by the financial services industry, the Consumer Credit Counselling Service. The CCCS has been criticized by the free advice centres for its policies and its fees of between nine and 15 percent of the total mount owed. However, the foundation is a much more reliable source of help than the burgeoning private companies that charge 15 to 25 per cent of the total debt and have gained themselves an unenviable reputation for their heavy-handed tactics.