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Does consumer credit threaten family ties?

Niall Cooper
National Coordinator
Church Action on Poverty
UK Household debt

• UK household debt now exceeds £1 trillion (€1.5 trillion)

• 6.1 million families reported some difficulties meeting their debt repayments

• Citizens Advice Bureaux advisers across the UK now see over 1 million new consumer debt cases per year – up by 47% in 5 years.

Debt and poverty

• More than ½ households in serious debt have incomes of less than £7,500 a year

• 1/3 regard their debt as a burden and 10% as a “heavy” burden, with many of those among lower income families.

• Low-income households are 3x more likely than the general population to be in arrears with rent, council tax, utility bills or mortgage payments.
The need for credit

• Obtaining credit is an essential part of everyday life for people on low incomes.

• 90% of people need to borrow money not only to buy essential items, but also to make
ends meet.

• People regularly borrow to pay bills, to buy clothes and school uniforms, and for birthdays, holidays and Christmas.

The need for credit

“I have a fifteen year old daughter and she needs clothes so I have to get a Provi loan or vouchers. It’s hard. At the end of my benefit I’ve nothing left to pay back the loan and vouchers. I can’t spend money on shopping and bills.” CAP national policy forum participant – 9 July 2001

Debt traps

• Mary, a lone mother on Income Support (£101.50 a week), took out a £200 doorstep loan over 30 weeks. Total cost £300 (330% apr).

• One month later, Mary ran into difficulties and was encouraged to take out another £500 loan with £310 further interest over 54 weeks (170% apr)

• Again Mary ran into difficulties and was offered a £1,000 loan to pay off the balance. Interest on this was a further £620 over 54 weeks, at 170% apr.

• In six months, Mary’s loan of £200 had turned into a debt of £2,227. Sucking money out of communities

• 87% of households in Meadow Well, North Shields, have loans with doorstep lenders.

• Average repayments are 33% of total weekly income (averaging £200 per family)

• Around £5 million pa is paid out by households in debt servicing and repayments.

• Interest payments alone are £1.6 million.


• Social relationships

• Women

• Health and mental health

• Crime

• Work disincentives

1: Social relationships

• Feelings of shame, failure and other negative internalised identities are common

• People do not participate in social activities because they feel stigmatised by the shame associated with being in debt.

• The biggest cause of rows within a relationship is not infidelity but money, according to Relate – the UK’s main relationship counselling agency.

2: Women and debt

• Men generally control and allocate financial resources and women undertake the financial management of them.

• 81% of local agents for doorstep lenders are self employed women usually living in the area in which they work.

3: Debt and Health

• Debt has a detrimental affect on people’smental and physical well-being due to stress, stigma and fewer associated life opportunities.

• ¼ of those in debt also receive treatment for stress, depression and anxiety from their family doctor.

• A link has also been found in one study between debt and maternal depression. Health responses Some doctors surgeries now provide access to debt advice services

• Bradford South and West Primary Health Care Trust supports 3 debt advice services to which around 300 patients were referred in 2003.

• Wolverhampton Health Action Zone funded advice sessions in 18 local doctors surgeries, attended by over 700 people.

4: Crime…

• “At the moment I’m on income support and child benefit. I’ve used the Provvy and Shopacheck and I’ve been unable to keep paying them so I don’t do that no more. Now I have to buy from shoplifters so I have money to look after myself.” CAP national policy forum participant – 9 July 2001

5: Work disincentives

• There were cases where lone parents found themselves in debt, struggling, worse off than they had been on benefits – or not sufficiently better off to feel they were adequately compensated for the new demands on them.

• “I think this does stop me looking for work…it’s always on my mind, even with all these court things, if I got a job, then they’re gonna take it out of my wages and things like that, and I can’t really afford for that to happen if I’ve got pay housing and council tax, and look after my son, it’s quite scary” Conclusion

• Families - especially on low incomes – do need access to credit…

• … but debts can also damage families, health and wider social relationships

• Irresponsible and extortionate lending practices will worsen impact on families.

ID: 37322
Author(s): iff
Publication date: 25/04/06

Created: 25/04/06. Last changed: 25/04/06.
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