Free advice line 0800 014 7863
People with debt problems have been given 30 days breathing space thanks to a new agreement between The Credit Services Association (CSA) and the government.
The CSA, the national association for debt collection agencies, met with the government in a bid to help solve the growing debt crisis. The government has been increasingly concerned about the amount of people who are refusing to seek professional debt counselling or advice. It is hoped the new 30 day rule will encourage debtors to seek professional help and establish repayment plans with creditors.
The CSA are prepared to allow debtors 30 days breathing space, starting from the date they are contacted by a debt counsellor informing them that they are in consultations with the debtor. This agreement is set to come into effect by the end of May 2009.
A spokesman for the CSA has admitted however, that in some case the 30-day agreement actually imposes a tighter timeframe on the debtor. He said: “It was not untypical for this to have gone beyond 30 days,” said a spokesman for the Credit Services Association (CSA).
The majority of consumer debt is for unpaid utility bills, credit cards and banks loans.
“This new 30-day rule will give people a breathing space to help them take control of their finances as well as encourage them to seek help from debt advisers,” said Consumer Minister Gareth Thomas.
Debt collection firms prefer when the person with unpaid debt has contacted an advice service because it demonstrates a willingness to repay. The new rule will now be added to the CSAs code of practice that all 300 of its member must follow.
The CSA have estimated that the average debt per head may currently be £27,000. In reference to claims that the recession is something of a jackpot for debt collectors, CSA director Kurt Obermaier, insisted that this was not the case.
“We also need to recognise that even though the volume of debt being put out for collection - the number of cases - will far exceed last year’s total of 21 million, that does not mean a bonanza time for collectors,” said Kurt Obermaier, director of the CSA.
“There will simply be more people who cannot rather than will not pay, and therefore more money lost to the economy.
Consumer debt tends to hog the headlines while commercial debt goes largely ignored. The amount of money lost to the economy because of unpaid business debts is an entirely different prospect. What the government hopes to achieve as a result of this new agreement however, is simple – to recoup money back into the economy.
The new clause in debt collection comes at a time when people with low incomes and few assets are able to clear debt under another government initiative – Debt Relief Orders.
As of April 6, people with debt below £15,000 and who do not own a property can avail of a Relief Orders. For more information, click Debt Relief Order.
