MoneySavingExpert founder Martin Lewis and the StepChange Debt Charity have called on the Government to fix the rules for people struggling with temporary debt. The move comes as new figures show one in five people making unsecured debt repayments have been left unable to afford food.
In a joint statement issued today, Martin and Mike O'Connor, StepChange Debt Charity's chief executive, said the Government should use its upcoming review of the rules surrounding debt administration to consult on proposals for a 'breathing space' scheme.
The scheme would see people who seek advice for debt problems given a period of six months to a year in which interest and charges are frozen and enforcement action halted, to give them time to get advice to sort their finances.
Where people can repay their debts at an affordable rate and within a reasonable time, this 'breathing space' would then be extended. But the protections would only be accessible when recommended by a regulated debt advice agency.
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Unable to afford food
Today's call comes as new research published by the StepChange Debt Charity lays bare the impact of debt on people's day-to-day lives. A survey of 1,000 people who were in financial difficulty and making unsecured debt repayments found 20% have been left unable to afford food, 15% have been unable to heat their home and 12% had run out of money to pay for electricity.
Martin Lewis says: "The inability to heat your home and feed your family is an easily prevented nightmare – if we bring in a widespread breathing space scheme. It won’t just help people financially, but also reduce the damaging mental-health consequences that are often a symptom of serious debt pressures.
"While some creditors already freeze interest and charges for people who are struggling, it only takes one creditor to not provide breathing space to stop those in financial difficulty sorting their finances. It’s time for the Government to step in.
"By freezing the costs for people who are trying to repay, and allowing them time to get their finances back on track, it could also help lenders increase the amount they actually recover in the long run."
Mike O’Connor adds: "When people who are struggling with debt get advice, take action to deal with the problem and do their best to repay their debts, they deserve help and support which allows them and their families to get back on their feet. The absence of statutory protections for people in temporary financial difficulty is a serious public policy failure."