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Will debt settlement programs boost in light of the recession?
New evidence from December 2009 has shown clearly that consumers will increasingly turn towards debt settlement programs in 2010, with more and more indebted citizens resorting to new solutions in order for resolve to be achieved. One expert, David Kuo, said: “Inflation is a problem, and inflation will rise”.
Britain’s economy is finally clawing its way out of the deepest recession since the 1930s, but in the latter quarter of 2009 it only managed to expand by an extremely weak 0.1%. January figures from the Office for National Statistics (ONS) show that the Consumer Price Index (CPI) measure of inflation rose in November and December last year to reach 2.9%, the largest ever annual increase in the rate between two months.
Debt settlement clinics have made it possible to avoid filing for bankruptcy, and as UK personal debt has rocketed to nearly £1.5 trillion – a number which, when divided between the population, means that every adult in the UK owes over £30,000 – these programs are becoming increasingly more popular. The recession has slowed down the economy at all levels, and though the Bank of England Monetary Policy Committee voted in January to hold the base rate at its record low level of 0.5%, debt is still the primary issue facing most consumers, particularly in the light of the culture of apparently obligatory, massive student loans.
Debt management plans work as an interface between borrowers and lenders, and the recent economic stimulus package proposed by the Government encourages companies to be lenient regarding the debt amount, in order to recover something rather than nothing. In addition, government agencies are now available to assist consumers in settling their outstanding debt.
More than 50% of credit card holders are facing problems with loans, with credit card debt reaching an estimated £54.5 billion before the recession appeared to bring consumers ‘back down to earth’. Because of the vast rise in credit card defaults, companies are coming out of the woodwork in order to offer their services to help people settle credit card debt problems.
More than a third of respondents to an online poll highlighted paying off credit card debt and overdrafts as their key financial goal for 2010, and this should see a massive rise in debt settlement programs. Howard Archer, chief economist at IHS Global Insight, said that separate figures released by the British Bankers' Association showing an increasing net repayment of consumer debt in December came from ‘many consumers' desire to reduce their debt, low demand for credit and a lack of availability of unsecured credit from banks.’
According to this expert, consumers are ‘looking to improve their financial situations in the still challenging and worrying economic environment’, and this will lead to the increasing popularity of debt management programs in 2010.