UK Authorities Guard Against Rising Credit Card Debt

A shocking statistic has filtered through markets in the United Kingdom: the country is faced with £68 billion in outstanding credit card debt.

Credit card debt has risen sharply since 2007 when it was around £55 billion.

The steepest rise took place between 2014 and the present day. Of course, there are several important reasons for rising debt levels among UK consumers, notably a return to normalcy following the global financial crisis, low interest rates, rising prices, and uncertainty related to Brexit concerns.

The UK economy was stagnating between 2009 and the beginning of 2013. Credit card lending all but dried up, and outstanding amounts decreased from over £62 billion to under £55 billion.

The current level of outstanding credit card debt in the United Kingdom is the highest on record.

The FCA and the Bank of England Intervene in Credit Crisis

Various regulatory authorities in the UK are now carefully eyeing debt levels to try and assuage concerns about the economy. The Bank of England (BoE) and the Financial Conduct Authority (FCA) have joined the chorus of organizations and charities complaining about rising debt levels. To counter the rising debt problem, the conservative and labour party have proposed a manifesto which seeks to impose a form of debt forgiveness.

If this manifesto is passed, a statutory payments option will be introduced for borrowers who are finding it difficult to make good on their payments. To implement such policy, the Tories have vowed to improve protection measures for all leasing tenants, and reduce household bills and expenditures. The objective of these measures is to provide some relief for households that are struggling to come to terms with their debt burdens.

3.3 Million People Plagued by Persistent Debt

Credit card lending has come under increasing scrutiny by the FCA. People who are facing long-term debt burdens (18 months) may qualify for a form of debt relief from creditors thanks to the FCA. Credit card companies are now being investigated, and they may be required to waive interest and/or charges, or cancel them altogether. This is also true of all high-cost credit facilities.

There are currently 3.3 million people in the United Kingdom facing persistent debt vis-à-vis credit cards.

The strict definition of persistent debt is one which persists for 18 months and is comprised of more interest repayments than principal repayments. When this continues for that period of time, the FCA has mandated strict guidelines for intervention and relief. Many credit card holders are turning to debt advice charities such as StepChange for assistance. In 2016, that number swelled to 600,000 Britons. Debt advisers also encourage debt ridden families to seek debt consolidation options for credit cards. There are many bank and non-bank lenders willing to offer lower interest debt consolidation loans to alleviate these growing concerns.

UK Debt Levels Rising

It comes as no surprise that the debt levels are so high in the UK. Interest rates are at historic lows in Britain, and lenders are aggressively competing for customers. By issuing more credit lines to more people, a natural increase in credit card debt will follow. Many clients are being offered zero rate interest on new accounts, and this enticement is hard to resist. In fact, there are even credit card suppliers offering up to 43 months of zero interest balance transfers. This encourages spending and is invariably a net negative when interest rates rise.

Personal debt remains the bugbear of families across the UK, the US and Europe. It comes in many forms including expensive credit, mortgages, student loans, overdraft facilities and personal loans. The UK currently has approximately 64 million credit cards in use, and that number is growing all the time. Today, 8.8 million people are using credit facilities to keep up with their monthly expenses. This, despite 41% of them being engaged in full-time employment. For now, lenders may be basking in rising debt levels, but if the FCA gets its way relief will be forthcoming.