Consumers have been turning to Debt Management and IVA providers in increasing numbers in an effort to avoid total financial ruin. Since the start of the current financial meltdown, there has been a sharp increase in unemployment as well as repeated falls in the average value of property.

These factors, along with wage freezes, and other influences, have left many consumers unable to cope with their unsecured loans and credit card debt problems.

Debt management and IVA providers urge people to speak to an expert before it’s too late. There are many different solutions available for people that need debt help, the important thing is to act now, before the situation gets any worse.

This news that unsecured borrowing had declined has added weight to the argument that consumers are more likely to pay off unsecured debts, instead of saving up during periods of low interest rates.

The number of new mortgages approved during October rose for the 11th consecutive month, whilst at the same time unsecured loans declined by £713 million in October compared, when compared with the previous month. The number of people applying for re-mortgages remained subdued.

unsecured loans down, but credit card debt up

There was a surprise increase in credit card debt levels, as spending on plastic increased by £134 million during October, compared with the previous month. This was more than offset by the decline in other forms of debt such as loans for cars, hire purchase agreements and unsecured bank loans.

The total of outstanding unsecured loans in the UK is around £228 billion, which is a similar figure to the beginning of last year. This shows that despite the best efforts of consumers to reduce their borrowings on unsecured loans, the figures remain more or less unchanged.

If you are struggling with your finances, and having difficulty making repayments on credit card debt and other loans, the best thing to do is contact an IVA or Debt Management provider for some help and advice. DEMSA, the Debt Managers Standards Association, have received approval for its code of practice under the Office of Fair Trading Consumer Codes Approval Scheme for advice for debt management plans (DMP) and Individual Voluntary Arrangements (IVA). A list of DEMSA members can be found on their website, demsa.co.uk.

Debt Management worries ease as consumer borrowing falls is a post from: Hamilton Locke Debt Management

The credit card giant tried to force Ms Thorius to repay the £8,000 of credit card debt owed, but the Judge decided that an unfair relationship had existed between Ms Thorius and MBNA because of the way the lender had sold the card insurance.

Crucial to the prosecution’s argument was that Ms Thorius had not been told that MBNA would regularly receive commission payments from the insurance provider ITT London & Edinburgh, a subsidiary of the Aviva insurance group.

Judge Smart ruled that this “secret” commission meant the credit card agreement was unfair and therefore in breach of the Consumer Credit Act.

This point could potentially undermine many other agreements where PPI has been sold and open the floodgates for millions more people who are struggling to get out of debt after being mis-sold similar insurance products alongside personal loans, car finance deals and even mortgages.

Judge Smart also agreed with Ms Thorius’s lawyer that the credit card debt on Ms Thorius’s account was unenforceable because MBNA could not provide a copy of the original loan agreement, which is also a requirement under the Consumer Credit Act.

Judge Jacqueline Smart at South Shields county court ruled that the company should either pay Ms Thorius’s PPI premiums and interest back to her, or the value of the commissions it had received which so far has been undisclosed.

Ivan Cooper, Chairman at debt management specialists Chiltern, said: “This could open floodgates for millions more people who are struggling to get out of debt after being mis-sold similar insurance products.

“However consumers should always seek impartial debt advice first and shouldn’t just think that they don’t need to pay for their credit card debts and other balances.

“This case is a county court case so does not set any legal precedent. Each case is decided on its own individual merits and on the factual circumstances within it.”

Credit card debt written-off in landmark court case is a post from: Hamilton Locke Debt Management

The IMF predicts Britain, which has the highest number of credit card borrowers in Europe, would suffer from much of the £1.5bn of consumer debt that it predicts will not be repaid across the continent.

As unemployment and the number of personal insolvencies continue to rise, analysts expect a wave of defaults on credit card debts, personal loans and other unsecured consumer borrowings.

The number of personal insolvencies reached 29,774 in the first quarter of 2009, and analysts expect this to continues to rise.

The IMF predicts the “crisis” would mirror debt problems already being felt in America, where it expects around 14 per cent of the country’s £1.16bn credit card debt to go unpaid this year.

Debt advice organisations have also reported an increase in the number of enquiries for debt management services.

Ivan Cooper, Chairman at leading debt management firm Chiltern, said: “We have seen a sharp rise in the number of enquiries from people struggling with their consumer debts since the start of the economic downturn.

“We are also seeing more people enquire that are struggling to maintain their commitments following unemployment or from reduced wages brought about by a drop in working hours.”

Britain’s biggest credit card lender, Barclays, reported earlier this year that overdue payments or defaults had risen in the first three months of this year.

Credit card debts to grow warns IMF is a post from: Hamilton Locke Debt Management

One of the main contributory factors to severe debt problems is too much credit card debt, and credit card cheques have simply made it far easier for a consumer to rack up big bills. Critics of the cheques have been demanding a ban for years, saying that they are simply a ploy by the banks to encourage people to use their cards more.

Inevitably, the people with the least self control will end up in severe financial difficulty, when they start using credit card cheques to pay normal house hold bills.

Removing the temptation could help some consumers to keep a tighter reign on their finances, and they may be less likely to end up with an unmanageable situation. This could help some consumers to avoid insolvency, or having to sign up for some sort of debt management plan.

The government is also planning to announce how it will help people facing debt problems, and measures that will help consumers avoid being conned by rogue traders during the recession. Historically, an economic downturn is usually accompanied by a boom in cons and scams, as desperate individuals search for an easy way to make a fast buck.

The announcement may be a little late for some people, since the Bank of England figures show that UK residents owe £233 billion on personal loans, overdrafts and credit card debt.

The government is expected to look at ways to make lending practices more responsible. In light of recent research from Uswitch, which stated that 20% of card holders saw their credit limits rise over the last year when they had not requested it, the government needs to act sooner rather than later.

Cheque ban could avoid debt management is a post from: Hamilton Locke Debt Management

According to figures from Tescocompare.com, more that a third of all individuals that are trying to spend less on credit, are doing so in order to shrink the overall size of their debt.

Since the start of the current financial meltdown, there has been record number of people with chronic debt problems, more often than not with out of control credit card debt as the major factor. For these individuals, simply reducing spending on the cards will not make the problem go away, and in increasing cases, more drastic action is required.

With a Debt Management Plan, monthly repayments on credit cards can be reduced to a more affordable level, and consolidated into a single payment. Furthermore, interest and charges on the cards can be stopped.

Reducing debts was not the only reason why people are ditching the plastic. One quarter of those people that were surveyed said that they wanted to increase their savings, whilst 18% of respondents said that they simply wanted to be less reliant upon credit in the future.

Surprisingly, the survey revealed that around one third of us have no intention of reducing our credit card spending, at all. Nearly 5 million people saw an increase in their total outstanding credit card debt, over the last 6 months, and this is despite the fact that we are currently in the worst recession in living memory.

Some financial commentators see this “live for today” mentality as a potential future problem, with many individuals falling into financial difficulty when they are unable to keep up with their repayments. Consumers that are unable to control their credit card spending could benefit from debt management advice and assistance if they become overcommitted.

Debt management could help control credit card debt is a post from: Hamilton Locke Debt Management

The new restrictions, that are to be introduced next February, will put an end to some of the practices currently employed by credit card companies which have been accused of encouraging debt problems.

Among the main changes to the existing laws are ones that:

• require that cardholders be told how long it will take, and the total amount of interest costs involved, in paying off a card balance if they only make the minimum payments each month

• stop arbitrary interest rate increases and “universal default” on existing balances. When an account is placed in universal default, a lender can change the cardholder’s account to more expensive “default” terms when the lender learns the account holder has missed a payment on an account with another lender – even if the cardholder has not defaulted with the first lender

• require that promotional rates must last at least six months and stop lenders from raising rates for a cardholder in the first year after an account is opened

• require any penalty fees to be “reasonable” and “proportional” to the cardholder’s violation

• stop issuers from charging fees for spending beyond their limits, unless the cardholder chooses to allow the issuer to process the excess spending, and restrict any “over-limit” fees

• and require that cardholders must get 45 days’ notice of interest rate, fee and finance charge increases.

Where the US leads the rest of the western world quickly follows, so the new provisions could end up helping those looking to get out of debt across other parts of the world too. Although according to Sandra Quinn of UK card association Apacs: “Many of the new US policies already exist in the UK under the Banking Code and have done for four years.”

She also added that Apacs will “watch to see how the situation in the US develops.”

People who are one month or more behind with their repayments however, are the exception to the new restrictions on rate changes.

American borrowers who find themselves in this position will continue to run the risk that their card provider could decide to levy a higher interest rate if they decide are now a bad risk.

This could increase their risk of developing further debt problems as they struggle to keep up with repayments.

Debt help organisations recommend anyone in the UK who is in a similar position, and is finding their unsecured balances difficult to manage, to contact them for some free and impartial debt advice.

Reputable debt help companies, such as Hamilton Locke, Chiltern and The Debt People, offer a number of professional debt solutions.

These include Debt Management Plans (DMPs), Individual Voluntary Arrangements (IVAs), Trust Deeds amongst others. Debt Management Plans, IVAs and Trust Deeds enable repayments towards multiple unsecured balances to be gathered into one manageable payment.

For information on a number of debt help programmes, or for immediate debt advice, please call the number at the top of this page.

Plans to cut US credit card debts is a post from: Hamilton Locke Debt Management

The loophole in the law, which could make credit agreements unenforceable, has been exploited by some companies to offer a lifeline to people wanting to get out of debt quickly.

However, more than 100,000 claims currently being handled on behalf of overstretched borrowers have been temporarily put on hold, pending the outcome of “a few carefully selected” test cases in London’s Commercial Court.

This means that, until a judgement is made, indebted consumers will have to carry on repaying their loans and credit card debts.

Borrowers have also been warned not to fall victim to Claims Handler’s promises, made on their adverts which claim to wipe out credit card debt, alleging that contracts put in place before April 2007 are potentially unenforceable.

Daniella Lipszyc, a solicitor at Ultimate Law said: “The ruling by His Honour Judge Halbert is a landmark decision that will have massive implications on cases involving the enforceability of credit agreements.

“After a number of early wins, many claims management companies have jumped on the band wagon, promising desperate consumers that they can write off credit card balances.

“In reality, cases have simply ground to a halt as banks and lenders up their game and become more clued up on the Consumer Credit Act and subsidiary legislation. It’s now extremely inappropriate and misleading for any company to promise to write off balances in light of this judicial move.”

A more legitimate way to resolve any debt problems would be to seek advice from a reputable debt help organisation – such as The Debt People, Hamilton Locke or Chiltern.

These companies all offer a range of professional debt solutions which can help you to regain control of your finances whilst affordably still repaying debts.

The debt help programmes they offer include Debt Management Plans, Individual Voluntary Arrangements (IVAs) and Trust Deeds amongst others.

For help with any debt problems, or for immediate debt and IVA advice, please call the number at the top of this page.

Credit card debt claims frozen by Judge is a post from: Hamilton Locke Debt Management

The already expensive process of using a credit card for a cash advance is about to get even more expensive, as Egg is increasing its minimum cash withdrawal fee, meaning credit card debts could worsen.

The provider, which has around two million credit card customers, has announced that from 28 May they will raise the minimum cash withdrawal fee from £3 or 3% of the amount withdrawn (whichever is greater) to £5 or 3% of the amount.

An Egg spokesperson said: “The aim of this move is to discourage people from making small cash withdrawals. Those who tend to do this are often facing financial difficulties and might be having problems obtaining cash, therefore they pose a higher risk of being unable to repay the money.”

So if you were to withdraw £20 from a cash machine with your credit card, you’d be charged an extra 25% of the amount you took out – just for the privilege! This charge also applies to withdrawals made overseas, which also incur an additional 2.95% foreign exchange fee.

As it is generally people who are desperate for cash that use their plastic in this way, there are concerns from debt advice organisations that they will see increased numbers of people seeking professional debt solutions as a result.

Debt advice organisations have expressed their concern that not only will people with debt problems be punished initially with the expensive withdrawal fees, but they will then face ongoing interest at a high rate for using their card in this way. Some of the lowest rates for cash withdrawals on a credit card are still over 22% higher than the current base rate of interest – with the average interest on cash withdrawals being charged at 26.7%.

Many debt help organisations offer help and advice for people who are struggling with their finances, and provide solutions such as a debt management plans or IVAs to help combat credit card debts.

Debt management and IVAs offer a way for people with financial difficulties to regain control of their finances whist still repaying their unsecured balances. These debt solutions enable outstanding amounts on personal loans, overdrafts, store cards and credit cards to be gathered into one affordable monthly payment – which is rescheduled over a longer period to make it more manageable.

Following our free debt and IVA advice, we may recommend an Individual Voluntary Arrangement (IVA) as the most appropriate solution. This means that you could be clear of all unsecured debts once the IVA is complete (usually within five years).

Alternatively one of our other debt help programmes may be more suitable – such as a debt management plan. This would still enable debts to be repaid at a more affordable level.

Egg is not alone in raising charges and other banks are increasing the minimum withdrawal fees accordingly.

Withdrawal symptoms: higher credit card debts is a post from: Hamilton Locke Debt Management