Government “Grace period” for helping people in serious debt
The Government has announced a plan to help people in serious debt.
Credit card costs are at their highest level in over ten years. The interest rate applied to debt over the course of a year has jumped to an average 23%.
The idea is that borrowers would be given – as a last resort – a six-week grace period from higher interest charges and enforcement action to give them time to prepare a repayment plan. Unsecured credit – which is borrowing through credit cards, overdrafts and car loans – had topped £200bn for the first time since the financial crisis. Economists have warned that the annual rate of growth at just under 10% is unsustainable for both consumers and lenders – with banks signaling they will cut back.
The Economic Secretary to the Treasury, Stephen Barclay, said: “For many people in the UK problem debt seems impossible to escape.
“Its effects can be far-reaching, impacting all aspects of a person’s life and leaving them feeling helpless.
“That is why we are working to give people who are overwhelmed by debt more time to seek advice, find a workable solution, and help get their lives back on track.
“Although many people can and do use credit successfully to manage their personal finances, for the minority who get into difficulties this government wants to offer more support.
“The new scheme could include legal protections that would shield individuals from further creditor action once a plan to repay their debts is in place.”