Families Facing Debt Problems Could be in a Much Worse Situation than CAB Report Reveals

February 2009

In response to today's Citizens Advice Bureau report on consumer debt, leading debt management provider, EuroDebt, is reporting that the average level of unsecured debt for its clients is over £24,000 with 8 creditors.

In response to today's Citizens Advice Bureau report on consumer debt, leading debt management provider, EuroDebt, is reporting that the average level of unsecured debt for its clients is over £24,000 with 8 creditors. This is in contrast to the CAB Report which shows its clients having an average debt of £16,971 in 2008. And the picture for homeowner clients of EuroDebt is considerably worse with the average debt running at over £35,000 with 9 creditors.

"The data on the level of debt facing our clients is markedly different from the CAB Report" confirmed Kevin Still, Director, EuroDebt. "We believe this can be attributed to two key factors. Firstly the charity debt organisations, such as the CABs, are facing an overwhelming demand for help. And often the clients who most urgently need help - usually with the higher levels of debt - don't believe they can wait for assistance from the voluntary sector. Hence they come to organisations like EuroDebt which can offer them an immediate support, dealing with creditors already chasing for outstanding payments, often freezing interest and charges.

"The other reason I believe the profile of clients of debt management companies like EuroDebt is so different to those of the Citizens Advice Bureau is because the voluntary organisations focus on a self-help approach to debt management. These keeps the onus with the individual on managing the relationships with their creditors and, unfortunately, often means that they are less successful in getting interest frozen on outstanding debts or stopping debt recovery activity."

"We firmly believe that there is a place for both types of debt advice organisation. It is not uncommon for EuroDebt to refer people with very low disposable income to their local CAB. The CAB's profile of debt clients in 2008 confirms that 58% had no spare money to pay their credit debts."

EuroDebt aims to help consumers take a responsible position with their creditors, especially where they have multiple credit cards and loans, by notifying the unsecured lenders that they have entered a Debt Management Plan. This involves no further borrowing and in the majority of instances lenders agree to freeze interest & charges, meaning that recovery activities stop, the debt balance will begin to reduce at a rate based upon the negotiated reduced payments to creditors and the consumer can begin to take control of their finances again. Payment proposals are presented to creditors in a consistent manner and all the figures quoted in the income and expenditure analysis will have been verified through a home visit.

A Debt Management Plan may be for a relatively short period ranging from 12 months to 3 years or a long-term plan that enables them to become debt free, potentially with some equity release for home owners in the future. The flexibility of a Debt Management Plan sometimes allows clients to resume contractual payments where creditors accept EuroDebt's proposals of a reasonable offer for a transitional period until the client's circumstances change. For example; find new employment, return to work from long-term illness or maternity leave.

EuroDebt, unlike any other fee charging Debt Management Company, is the only debt management business that makes home visits a core component of its 'fact find' process, ensuring a complete picture of each individual's situation is gained.

"This is crucial" continues Still. "At this visit, the debt advisor is able to assess not only priority expenditure, like mortgage or rent, council tax and utilities, but any arrears on these payments. Repayment arrangements to clear arrears are a priority to protect a client's home and family. There are also instances where critical insurances have been dropped, like life insurance and home insurance, which may need to be re-prioritised."

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