Debt collectors chase record arrears

Debt collectors are chasing UK consumers for a record £5bn worth of debt, a report has said.

Despite the lowest interest rates for more than 40 years the level of arrears being passed to debt collection firms has soared 70% since 2001.

Easily available credit and irresponsible borrowing are to blame, according to the Credit Services Association (CSA), the debt collection industry body that sponsored the report.

The CSA warned that even a small rise in interest rates could send tens of thousands of people into arrears.

Admitting there is a problem and that you need help is an important first step Steve Quinn, debt adviser How to deal with debt problems

A staggering 20 million cases have been passed by credit firms to debt collectors in the past year.

It is estimated that Britons have fallen behind on debt payments totalling £60bn, and as yet only a fraction of this has been passed onto debt recovery services.

Disaster

However, according to Scott Soutar, president of the CSA, many more consumers could find themselves in arrears.

Many people... are borrowing unmanageable amounts then simply going bust without thinking of the consequences Scott Soutar CSA president

"An interest rate hike of only a couple of percentage points could spell disaster for a lot of debtors," Mr Soutar told BBC News Online.

The CSA blamed the easy availability of credit and a lack of personal responsibility for the arrears crisis.

"We are finding many people, particularly in their mid to late twenties, are borrowing unmanageable amounts then simply going bust without thinking of the consequences," Mr Soutar said.

However, Malcolm Hurlston director of the Leeds-based Consumer Credit Counselling Service believes lenders are too quick to call in the debt collectors when consumer slip into arrears.

"Lenders could treat customers in debt better - all too often they either try and sell a consolidation loan or simply refer the case to a debt collection firm."

On Thursday, key figures in the UK credit card industry are due to appear in front of the Treasury Select Committee to defend their industry from charges that it ensnares people in debt through aggressive marketing tactics.

The CSA's debt survey was undertaken by the Credit Management Research Centre at the University of Leeds.