Page last updated at 04:59 GMT, Sunday, 18 May 2008 05:59 UK

Problem debt 'hitting affluent'

Credit cards and scissors
Transact is expecting the rate of problem debt to get worse

A national debt advice organisation says its offices in some of the most affluent parts of the UK are being overwhelmed by demands for help.

Transact told BBC Radio 5 Live the credit crunch was leaving many professionals and homeowners unable to cope with their debts.

It said demand for advice was rising across the country, but the increase was dramatic in middle-class areas.

The organisation represents more than 1,200 debt advice centres.

In Haywards Heath in Sussex and Congleton in Cheshire, for example, there had been a 100% rise in inquiries over the past year.

It said some advice centres were so busy they had been turning people away.

Benefits

Transact says government funding has been generous, with an extra 55 million over the past three years to fund an extra 500 debt advisers.

But it says this has been concentrated on inner-city areas where the rise in problem debt has been less severe.

These services now with the credit crunch are being overwhelmed by a whole new breed of debtor: middle-class people
Jamie Elliott
Transact co-ordinator

Transact co-ordinator Jamie Elliott told the BBC that debt advisers were seeing a new type of client.

"In the past it was almost uniquely people on benefits, people in social housing who went to debt advice agencies.

"Since the credit crunch started, they are seeing a big increase in professional people and homeowners coming to seek help, who have just been pushed over the edge and now can't cope with their outgoings.

"These services now with the credit crunch are being overwhelmed by a whole new breed of debtor: middle-class people.

"But what that means is there is much less debt advice to go round."

Tougher lending

Many of the people Transact sees have taken advantage of easy access to credit or extended mortgages to pay for home improvements or just general spending.

But in recent months lenders have become much tougher and less willing to be flexible over repayments.

I've had at least two clients sit in front of me and tell me they would have killed themselves if they hadn't found out we were here
Emma Russell
Senior debt adviser

And with fixed-rate mortgages coming to an end, higher fuel costs, food bills and council tax, it says many people with decent salaries are struggling.

Transact expects the problem to get worse and wants more funding for debt advice and financial education.

At the Mid-Sussex Debt Advice Centre which serves the Haywards Heath area, the average debt of clients - excluding mortgages - is 20,000, rising to 110,000 in the most extreme case.

Senior debt adviser Emma Russell said: "We've seen probably almost a 100% increase in clients. This time last year we were really quite quiet."

And she added: "I've had at least two clients sit in front of me and tell me they would have killed themselves if they hadn't found out we were here."

Debt advisers say financial institutions must take some responsibility for encouraging debt and the government should do more to educate people about financial responsibility.

But they also say a large part of the blame also rests with the individuals who have borrowed so much.


SEE ALSO
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