A plan to help people in serious debt, by potentially giving them a six-week grace period from things like higher interest charges, has been announced by the Treasury.
The Government said it was launching a consultation until January on how its “breathing space” scheme could work and in what circumstances amid concerns about growing problem debt levels among “millions of people in the UK”.
It was revealed in the summer that unsecured credit – which is borrowing through credit cards, overdrafts and car loans – had topped £200bn for the first time since the financial crisis.
Regulators and economists have sounded warnings that the annual rate of growth in that total – at just under 10% – is unsustainable for both consumers and lenders alike – with banks signalling they will cut back.
More people have turned to credit in the wake of the Brexit vote amid record low interest rates and pressure on household budgets from rising inflation and weak wage growth.
The Treasury said a series of meetings would be held with key industry representatives from charities, debt advice organisations, lenders and creditors to formulate the policy.
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.”