Consumers have been turning to Debt Management and IVA providers in increasing numbers in an effort to avoid total financial ruin. Since the start of the current financial meltdown, there has been a sharp increase in unemployment as well as repeated falls in the average value of property.

These factors, along with wage freezes, and other influences, have left many consumers unable to cope with their unsecured loans and credit card debt problems.

Debt management and IVA providers urge people to speak to an expert before it’s too late. There are many different solutions available for people that need debt help, the important thing is to act now, before the situation gets any worse.

This news that unsecured borrowing had declined has added weight to the argument that consumers are more likely to pay off unsecured debts, instead of saving up during periods of low interest rates.

The number of new mortgages approved during October rose for the 11th consecutive month, whilst at the same time unsecured loans declined by £713 million in October compared, when compared with the previous month. The number of people applying for re-mortgages remained subdued.

unsecured loans down, but credit card debt up

There was a surprise increase in credit card debt levels, as spending on plastic increased by £134 million during October, compared with the previous month. This was more than offset by the decline in other forms of debt such as loans for cars, hire purchase agreements and unsecured bank loans.

The total of outstanding unsecured loans in the UK is around £228 billion, which is a similar figure to the beginning of last year. This shows that despite the best efforts of consumers to reduce their borrowings on unsecured loans, the figures remain more or less unchanged.

If you are struggling with your finances, and having difficulty making repayments on credit card debt and other loans, the best thing to do is contact an IVA or Debt Management provider for some help and advice. DEMSA, the Debt Managers Standards Association, have received approval for its code of practice under the Office of Fair Trading Consumer Codes Approval Scheme for advice for debt management plans (DMP) and Individual Voluntary Arrangements (IVA). A list of DEMSA members can be found on their website, demsa.co.uk.

Most commentators agree with the Chancellors remarks; however the most recent evidence shows the pace of growth in jobless numbers is slowing noticeably. Generally, the UK has been doing a good job keeping unemployment down. According to one reading of the official statistics, the number of people out of work has been falling over the last couple of months, and now stands at just below 2.5m. This represents around 8% of the total workforce.

When you take into account the 6% fall in GDP seen since the spring of last year it could be seen as a positive when you consider how modest the rise in UK unemployment has been. The Governor of the Bank of England and the Director General of the CBI have both recently pointed out that things are not all doom and gloom. Other countries have seen much higher unemployment, including the United States. Mr Darling’s remarks coincided with the news concerning the Dubai crisis.

There has been a sharp increase in the number of UK consumers that are struggling to repay their debts since the start of the current recession. Debt Management and IVA providers have had to deal with more people with unaffordable debts as unemployment continues to increase.

Ivan Cooper, Chairman at Chiltern Debt Management said: “We are monitoring the jobless situation closely and, wherever possible, we are putting in place the necessary provisions to deal with increasing numbers of over indebted consumers.

“We welcome the news from the Chancellor concerning the decline in the rate of increase in jobless numbers, as we all hope to see an end to the current financial crisis soon.”

According to figures from CML, the Council of Mortgage Lenders, the amount lent out for mortgage purposes in June was £12.3 billion, up from £10.5 billion in May this year. Although this represents an increase on a month to month basis, the June figure is around half what it was in 2008. Debt advice providers believe that this is just a seasonal increase, and nothing to get excited about.

More people than ever before are struggling with financial issues and unaffordable debt. A lot of hard up consumers are signing up for Debt Management Programmes and IVAs, in order to avoid total financial ruin, and some experts do not see the situation improving any time soon.

Nathan Gladwell, spokesman for Chiltern, the leading debt specialist had this to say; “Any increase in mortgages activity can usually be viewed as a positive sign of economic improvement.

“In this case, however, we are not going to get excited about the increase since the overall level of lending is so far down on last years figures.”

With many individuals still unsure of the financial future, owing to the increasing level of unemployment, there has been no noticeable rise in applications for credit such as personal loans, overdrafts and credit card debt.

The real problems began a long time before the credit crunch hit. Whilst the UK was enjoying something of a boom that just seemed to go on and on, people continued to spend more and more. Employment opportunities were plentiful, and house prices soared, giving people confidence and making them feel wealthier than they really were.

When the global financial meltdown struck, the house of cards collapsed. All of a sudden, people were beginning to loose their jobs as companies struggled to survive the downturn. Then house prices collapsed, cancelling out all of the equity growth from the last five years. Suddenly people were not so well off anymore.

The bills still have to be paid. A lot of consumers accrued massive debts, during the good times, on personal loans, credit cards and store cards and for many these are now unaffordable. Many consumers have turned to debt specialists in an effort to deal with their financial difficulties.

Debt Management Plans and IVAs are a way of consolidating and reducing debt repayments, without having to borrow money by way of a consolidation loan. They are designed to help people that are really struggling with their repayments, and can offer a financial lifeline to many. Consumers have been signing on to these programmes in record numbers, and the rush does not look like it’s going to end anytime soon.

If you are suffering with serious money worries, then it is best to seek advice now, before things get any worse.

The figures were gathered together from a poll of UK banks and building societies, and the picture that was revealed was a fairly gloomy one, as more people are now unable to afford payments on mortgages and other debts.

The poor economic situation, coupled with rising unemployment, was the main driving factor behind the rising figure. Record numbers of consumers are seeking debt advice, in a bid to avoid complete financial collapse, and signing up for Debt Management Plans or IVAs.

The figures also showed that lending to businesses had not increased in line with expectations during the last quarter, with many banks facing criticism from corporate leaders for the lack of available funding. In answer to this, the banks are confident that the availability of credit, for business, will increase during the next quarter.

The next three months could be interesting, with predictions that secured borrowing is likely to increase, whereas the financial institutions are expecting a fall in the uptake of unsecured personal loans and credit card debt.

The banks that are most likely to increase lending levels in the near future are those that are part government owned, in an effort to boost the economic recovery. A quick return to the lending levels that were seen before the credit crunch seems very unlikely.

A substantial amount of money is at stake, with the UK banks currently earning more than £2 billion a year from charges and fees levied against their customers accounts.

The news of a delay in the final decision has caused concern amongst IVA advice specialists and debt management providers, who are worried that more consumers could be forced into insolvency as they await the outcome. Many thousands of people have fallen into financial difficulty since the start of the recession and in some cases, bank fees and charges make up a large part of their debt. If it transpires that these fees do not need to be repaid, then it could help indebted consumers avoid insolvency.

The battle between the OFT and the banks has been raging for two years, and around a million refund claims, from bank customers, have been kept in limbo. Some people are worried that the Law Lords decision could still not bring the matter to an end. The matter, or at least some of the issues, could be referred on to the European Court of Justice.

The Lords presided over a 3 day hearing in the House of Lords, where they heard arguments from barristers representing the banks and the OFT. The banks were represented by Jonathan Sumption QC, who squared up against Jonathan Crow QC for the OFT.

The banks argument was that the OFT did not have the power to scrutinise bank charges, regardless of whether they thought that they were fair or not. The OFT countered, saying that they were not only worried about the size of fees, but also the way in which they were charged.

If the decision goes in favour of the OFT, then this could spell major problems for the banks, which could involve having to reduce the fees that they charge in the future. They may also be required to refund bank unfair charges to their customers and with a million eager claimants waiting in the wings, the bill could be astronomical.

Once the matter has been resolved, or if the matter is ever resolved, TCF regulation of the banks will be in the hands of the Financial Services Authority. The FSA will take over formal regulation of the way in which customers are treated by the banks, sometime in November this year.

In a deal that was announced a couple of weeks ago, Accuma will sell its IVA book to Grant Thornton, which will leave debt management as the groups core business. Another Accuma subsidiary, Thomas Charles & Co ceased trading earlier this year according to the trading statement that was issued today. Thomas Charles & Co specialised in the provision of IVA advice and the arrangement of IVAs.

There has been a significant decline in the number of new debt management cases arranged by the group, which has been blamed on the reduction in advertising by the IVA division. The number of new plans arranged by Byrom Keeley slumped to 181 for the later half of last year – down from 301 for the first six months.

All of this adds up to a massive reduction in the goodwill value of its Byrom Keeley subsidiary, which the group now puts at £3.5 million.

It wasn’t all bad news though, with the Accuma board saying that it was confident about the future of the debt management arm. They added that they have made deals for the “supply of clients on a contingency basis” which they believe will result in more debt management sign ups. They went on to say that the economic situation was favourable for the debt solution industry.

They may be right. The current recession is likely to last longer, and hit harder, than was first thought, and the number of UK consumers that require debt advice, or a managed programme is likely to increase in the coming months.