Three in four Brits think credit companies should provide more support to their struggling customers

With the government’s announcement of a review into Debt Relief Orders this week, the subject of how to manage debt arrears generates strong opinions among consumers. Indeed, according to new research from Mintel, the majority of Brits (75%) believe that credit providers should provide more assistance for customers who are in financial difficulty.

While the research has found that consumers believe more support should be given to debt holders by credit companies, it seems that overall, Brits do not believe arrears should be written off. Today, just a quarter (27%) of Brits agree it is unfair to expect people to repay any debts if they are no longer able to afford them.

Toby Clark, Director of Research, EMEA and APAC at Mintel, said:

“It is clear that people think there is a real difference between what lenders and borrowers can be held responsible for. There is a consensus that it is borrowers’ responsibility to ensure debts are repaid – but that lenders also have a responsibility to give them every opportunity to do this. Consumers put the blame on the part of the lender if they arrange a debt with repayments that the borrower cannot afford to maintain. As a result, there is an expectation that the lender should rearrange the repayment schedule to correct the situation. However, this does not take away the fact that the borrower has a responsibility to repay the money owed.”

In addition, in terms of coping with their debt repayments, three quarters (76%) of Brits with debt claim to be comfortable, however the remaining quarter (24%) of those with debt are not so lucky. One in five (19%) say they are “fairly uncomfortable” (struggling to meet credit or debt repayments but they are just about manageable), while 5% claim to be “very uncomfortable”, having already missed repayments or saying that they are at risk of doing so in the future.

Today in Britain, the majority (70%) of consumers say that they owe money on at least one kind of credit, and Mintel’s research shows that two thirds (64%) of holders could be at risk of struggling financially or even missing payments if they increased. This includes the 24% currently struggling with their repayments and 40% of people with debt who say that whilst they currently have no problem meeting their repayments, they couldn’t afford to increase them.

“The consequences of an increase in interest rates could range from being forced to change lifestyle habits to falling into arrears and, in the most serious of cases, repossession of their home.” Toby continues.

Moreover, some 44% believe that in order to protect against these risks, people should have some form of insurance to cover their debt in the event of being unable to keep up with their repayments. However, Mintel’s earlier research found that just 2% of people took out insurance to cover their loan in the event of accident, sickness and unemployment.

“Consumers have a tendency to talk in terms of ideals, but in reality they often act very differently. The payment protection insurance (PPI) scandal in recent years has played a big part in this. As PPI has developed such a negative reputation due to widespread mis-selling, the product itself has accrued negative connotations. Consumers may also reject getting insurance because of the additional costs. Whatever a borrower’s reason for not insuring their repayments it would seem there is still an appetite for the idea of loan and card protection products. Providers just need to make the specific products appealing and make the benefits clear to consumers.” Toby continues.

Indeed when it comes to what they would prioritise in the event of financial difficulty, consumers were divided as to whether it is more important to keep up with debt repayments (33%) or household bills (37%). Overall, some 71% of people would make significant changes to their lifestyles in order to avoid damaging their credit rating.

“The common sense response would be that consumers should prioritise the essentials needed to maintain their home such as utility bills. For mortgage holders, one of their debt repayments is an essential living cost, which perhaps explains some of the lack of consensus. That there is such a level of disagreement points to something more than this. It shows how ingrained the importance of repaying debt is for many people.” Toby continues.

Finally, it seems that one in five of us are turning to our friends and family for extra finance, indeed, 5% of Brits admit they currently owe money to a friend or family member. Consumers who are struggling with their finances (17%) are more than three times more likely than average to have informal debt amongst family and friends. But more people feel more comfortable borrowing from formal lenders (48%) than friends or family (39%).

“Consumers are generally uncomfortable with the concept of borrowing money from friends or family. More people would feel comfortable borrowing from banks.” Toby concludes.

Mintel’s Consumer Attitudes Towards Debt – UK – 2014 report is available to purchase from Mintel priced £2195. Press review copies of the report and interviews with Toby Clark are available on request from the press office.