Welendus expresses caution over problem debt proposals

WELENDUS has warned that proposals to provide more “breathing space” for individuals struggling with problem debt could fail to tackle the root causes of the issue.

Amer Bhatti (pictured), chief compliance officer at the short-term peer-to-peer loans provider, suggested more needed to be done to help people avoid getting into too much debt in the first place.

“We are sceptical about the practicalities of the proposals considering that it would not tackle the root cause of the issues and certainly would not resolve the nation’s personal debt crisis,” he said.

“The government needs to ensure that it takes a measured approach and that consumer protection is commensurate with the access to credit.

“The proposals need to be realistic and the practicalities of effective and appropriate implementation should not be underestimated.”

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The proposals, unveiled in the Budget at the end of October, suggest 60 days of “breathing space” to let a borrower access debt advice and arrange a repayment plan.

Individuals entering a plan would receive legal protections from creditor action during the 60-day period and for the duration of their plan.

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To be eligible, an individual would have to be assessed as being in problem debt by a debt adviser and not have been in breathing space in the previous 12 months.

The government said it was also planning a no-interest loans scheme pilot for those who cannot access credit and will provide £2m to launch a challenge fund to promote technological solutions that support social and community lenders.

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