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As Millions Seek Help With Debt, Some Subprime Lenders Make Things Worse

by Jim ONeil on January 14, 2012

in Debt

New research conducted by the Money Advice Trust reveals that many UK residents are in financial dire straits. According to the study, approximately 1.54 million people in the UK sought debt assistance during 2011.

The previous year, this figure was 1.4 million. The research also uncovered that nearly ten million UK residents are engaged in a constant debt management battle, making life very unpleasant.

To make things even bleaker, the study predicted a sharp increase in demand for debt assistance during the first half of 2012.

The University of Nottingham conducted this study on behalf of the Money Advice Trust. It was designed as an update to previous UK debt advice demand forecasts.

Based on the research, demand for debt advice will increase during the next six months due to only modest growth in wages plus rising unemployment.

Money Advice Trust Chief Executive Joanna Elson OBE noted that many UK families had it rough financially in 2011. Unfortunately, she said, even more people will battle with finances during 2012.

While general price levels are increasing, wage growth is relatively flat and the unemployment level is increasing. This means a larger proportion of income must go toward fuel, utilities, and food.

As daily living costs consume more income, it becomes more difficult for many people to pay other bills. Some UK households take out cheap loans to close the gap.

Those with poor credit sometimes use no credit check loans to consolidate debt. In some cases, this works but in others, a difficult situation turns into one characterized by unmanageable debt.

Some people are going as far as selling prized assets like cars, jewelry, and even their pets, just so they can pay their bills. Financial experts advise consumers to seek free debt advice before they lose control of their finances.

If loans are used to consolidate debt, they recommend staying away from subprime loan Web sites, which may be misleading.

The European Commission recently discovered that 38 British subprime lender sites contained incorrect cost details. The Office of Fair Trading (OFT) studied 47 loan sites as part of a European Union (EU) investigation regarding the subprime borrowing industry.

It found that the large majority did not comply with advertising regulations for consumer credit products. Key details were omitted regarding available products and misleading cost information was provided.

If the OFT deems it necessary, it may fine these lenders.

The investigation did not cover the enter consumer credit sector. It focused only on loans for people with poor credit, situations where the “risk of financial hardship…may be higher.”

The OFT will now turn its focus to companies that provide payday loans. The agency will determine if these lenders are complying with its Irresponsible Lending Guidance standards.

John Dalli, EU consumer commissioner, stated that consumers sometimes learn that credit is more costly than originally thought, due to missing or unclear details.

Since consumer credit can be a complex animal, European legislation exists to shed light on the topic. These regulations help consumers make more educated credit decisions.

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