Full scale of debt crisis not addressed by Government review

The Salvation Army welcomes the Government consultation of Debt Relief Orders (DROs) but warns more needs to be done to protect thousands from pandemic related debt.

Lorraine Cook, Financial Development Inclusion Manager said: “Debt Relief Orders pull people back from the edge of crisis by temporarily stopping creditors demanding payment so the journey of debt management can begin. Increasing the threshold for DRO applications to £30,000 is an important move and will help thousands more people".

“However, it only tackles one part of the growing personal debt problems that the UK is now facing. With rising unemployment, more people are struggling to make ends meet and many will fall behind with bills and credit card payments”.

“The Government must develop longer-term solutions to help people get back on their feet and not focus on short-term fixes to prevent a national debt crisis”.

In particular, The Salvation Army is calling for the Government to retain the temporary £20 uplift to Universal Credit and to include advance payments (Government loans) in the debt respite scheme when in launches in May. This 60 day ‘breathing space’ period will see enforcement action from creditors halted and interest frozen for people with problem debt.

Over the last year some Salvation Army food banks saw a threefold increase in demand as the number of people relying on donated food increased in light of the financial fall-out from the pandemic.

The proposal for the new criteria required to obtain a DRO includes:

• Increasing the total amount of debt allowable to £30,000 (from £20,000)
• Increasing the value of assets owned by the individual to £2,000 (from £1,000)
• Increasing the level of surplus income to £100 (from £50) per month

Lorraine adds: “We need to take away the stigma of debt through education and encourage people to seek advice at the point they miss a payment with a creditor instead of waiting for enforcement action. The war on debt is only beginning and the Government must ensure we have appropriate tools to protect people from serious harm".