Consumer credit falls by 6% as families repay debt

According to recent figures, consumer credit lending fell by 6% in 2010 says the Finance & Leasing Association.

December, which traditionally has always been a strong month for credit card borrowing, saw a year-on-year fall of 5%, which many cite as being reflective of consumers’ pre-Christmas reluctance to spend on the high street, and all time low levels on consumer confidence. Store cards and store instalment credit (e.g. buy now, pay 12 months) also fell by more than a quarter respectively.

Many retailers are also citing the extreme weather conditions that have hit the UK in the run up to Christmas of 2010. Interestingly, car finance was the only lending sector that increased year-on-year, showing a 9% jump compared with 2009. Whilst some have cited this being in part due to the loss of many company cars, there are no verifiable figures to support the claim.

Credit results are unsurprising

Which? the credit expert commented on the figures by saying: ‘It’s not at all surprising that consumers are paying back debt, rather than applying for new credit cards and loans. With thousands of jobs at risk over the coming year, it makes sense for many families to reduce their exposure to debt.”

As a firm dealing primarily with commercial debt recovery and having a sense of how both the consumer and commercial debt sectors are being played out there are many parallels between the two. Whilst many firms use overdrafts as consumers do, the appetite for large scale borrowing does seem to be somewhat diminished. Whether this is the hangover from the credit crunch with people and businesses wanting to lower their exposure to short term debt or whether this is actually a dynamic shift in debt behaviour for the long term remains to be seen.

Either way, it is always sensible advice, commonsense and best practice to only take on board debt you (as a business or a consumer) can comfortably service so who knows, maybe this news, not being so welcome to the retailers this season, is actually a blessing in disguise for the future?

If you are concerned about how late payments or the onset of bad debt from your customer base or debtors book will affect your business, use the web site or pick up the phone to enquire about our range of services to address the impact of debt before and after its onset.

For more details, call our Liverpool Debt Recovery head office. Our services include:  Debt Recovery, BusinessDebt Mediation & Debt Dispute Resolution Reports and Debtor Tracing, Outsourced Credit Control and Corporate Legal Services.

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