Over-indebtedness in Britain

Authors: Professor Elaine Kempson
Funded by: Department of Trade and Industry
Published by: Department of Trade and Industry
Publication date: September 2002

The term over-indebtedness is used to describe debt which has become a major burden for the borrower. Over-indebtedness can be caused by, and contributes to, social exclusion, financial exclusion and poverty.

The level of consumer borrowing in Britain continues to rise to record levels, fuelling concerns that it will end in large numbers of households facing financial difficulties, just as occurred following the boom in credit use at the end of the 1980s.

In response to these concerns, Dr Kim Howells, then Minister for Consumer Affairs, set up a Task Force on Over-indebtedness, to explore the causes and effects of over-indebtedness and to look at ways of achieving more responsible lending and borrowing. At its first meeting, the Task Force noted the lack of up-to-date statistical information on both the distribution of consumer borrowing across households and the extent of financial difficulties being experienced. In its first report (Report by the Task Force on Tackling Over-indebtedness. Department of Trade and Industry, 25 July 2001), the Task Force recommended that a survey should be commissioned to provide the information it lacked and also to explore the links between specific lending practices and financial difficulties. The survey was undertaken by MORI between March and May 2002.

Altogether 1,647 householders were interviewed across Britain, and asked for details of both their own credit use and that of their partner, if they had one. Those who admitted to being in financial difficulty or to having fallen behind with any of their credit commitments or household bills were then asked a series of questions relating to the difficulties they had faced. A separate, but linked, survey was also undertaken with 189 young people, aged between 18 and 24.

The survey indicated that, since 1989, the number of households with credit facilities had increased markedly, but the proportion currently repaying credit was about the same. In other words, there had been a large increase in the number of households with overdrafts and credit facilities they were not using. The amounts owed by credit users had, however, increased considerably, especially on credit cards, loans and hire purchase agreements. The report goes on to examine the extent and nature of financial difficulties, and to discuss evidence of the claims of both irresponsible lending and irresponsible borrowing.


Over-indebtedness in Britain: a report to the Department of Trade and Industry (PDF, 675kB)


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