Consumer debt crisis: Scots forced to pay £7m more in court claims in one year

The Registry Trust has called on government, policymakers, regulators, the financial sector, and civil society organisations to collaborate to protect financially vulnerable households from further financial harm saying that the worst may be yet to come as government support for business during the Covid pandemic winds down.

The total number of court judgments over consumer debt in Scotland has also gone up by 9% from 13,308 in 2020 to 14,444 in 2021.

Cases involve money owed on credit cards, overdrafts, loans and rent arrears.

The Trust, the non-profit organisation which collects judgment information in Scotland on small claims and summary cases said there was an urgent need for help to repair people's finances, and promote financial resilience against future financial shocks. The study shows that the average value of claims has risen from £2,795 in 2020 to £3,054 in 2021.

Mick McAteer, chairman of the Registry Trust said the outlook for financially vulnerable households at the in 2022 "does not look good" – warning that the full effects of the cost of living crisis have yet to emerge in the wake of the Covid-19 lockdown.

He said: From our data and other recent research, we can see that almost no progress has been made in promoting financial inclusion and building financial resilience amongst financially vulnerable households since the last great economic shock in 2008. The disparity in the experiences of different groups of households in different regions is a feature of the Covid-19 crisis. For the most financially vulnerable, it is just the end of the beginning of the financial crisis with many still in the economic survival phase or just starting to repair and rebuild their finances."

It comes as some parts of Scotland face a whopping annual rise in energy bills of nearly £1350 - over 60% more than UK average.

And a survey has found that the vast majority of pubs, bars and restaurants are set to hike prices sharply for customers as the hospitality sector faces spiralling costs. UK Hospitality said firms predicted an average of 11% price rises to offset soaring costs - including energy bills.

The planned price increases come after the sector saw the key Christmas trading period “devastated” by the spread of the Omicron variant of Covid-19 and resultant pandemic restrictions.

Mr McAteer said: "The immediate priorities are helping those households who are already in financial difficulty and protecting households most exposed to the coming cost of living crisis. But we must also think about the post Covid-19 economy. Sustained efforts are needed to pre-empt and prevent future financial crises by helping households build financial resilience."

It comes as Age Scotland support calls for urgent action to help large parts of Scotland hit by the UK's highest hike in fuel bills that will see households facing bill rises nearly twice the British average.

Analysis has revealed a postcode lottery of fuel bills with some parts of Scotland paying over £1200-a-year more on their energy bills than the UK norm because of where they live.

On Thursday households across the UK saw their annual energy bills rise typically by £693 in the UK after the regulator Ofgem hiked the price cap by the biggest increase yet while the Bank of England warned the nation is about to suffer the biggest fall in living standards since comparable records began three decades ago.

The sharp 54% rise, which will impact half the population, is said to be driven by a record rise in global gas prices over the last six months, with wholesale prices quadrupling in the last year.

But in some parts of Scotland, average dual fuel prices will be over 60% higher than the UK average. Argyll and Bute will face a whopping annual increase of £1344.70 - over 60% more than than the typical UK rise set through the regulatory price cap.

Adam Stachura, head of policy at Age Scotland said: "There is no doubt that heating and powering your home is an essential expenditure but for hundreds of thousands of people in Scotland the pace of these wild increases has outstripped a rise, if any, to their incomes. When you look at this together with a range of other cost of living increases the financial pressures people are facing just grow and grow.

“If you are on a low and fixed income, such as vast numbers of Scottish pensioners then there are really stark decisions to be made about what they can afford to spend their money on, often to the detriment of their health and wellbeing. A big question hangs over whether the value of any social security available to support them with energy bills is adequate enough and needs a serious review.

“We must not overlook how all of this affects rural and remote parts of Scotland in particular as they can face even higher energy bills than most of the mainland. These parts of the country can often experience the coldest weather, have poorer levels of home energy efficiency and high number of people already living in fuel poverty, so they face a considerable whammy of factors working against them.

“Driving down the cost of energy and the need to use as much of it, boosting income, and expanding awareness and uptake of energy efficiency schemes must be a priority of all governments as we look ahead. Otherwise we face a never-ending drain on household budgets.”

Citizens Advice Scotland has been preparing for a rise in debt advice as Covid protection measures such as furlough and mortgage payment holidays end and the cost of living increases through rising inflation and energy prices, and stagnant or falling incomes.

CAS financial health spokesperson Myles Fitt said: “At Citizens Advice Scotland we have been very worried about a cliff edge moment for people in the spring of 2022 due to the removal of payment protections and the forbearance some creditors showed during the pandemic ending. That moment is compounded with a close to unprecedented cost of living crisis of rising bills and flat or falling incomes creates a nightmare scenario for people facing debt. Our message to people is to seek help."

Finance secretary Kate Forbes is due to confirm on Thursday how much extra money households in Scotland will receive to cope with the cost of living crisis.

Chancellor Rishi Sunak has already promised a £150 council tax rebate for most households in England.

The pledge could result in as much as £290m going to the Scottish government.

Ms Forbes said she will ensure "every penny is out the door to support households and families in need".