Discussion of the dangers of the implementation schedule for Universal Credit in 2017 including the effects on consumer credit.

The government has refused to shift their position on implementing the proposed changes to universal credit. Despite the Christmas period already a dangerous time for consumer borrowing, decision-makers have said the November rollout will go ahead as planned.

This could be dangerous for lenders and borrowers alike if the system has the expected negative effect on low income families.

What is Universal Credit?

A new welfare system is set to replace existing benefits available to UK households this winter. It replaces the series of benefits currently available in use into a single monthly payment; like that of a standard wage. The system works on an assessment basis which will generate your entitlement from current circumstances.

Benefits it intends to replace include:

While the simplicity of universal credit has been positively received, the timing of the switchover has faced opposition. Many believe changing an entire benefits system at an already tight financial time of the year could cause major problems.

Risk of bad debts

Consumer debt is not a worry to either side so long as it remains "good debt". This means it is manageable. This can be rent, a mortgage, a loan or anything similar.

Debts become "bad debt" should repayments shift into an unmanageable amount or the debtor's position changes, leaving them unable to pay. This creates a financial headache for everybody involved.

Debtors unable to keep up their payments can risk CCJs, bankruptcy and extreme financial pressure. Lenders can be at risk of not seeing their money back and debt collection agencies end up chasing extremely difficult debt. This vicious cycle benefits nobody and should be discouraged.


The introduction of universal credit is not the issue at this juncture. What could be a problem however is the timing. It is common around Christmas time for many low income families to borrow using payday loans and credit cards to cover Christmas expenses.

With many choosing this method, adding a level of uncertainty with a new credit system could unbalance thousands of families across the country. It is with this in mind that Labour MPs have asked for a later rollback. One problem with a new system is that payments initially may be delayed by a week or so if there are complications with applications. For low income families around Christmas time, this is a very dangerous situation.

As a debt collection firm, AYOM supports the notion as bad debt (particularly consumer debt) becomes very troublesome for all parties. While bad debt can be recoverable it is far less likely to be resolved quickly than an existing manageable debt.

Neither collectors nor creditors want to see a debtor struggling financially as it does not benefit any party. Any creditor would agree they would prefer a steady, secured amount regularly than being forced to chase what the debtor can pay and when (or even if).

Disappointing response

My David Gauke, Work and Pensions Secretary replied to the fears saying the changeover will go ahead as planned. Telling MPs:

The Department along with the jobcentres, case workers and the dedicated staff throughout the country are doing their utmost to ensure a smooth transition.

I know change of any kind can be difficult, especially for families struggling to get by. But there are a number of important components to the programme.

David Gauke, Work and Pensions Secretary

This has disappointed many: MPs, debtors and creditors alike. Opposition MPs are however still hoping for a dialogue before November to try and push back until the New Year

With fears that piling debt could become a problem, the same MPs are asking for food banks to be prepared, should the worst happen.

Will universal credit cause increased pressure on consumers? Will we see an increase in the use of food banks over the Christmas period? Only time will tell. If you are a consumer our best advice is to ensure you know exactly what repayments you need to make at all times and keep them manageable. Never borrow more than you can manage.

If you are a creditor in need of assistance from a debt collector, you can call AYOM on 0800 130 3357.

You can also get in touch via our contact page. We offer a range of services to ensure your cash flow isn't negatively affected by non payments. We can recover good and bad debts, consumer and commercial. Get in touch today to receive a free consultation.

Request a Callback