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Smartphone contracts driving debt

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  • Calls to National Debtline about telephone debts have increased 261 per cent since launch of the first iPhone
  • Calls for help have gone up 15 per cent in last 12 months
  • Charity warns of expensive smart phone contracts
Saturday 9th November marked six years since the iPhone first launched in Europe. As of this year 39 per cent of UK adults own a smartphone. Debt advice charity the Money Advice Trust is reporting that its National Debtline has seen a 261 per cent rise in calls for help from people with telephone debts since the launch of the first iPhone, and a 15 per cent rise in the last 12 months. In the first eight months of this year the free charity debt advice services spoke to 13,398 people about their telephone debts, up from 11,698 over the same period last year.  
 

This trend may be accelerating, but it is not new. Calls for help with telephone debts have been going up since 2007, the same year the iPhone was launched. National Debtline took 5,830 calls from people with telephone debts that year – representing 3.9 per cent of all calls, but last year that figure had ballooned to 17,766 – representing 9.6 per cent of all calls. This year the problem has grown further, with 11 per cent of callers reporting telephone debts. 

Telephone debts can grow quickly. Of the charity’s My Money Steps users in arrears to their telephone company, over 15 per cent owe more than £1,000 on their phone bills.  

The charity pin points expensive smartphone contracts as a potential cause of the problem.  

Joanna Elson OBE, Chief Executive of the Money Advice Trust, said:  

“Smartphones have in many ways revolutionised our lives, but we’ve certainly been made to pay for the privilege. A family of four with two parents and two teenagers could quite easily be paying around £140 a month for all four to have a smartphone – more than the average UK energy bill. For 42 per cent of smartphone owners, the phone is their sole internet access point, so they are quite reliant on keeping it running.  

“When you take out a contract for a smartphone you are in effect taking out a loan to pay for the handset. Smartphones are sold without contracts for upwards of £500, which would prohibit many from getting hold of one, but with a contract the upfront cost all but disappears, to be replaced by a monthly fee incorporating much of the phone’s usage costs as well. When people fall foul of that monthly fee, they can find themselves with a growing debt problem. The figures from National Debtline suggest this is happening more often in line with more people taking out expensive smartphone contracts.  

“There is responsibility on both sides of the agreement here. Individuals should only take on consumer credit contacts which they have carefully judged they are able to afford; and creditors like major mobile phone companies have a duty of responsible lending, to make sure that borrowers in financial difficulty are treated with understanding and forbearance.  

“Fortunately there are options available to those who are struggling. Free advice services like National Debtline can help you put together a budget and identify whether you are paying too much for your phone contract. People can also go through this process online at www.mymoneysteps.org. Advice can also help prioritise debts and come up with a plan for tackling them, as well as offering tips on how to contact your provider to arrange an affordable repayment plan.”

 
 
Year
Number of calls dealt with during the period
Number of calls dealing with telephone debts
Percentage of calls dealing with telephone debts
2007
149,785
5,830
 
3.9%
 
2008
173,947
7,691
 
4.4%
 
2009
216,963
10,114
 
4.7%
 
2010
215,943
11,856
 
5.5%
 
2011
 
197,771
 
14,651
 
7.4%
 
2012
185,609
17,766
 
9.6%
2013
(January – August)
123,949
13,398
 
10.8%
 
 
 
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