Very little has happened in 2017 that is good for the free debt advice sector: for the agencies, the advisors or – most importantly – our clients.
This article is for front-line debt advisers across the country, because someone needs to say just how bad things are out there at the moment. I hope it will also be read by all the regulators, quasi-regulators, government departments and creditors involved with debt advice.
In some ways, this article is a counterpoint to Jane Tully’s 10 big things in debt advice in 2017 – a lot of that is forward-looking, things which started this year which may (or may not) come to fruition in 2018. This article is more gloomy because so little has actually improved in 2017.
Millions of people have faced rising prices at a time when many wages and benefits have been frozen, many people cannot get regular and secure employment, benefits cuts have continued, and the introduction of Universal Credit is leaving people with debts and rent arrears. It’s not surprising that problem debts and the demand for debt advice has increased.
Against that backdrop, here are some problem areas for the debt advice sector.
More non consumer credit debt
Citizens Advice, National Debtline and StepChange all report the continued increase in the number of clients with council tax arrears. But it’s a more general problem with non-credit debts: utility bills, rent arrears and benefit overpayments. It’s hard to remember when I last saw a client at Citizens Advice who had a debt problem which was only credit cards and loans.
These sorts of debts are hard for a client to deal with on a self-help basis, often requiring negotiations with creditors, putting other debts on hold for a prolonged period and/or applications for grants. Inevitably many of them need face-to-face advice.
Apart from better funding for face-to-face advice, here are some ideas about how to reduce the problems in this area:
- consistent use of the Standard Financial Statement by all creditors;
- water companies should adopt common social tariffs which can be properly publicised nationally. A postcode lottery for help with water bills serves no useful purpose at all;
- same for electricity companies – the Warm Home Discount scheme should be compulsory and uniform;
- the level of deductions from benefits, especially Universal Credit, needs to be reduced – all this is doing is making people unable to pay this year’s bills.
Bailiff problems continue
Despite some great campaigning work, there is little evidence of change on the ground with bailiffs. Clients very often need practical assistance in dealing with bailiffs, not just good advice. Some suggestions:
- the Ministry of Justice needs to act on the Taking Control report, restructuring bailiffs fees, introducing standards for vulnerability assessments, using the SFS to determine what payments should be accepted, setting up an independent regulator with a proper complaints procedure etc;
- individual councils need to act as well. The high bailiff fees can be self-defeating, just making the client unable to pay their next year’s council tax. Well done to Hammersmith & Fulham!
- National Debtline and StepChange should look at how to provide extra help to clients with bailiff issues – the face-to-face sector cannot pick up all of these.
IVAs up massively, DROs down
I looked at this issue in Insolvency numbers up – but rising debt isn’t the main cause. The trend has continued in 2017.
DRO numbers aren’t down a lot, but this masks the fact that the upper limit for DRO debts was increased from £15,000 to £20,000 in late 2015. You would have expected to see an increase of a third in the number of DROs because of that – instead they have fallen slightly, so they are a long way down on where they should be.
I haven’t met a debt adviser who thinks there has been any decline in the number of clients who need a DRO. I think it’s some combination of mis-sold IVAs and badly under-resourced free sector debt advice. As I said in that article:
With the fragmented nature of IVA regulation, it may not be easy to get the full picture, but someone should be trying.
If the Insolvency Service, the FCA, Money Advice Service etc are actually looking into this, that’s great. But it’s not good enough to say it’s not your area of responsibility or it’s not easy. Possibly 10,000 people a year are being sold an inappropriate debt solution and this is happening on your collective watch.
Debt PAP – how to stop people from reading the letters
The long-awaited Debt Pre Action Protocol finally went live in October. Many debt advisers may not even have noticed this because the debt collectors have decided to make the cover letters look so boring, complicated and (in some cases) misleading that the clients don’t realise what they are and ignore them. TCF? Really?
Debt advisers – redundancy
The Debt Counsellors closed in June 2016. I wrote then:
It is a sad day for the UK debt advice sector that a firm specialising in the most difficult clients was unable to secure enough funding to keep going.
That funding problem is widespread. In too many CABs and other face-to-face agencies, debt advisors have been made redundant or not had contracts renewed. The timescales for DROs are now at around ten weeks in many cases. (That also highlights how inadequate the idea of a six-week breathing space is.)
I am a believer in both self-help and digital delivery – that is what Debt Camel is based on. But it is no substitute for adequately funded, crisis debt help to vulnerable people, which we do not have at the moment in the UK.
Affordability – more reports and consultations
Everyone apart from the lenders knows that persistent credit card debt and overdrafts are an enormous problem. But after another year of talking, nothing has actually happened.
Take one very small piece of this jigsaw – Vanquis’s ROP product. Vanquis agreed to stop selling this to new customers from April 2016, but its previous sales are still being investigated by the FCA. Just what is taking so long? Customers making a complaint about ROP mis-selling are often getting refunds. But this shouldn’t be left to the good luck of individual customers finding this on the internet…
(UPDATE – the FCA decided in February 2018 that Vanquis has to automatically refund £168million for ROP mis-selling.)
Justice delayed is justice denied for these sort of affordability issues. In the years it takes to think what to do, consult then implement, hundreds of thousands of people are being badly affected.
Credit to National Debtline for putting out a fact sheet on payday loans in 2017 which refers to affordability and refunds. I’m not sure why Citizens Advice, StepChange and Money Advice Service don’t do the same – it’s great to campaign for reform in the future, but existing redress also needs to be publicised.
Gambling
Gambling is a huge problem for debt advice – until a client has stopped, it’s almost impossible to help them with their debts.
So continuing the theme of everyone knows… everyone knows the huge damage being caused by FOBTs. Well everyone except the bookies and HMT, who make a lot of money from them. So we have another consultation. What am I bet that the responses will be ignored?
Will 2018 be better?
Let’s hope 2018 actually sees some real change. Persistent credit card debt and overdraft charges tackled, bailiffs brought under control, SFS being used by all creditors, and a breathing space that will actually work in practice – that would be a good year.
Gambler says
Why is it that everyone talks about FOBT in betting shops when talking about the horrors of gambling? There are many machines in high street sites such as cashino that can swallow mind boggling amounts of money in a very short space of time. An example might be magic lotto machines with stakes from 25p to £2 a spin and auto play . On autoplay, although I have not actually timed it , each spin takes two to five seconds.
There needs to be regulation, not only of bookmakers but also high st stores. The gambling commission reported 48 % of adults had gambled within the last 4 weeks which was up 3% on the previous report. And those are only the ones who admit to it.
It is so easy to lightly say you can not help debtors until they stop gambling but there is less and less money available to help and treat problem gamblers but because the % of people who identify as problem gamblers is so low at 0.7% or 7 in every 1000 people it is easy to dismiss the problem but every problem gambler impacts many other people be that parents, partners, children or other family.
Debt is awful but the causes of debt need to be tackled and not just the debt advice ‘industry’ because sadly that is what it is
Sara (Debt Camel) says
Every debt adviser will agree with you. And none of us say “lightly” that we can’t help until the gambling stops – see https://debtcamel.co.uk/gambling/.
Gambler says
I am very cynical I am afraid about the whole gamcare /gambling help available. It is, of course funded by the gambling industry. The link you provide to see if you are a problem gambler doesn’t use the measures that have been used for many years to identify problem gambling.
I think it has a much greater impact on debt than us recognised partly because it us so often hidden. These are problems of the ideology of individual responsibility and profit being king.
Sara (Debt Camel) says
Do you have a suggestion for a better link?
Gambler says
The PGSI – Problem Gambling Severity Index is the scoring system that is used internationally and was used in the British Gambling Prevalence Surveys when they were completed- sadly they are no longer done in the same fashion.
This link is Australian but works just as well http://www.gamblinghelponline.org.au/take-a-step-forward/self-assessment/problem-gambling-severity-index-pgsi
Unfortunately it does not have the relevant contact details on it
One of the major problems with the link on the site you provided in my opinion are the questions which ask if others have commented on your gambling- gambling by its very nature tends to be a secretive activity so when you answer that no one says you gamble too much, while it may be true , it distorts the figures.
Sara (Debt Camel) says
Thanks, I will have a look at this.
Nick Pearson says
Hi Debt Camel, As the former CEO of The Debt Counsellors, which as you mentioned had to close in June due to lack of funding, I wanted to say a big Thank You. Thank you for remembering us. It was one of the saddest days of my life when I closed the TDC office door for the last time – I set up the charity specifically to provide telephone debt to the poorest and most vulnerable clients. I was and am very, very proud of the work my brilliant team of debt advisers did and when we were forced to close it felt like a bereavement to me. Running The Debt Counsellors was the best thing I have ever done. Another thank you for the wonderful Debt Camel website and updates – the very best information resource on debt advice. Have a great 2018 one and all.
Jane Taylor says
Sara,
This article does make grim reading, and for volunteer debt advisers like me, I agree, 2018 will be tough for the sector unless things start to change. One of my concerns is that some smaller debt advice centres, often run by volunteers, are feeling the strain of the increases in FCA regulation as well as other challenges and there may be more of that to come. Yet, Bailiffs continue to be a law unto themselves!
Thanks for all you do in terms of providing information and support to clients via Debt Camel and also in your job.
Jane Taylor, Volunteer at Cornerstone Money Advice and Operations Support Manager with Community Money Advice.
Michael Peoples says
I agree that there are many people in IVAs who would qualify for DROs and misselling is undoubtedly a problem. However the pressures on the DRO providers and the timescales involved are also a significant factor and this needs to be addressed. An interim order can be put in place within days and an IVA arranged within weeks thus protecting debtors from all legal action but the timescale for a DRO is ten weeks as your article says. This almost forces debtors into IVAs as either they seek protection in this fashion or leave themselves exposed to bailiff action for months without any protection at all. Unless there is more funding provided and the process speeded up, there will continue to be people entering unsuitable IVAs just to be able to sleep at night.
Perhaps there is little political will to make DROs more accessible as in many cases the writeoffs would relate to tax credits, council tax and utilities. Making this any easier for debtors may not be palatable for politicians.
Sara (Debt Camel) says
It is still completely wrong for an IVA provider to propose an IVA for someone who would qualify for a DRO. They need moral support and hand-holding whilst the DRO is being set up, not to be sold something which is unsuitable because they are scared.
The creditors and creditor reps should also be looking more closely at the low DI, no asset IVAs and rejecting them if they don’t appear to be a suitable solution for the client.
Andrew Sykes says
Really interesting article. Continued austerity and pressure on local authority / local NHS budgets is having a massive impact across the voluntary sector in general: free advice agencies like ours have historically received funding from the LA / NHS in recognition of the sometimes vital part we play in supporting the poor / vulnerable and preventing escalation in to crisis and referral to more costly services.
Universal Credit went full service in our area in July 2017 since then we’ve seen a doubling of referral numbers in to our service (we offer 121 advice and specialise in chaotic, hard to reach individuals). At the same time the number of DRO’s we’re submitting has doubled – 35 in the last 1/4 of 2017 as opposed to 61 for the whole of 2016. Set that against a backdrop of our 2017 LA funding having been cut by over 2/3rds (we now get around £8,500 per annum) and life isn’t rosy at the moment. We’ve just lost a part time staff member (we trained her from scratch to become a DRO intermediary) who left for greater job security.
2018 will definitely be a year of challenges and it’s hard to see how we’ll be able to sustain things as they are currently. Regrettably it will be the most vulnerable in our society who suffer as we will have no choice but close our doors to new referrals. Where these clients and the agencies that are supporting them will turn to for support is anyone’s guess because they’re simply aren’t the services in our area to support them.
Sara (Debt Camel) says
That sounds horribly familiar :(
Michael Peoples says
I agree and as a firm we do not like low DI IVAs especially where a DRO is an option. Apart from anything else they are the most likely to fail due to lack of affordability as the I&E is normally extremely tight. IP firms should certainly make their clients much more aware of the DRO option but there also needs to be more funding for DRO providers so the debtors can get the protection that they need more quickly. The loss of The Debt Counsellors and reductions elsewhere in debt advice funding is leaving people vulnerable and scared.