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… paying an extra £20 or £30 a month on their Vanquis bill (and then paying a high APR on that) is a significant detriment to these clients.
(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 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.