Who on New Year’s Eve will be opening the champagne to toast a successful year? And who would rather forget all about 2014? Here is Debt Camel’s completely opinionated round-up of the debt world in Britain – the winners and losers in 2014 and what’s coming up in 2015.
- Bailiffs – the knock-on effect of 2013’s council tax benefit changes is now being seen by every debt advisor. Council tax arrears are increasing and bailiff referrals for council tax arrears have reached record numbers. And those bailiff “reforms” in April? Well the fees have certainly been simplified (good) but the level at which they were set is horrendous. Bailiffs must have had a very good 2014 :(
- Trussell Trust – there are now many more food banks helping many more people. It’s great they are there but so sad that they are one of the top success stories of the year. I’ve no idea how many referral forms I handed out in 2014 to Citizen’s Advice clients, but it was too many, almost all resulting from benefits sanctions, delays and errors. I wrote a guest post on a visit I made to my local food bank.
- The FCA – the FCA took over regulating consumer credit business in April. Its payday loans moves (see “Losers” below) made headlines, but its warning in September that “Many [debt management and credit broking] firms are falling well short of our expectations and they will need to raise their game if they want to continue operating” may be more significant in the longer term. Debt advisors at the MALG14 conference in November sat bemused as a string of creditors and debt collectors recited the FCA’s “treating customers fairly” mantra, proclaimed they had seen the light and no longer cared about the money if they could just be friends with the debtors. Hallelujah!
- Wonga – Britain’s largest payday lender has had the year from hell. It paid £2.6 million in compensation for sending letters from fake lawyers, which was then dwarfed by having to write off over £220 million from loans where it hadn’t carried out proper affordability checks. The Advertising Standards Authority banned some of its ads and it has had to stop using its trademark puppets in advertising. Then in November it lost its 3rd CEO in 11 months (“to lose one CEO maybe regarded as a misfortune, to lose two looks like carelessness, to lose a third…”)
- Payday lenders and brokers – At least Wonga is still going but many of its competitors have already exited the market or may do so soon, following the FCA’s cap on interest and charges. And some of those that are just profitable on paper are likely to have been contemplating the FCA’s action in “persuading” Wonga to write off loans and deciding to get out. That would be good if it happens; experience in the US shows just how hard it can be to regulate payday lenders out of business – see this funny (not work safe) video.
- People stuck in an unsuitable debt solution – far too many people are in Debt Management Plans that may never end. Others have been persuaded into IVAs when a Debt Relief Order or bankruptcy would have been a better option. Sometimes the debtor had bad advice at the start, in others their circumstances have changed – a succession of years with benefit and pay freezes has left many more households struggling in 2014. This needs joint action by the FCA and the Insolvency Service: “treating customers fairly” and this year’s consultation on raising the £15,000 DRO limit are two key building blocks to really tackle this area in 2015.
- interest rates rises? This dog stirred a bit in its sleep in 2014, but settled back down and not a bark was heard… By mid 2014 most economists were expecting rate raises before the end of the year, now they are still a way off. But anyone with a mortgage and other debt still needs to be thinking about how they will manage when rates do start to edge up.
- pension “reforms” Amidst the excitement about pensions “freedom”, cartoonists drawing Lamborghinis, squeals of pain from the annuity providers and the very real problems in planning how to give pensions advice guidance, the impact of the new April 2015 pensions changes on debt advice has gone largely unnoticed. Hopefully the potentially horrendous problem for bankruptcy is now going away following December’s Horton vs Henry case. However that still leaves the more general issue that debt advisors are generally not qualified or authorised to give pensions advice, as this article describes.