The importance of consistency when considering people’s finances when they are in debt

Sheila WheelerIn a guest post for the Trust’s blog, Sheila Wheeler, Director for UK Debt Advice at the Money Advice Service, shares an update on the new Standard Financial Statement (SFS).

For people with problem debt, seeking advice is the first important step they will take on their road to getting their finances back on track. They may be stressed or embarrassed about their situation and there may be a range of other issues which need resolving to help improve their finances. With this in mind we need to make the process of assessing affordability as effective and easy as possible.

Building on the principles and format of the current Common Financial Statement (CFS), operated by the Money Advice Trust on behalf of the sector, the Standard Financial Statement (SFS), which will go live on 1st March 2017, will bring greater consistency to this process. The SFS will provide a single format for assessing income and expenditure for over-indebted people. It will also include a savings category to help people build financial resilience while repaying their debts. This important addition is intended to help people in debt to withstand unexpected costs and give them a solid financial footing once they are debt free. It will also help to encourage them to recognise the importance of saving and to continue this in the future.

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Time for statutory Breathing Space?

shutterstock_163433831Meg van Rooyen considers the possibility of a scheme for England and Wales, along the lines of the Scottish Debt Arrangement Scheme, to provide a statutory breathing space for people with financial difficulties. This article is reproduced on Thoughts from the Trust with permission of Quarterly Account, the journal of the Institute of Money Advisers.

Where people in debt ‘do the right thing’ by engaging with their creditors, make affordable offers of payment using the CFS or SFS, CASHflow, or a recognised equivalent and maintain regular payments, they should get protection from further enforcement.  This currently does not take place unless people enter a formal debt remedy such as an IVA, administration order, debt relief order or bankruptcy.  Even where a formal debt management plan is in place, there is no guarantee that creditors will accept the offers made or freeze interest and charges.  There is no protection against any creditor who forms part of the plan from undermining its effectiveness by taking further action, typically by issuing a claim in the county court.

The primary objective in providing a suitable remedy in relation to a temporary change in circumstances is to provide for a mandatory freeze on interest and charges and a moratorium on enforcement action.  This would allow people time to seek support, source an appropriate debt option and most importantly prevent their situation from getting worse.

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We must do more to help under-25s avoid and tackle problem debt

Borrowed YearsToday the Money Advice Trust has launched Borrowed Years – a new series of ‘spotlight briefings’ exploring young people’s experiences of credit and debt.  Our research has found that many young people are building up debt and worrying about money in their first few years of adult life, but far too few are seeking advice when they fall behind.

Last year just 12% of callers to National Debtline were aged 18 to 24 – an experience shared by other advice agencies. And yet research by the Money Advice Service has shown that this group makes up 21% of the UK’s over-indebted population – equating to 1.8 million young people under 25 falling into financial difficulty as they take their first steps into adult life.

We must all do more to close that gap, and ensure that more young people receive the free advice they need. Read more

 

Reviewing the Consumer Credit Act – a debate that’s dry, but absolutely vital

CCA 1974After recent figures showing yet more growth in consumer credit, and last week’s cut in interest rates, it seems a good time to share my thoughts on the piece of legislation that underpins much of the borrowing that takes place in the UK.

Since responsibility for the regulation of consumer credit moved from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA) two years ago, the FCA has had some high profile successes in tackling this new brief – not least its intervention in the high cost credit market through the payday loan cap.

Some of its other work, of course, is less headline-grabbing, but every bit as important.  In no area is this more true than its review of the Consumer Credit Act (CCA).

This review came about during the transfer of consumer credit from the OFT, at which point the Treasury required the FCA to carry out a review of whether to keep the remaining provisions of the CCA or replace these with FCA rules.  The review will report back by April 2019, and is a hugely significant piece of work.

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Why the FCA must regulate insolvency practitioners and lead generators

shutterstock_355590383There has been much discussion in the world of credit and debt about what the debt advice landscape will look like after the FCA authorisation process is completed.  It is possible that many fee-charging debt management companies will be permanently removed from the market.  This is to be welcomed if future consumer detriment is prevented as a result.

However, we are concerned that there is a very real chance that a new regulatory gap in the market is opening up instead.

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No enforced changes – some thoughts on the Lord Justice Briggs review

shutterstock_158288861In the next few weeks we should see the final report of the Ministry of Justice’s Civil Courts Structure Review, chaired by Lord Justice Briggs.

Here at the Trust we have been engaged with the Review throughout the consultation process, and more specifically, highlighting our concerns over the prospect of unifying County Court and High Court enforcement processes.

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Advisers need practical support to help clients in vulnerable circumstances

Chloes blog cropAnyone who has worked on the debt advice front line knows that supporting individuals in vulnerable circumstances can be a huge challenge. Many are trying to cope with difficult situations and limited resources. Changes in employment status, health issues and other life events can suddenly put someone in a vulnerable situation, either temporarily or for a longer duration.

They might be distressed, worried or finding it hard to cope – and at the point of seeking advice, receiving the right support, sensitive to their situation is crucial.

At National Debtline, clients have told us that they need advisers to be “patient, understanding, knowledgeable and reassuring”, to be able to “[feel] comfortable talking about a difficult problem.”  As one couple our advisers recently helped put it, “We are extremely anxious, very exhausted and emotional. Being able to speak to someone who understands and gives clear advice is a godsend.”

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Useful new evidence on the link between debt and mental health

Money on your mindToday sees the launch of the Money and Mental Health Policy Institute’s new report – Money on your Mind – revealing the relationship between financial difficulties and mental health problems.

Money and Mental Health has had a busy first few months since it was launched by MoneySavingExpert.com’s Martin Lewis, and its director Polly Mackenzie and her team have put together an excellent first report that throws a welcome spotlight on this crucial issue.

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Thoughts on this year’s IMA conference

IMA Conference 2016The Trust’s Head of Learning Development, Lyndsey Humphries, shares her reflections on this year’s Institute of Money Advisers’ (IMA) annual conference in Manchester.

This year’s Institute of Money Advisers conference – my first – was an excellent mix of workshops and sessions which provided useful insight on some of the issues facing our sector.  In this blog I’ve collected some quick thoughts on various aspects of the two days.

Tying them all together is the sheer scale of the changes impacting both the sector and the people that we exist to help.  The impact of FCA regulation, a renewed focus on financial capability and for many of our clients, the enormous implications of the Universal Credit roll-out, all add up to the need for all advisers and agencies to keep up to date as the landscape changes around us.

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12 steps for advice agencies on vulnerability

Colin Trend is an independent consultant and an approved subject matter expert and instructor for the Money Advice Trust’s ‘mental health’ and ‘vulnerability’ training programmes. With Chris Fitch, he co-authored the Trust’s new vulnerability guidance for advice agencies, launched by the charity with the backing of a range of organisations across the advice sector in June 2016.

Vulnerability front cover 800 550In “Vulnerability: a guide for advice agencies, 12 steps for treating clients in vulnerable situations fairly”, Chris Fitch and I ask 12 central questions that advice agencies should reflect on in terms of their approach to vulnerability and supporting clients through their over-indebtedness options.  Launched by the Money Advice Trust with the backing of a range of organisations in the sector this month, we hope it will prove useful to agencies at a time when vulnerability has never been higher up the agenda. Read more