A spotlight on young people, mobile phones and financial difficulty

Earlier this year the Money Borrowed YearsAdvice Trust launched Borrowed Years, our new campaign to raise awareness of free debt advice amongst 18 to 24 year olds – a group that we know is under-represented amongst the people that contact National Debtline and other agencies for advice.

So far the campaign has generated more than 160 items of media coverage, and its launch led to the busiest day to the National Debtline website in 2016 so far, including visits to our tips for 18 to 24 year olds.

In our first spotlight in August, we looked at young people’s experiences of credit, debt and borrowing – finding that 37% of 18 to 24 year olds are already in debt, while around half are regularly worrying about their personal finances. Our second spotlight focused on borrowing from family and friends and the vital ‘safety net’ that this provides for many under 25s.

Today we launch our third and final spotlight, looking at this age group’s experience with mobile phones – a near-necessity for all, and unfortunately, a source of financial difficulty for some.

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What might the Autumn Statement bring for JAMs?

shutterstock_258751613Tomorrow lunchtime the Chancellor, Philip Hammond, gives his first widely anticipated and heavily trailed Autumn Statement. Much has changed since the last major fiscal event, the Budget in March when George Osborne was still at the helm. For the new government, Wednesday will be a key opportunity to set out its stall in more concrete terms than we’ve heard over the past few months, and demonstrate that the focus on the domestic policy agenda hasn’t been lost of amidst the enormous task of implementing Brexit.

We’ve been taking a look at what’s expected to be announced in the context of the Trust’s work with people and small business owners in debt and financial difficulty and what else we’d like to see.

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Freedom at a cost? Challenges for the debt advice sector in the new pensions landscape

shutterstock_355590383The new pension freedoms which came in from April 2015 are proving to be quite a challenge in the debt advice world.  All those people over 55 with a defined contribution pension can now access their pension savings in various ways.  People can now take 25% of the pot as a one-off tax-free lump sum and choose how to invest the rest of the pension pot with no requirement to take out an annuity.  This poses the question, should we ever advise people to use their pension to pay back their debts?

The implications for debt advisers need to be given careful thought.  In the free debt advice sector, we are authorised by the FCA to offer debt advice to the public, usually under the limited permissions regime.  We are not generally authorised to provide financial advice about ‘retail investment products’ such as pensions.  We can provide generic guidance about pensions but cannot go any further.

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#stopthecharge for the debt and mental health doctor’s note

Rose ActonIn a guest post for the Trust’s blog, Rose Acton – Policy and Research Officer at The Money and Mental Health Policy Institute – shares and update on the new #stopthecharge campaign.

This month Money and Mental Health have launched a campaign to stop the charge for the debt and mental health doctor’s note, and we are delighted that Money Advice Trust, along with a number of other leading debt and mental health charities, have publicly backed the campaign.

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Bankruptcy mythbusting – new materials from the Insolvency Service

Insolvency Service bankruptcy header 600 300In a guest post for the Trust’s blog, Adriana Hawthorne, Publications/Content Manager at The Insolvency Service, shares an update on new materials on bankruptcy mythbusting.

I began learning about bankruptcy when I joined the Insolvency Service’s Online Debt Solutions (ODS) team. This team was working to design, create and launch the new online bankruptcy application.

One of the team’s main aims was to ensure that the new application was easy for individuals to use. To achieve this, we relied on regular user testing both with members of the public and with debt advisers.

Through this user testing, we came to realise how many misconceptions and fears still exist regarding bankruptcy. Individuals who took part in the research all self-identified as being in unmanageable debt, and yet many didn’t know anything about bankruptcy and were also nervous about getting debt advice.

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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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