Last week, we at the Money Advice Service published a report setting out a new perspective on the value of debt advice.
‘The Economic Impact of Debt Advice’ provides robust evidence that in financial terms debt advice benefits the UK economy by up to £960million a year.
And we used extremely conservative assumptions – relying on data from only four of twelve areas where there is plausible impact. This means our level of confidence in these figure is high and it is extremely likely that there are even greater financial, let alone personal, benefits being realised.
We estimate (generously rather than conservatively in this case!) that between £150m and £200m is invested annually in debt advice so our view is that the benefits we’ve identified represent a genuinely impressive return on investment.
The context for this, of course, is that only one in five over-indebted people are seeking advice – our analysis suggests that were we to increase this number then the level of benefit we would expect would rise in proportion.
I am delighted that The Money Advice Trust is supporting Take Five to Stop Fraud, a national awareness campaign on financial fraud and scams, bringing together the financial sector and the UK Government. Scams are becoming more sophisticated and criminals can catch out even the savviest consumers. By working together with Take Five, The Money Advice Trust, creditors and debt advice charities can help consumers confidently challenge fraudsters.
From 22-26 January Take Five to Stop Fraud Week is taking place to raise awareness. And you can play your part too. We’d love you to ‘take five to tell five’. During the Week we’d like everyone to spend five minutes to tell five people – your friends, family, neighbours – about how they can protect themselves from fraud and scams. That way we can spread the message far and wide and make sure we’re all confidently challenging the criminals who would like to part us from our money. Thank you for your support and remember – ‘My money? My info? I don’t think so’.
As a Senior Fraud Prevention Officer in the Dedicated Card and Payment Crime Unit, I have seen first-hand the financial and emotional cost to victims of fraud. No one is too smart to be scammed.
Hardly a day goes by without an announcement or news story about energy. Much of this attention tends to focus on households. It is far rarer to hear about energy in the context of small businesses and the challenges they may face. And yet for many small businesses gas and electricity are significant running costs. Falling into arrears on an energy bill is not only a difficult experience in itself but, if unresolved, can result in a business closing down and ceasing to trade.
At Business Debtline we advised more than 30,000 small business owners in 2017. A considerable proportion of these had energy arrears. From what our advisers hear on a daily basis, we recognise the broad issues many small businesses face in relation to energy. We have worked hard to engage the energy sector and to build good relationships with many suppliers and the trade association, Energy UK.
However, we felt insight was needed to gain a better understanding of this area. To inform our work we commissioned research from the Personal Finance Research Centre at the University of Bristol to explore in greater detail the impact of energy debt on the lives of those people who have contacted Business Debtline.
Director of external affairs Jane Tully blogs on the Trust’s response to the Treasury’s call for evidence on breathing space and statutory debt repayment plans.
This week we turned in our submission to the Treasury’s call for evidence on breathing space – a subject our policy manager Meg van Rooyen has written about on this blog previously, having been closely involved in developing this idea with colleagues in the advice sector over the last few years.
As an idea, breathing space has been a long time coming, and we have been pleased to engage with the Treasury over the last few months as they continue to develop the scheme. Here is a quick tour of some of the main points we have made.
Two schemes, not one
While the two elements that the Treasury are consulting on – breathing space and statutory debt repayment plans – are closely interlinked, it is important that we consider the effectiveness of each in isolation, and that the two elements are not seen as ‘one scheme’.
In this guest post for Thoughts at the Trust, Monzo’s head of financial difficulties, Stuart McFadden, shares his thoughts on designing products and services with debt problems – and vulnerability – in mind.
Debt and mental health go hand in hand. Research shows that people with mental health problems are much more likely to experience problem debt. It’s a vicious circle with each attributing to or exacerbating the other. I’ve given advice and listened to hundreds of debt advice calls, and – it’s clear that getting the right advice can take away a huge burden. Getting the right advice is often the first step towards improving your finances, and your mental wellbeing.
The trouble is that the help and advice tends to come only after the debt problem has become a serious one. Too often the trigger to getting advice isn’t because a problem is on the horizon, but because things have come to a head. It could be because a bailiff is knocking at the door, eviction is threatened or simply because nobody will lend to you anymore, so you can’t continue to ‘rob Peter to pay Paul’.
This is why it is essential that the industry designs products that help people avoid problem debt, and equips people to tackle debt problems when they do arise – and always with the needs of customers in vulnerable circumstances firmly in mind.
Jane Tully, the Trust’s director of external affairs, reflects on a busy year for the debt advice sector.
It has been quite some year for those of us working in debt advice – with debt hitting the headlines in a way not seen since the financial crisis, and services under pressure. If you’ve found it hard to keep track (like the rest of us!), here’s a round-up some of the key developments over the past 12 months….
1. Personal debt is back in the news…
Mark Carney started the year by cautioning that the Bank of England would be ‘keeping a close eye on consumer spending’. By July, officials were insisting that banks hold more capital and warning of a ‘spiral of complacency’. Come September lending was positively ‘frothy’(!), with consumer credit noted as a ‘pocket of risk’. A quick glance at the trend-lines and it’s easy to spot the concern – rising inflation, sluggish wage growth despite record low unemployment and soaring consumer credit – now more than £204 billlion – were making people nervous. Then came the first interest rates rise for 10 years. While it wasn’t a surprise, it will have challenged people on tight margins.
2. …and in Westminster…
Meanwhile, over in Westminster, THAT election and the ensuing fallout brought ample opportunity to politicise debt. First, the newly appointed Treasury Select Committee got in on the act by announcing a review into Household Debt. Then the emboldened opposition – spearheaded by John McDonnell – announced a radical policy on capping credit card debts. Along the way there were a few skirmishes in the House of Lords on breathing space – and as if that isn’t enough, there’s a possible National Audit Office (NAO) review and Public Accounts Committee scrutiny – in the offing. The House of Lords Financial Exclusion Committee moved on this important agenda, too, securing a new Financial Inclusion Policy Forum from the government in response. We’ll be watching to see what action flows from this.
In this guest post, Christopher Woolard, Executive Director for Strategy and Competition at the Financial Conduct Authority (FCA) explains the work the regulator is doing to protect customers.
Financial services and products are important for all of us. They help provide the money we need to buy or furnish our homes, invest and save for our future, and protect our families and belongings in case things go wrong.
However, we know that there will be times in people’s lives when they find it particularly hard to deal with their finances. Losing a job, the death of a loved one or health problems can all make people vulnerable. Vulnerability is not always a permanent state and these types of issues can affect people at any time. Some people may also find it more difficult to navigate the market and find the right product for them.
Our Mission, published in April, sets out a framework which underpins our decision-making. It states that our Mission is ultimately to serve the public interest and explains that we will act where we can add the greatest value and have the greatest impact. In particular, we focus on harm and how to prevent it.
In this guest post, Joel Crawley, Project Coordinator for the WhatsApp Money Advice and Casework Development Project at Citizens Advice Manchester, gives an overview of the project, one of three funded by the Trust’s Innovation Grants programme for 2017/18.
The remarkable pace of change in technology and communications is a challenge for just about every industry and the advice sector is no different. As the way in which we consume information and communicate with each other changes, the importance adapting and developing new ways of delivering advice is becoming an increasingly relevant issue.
These changes bring with them a host of new challenges but they also bring new opportunities for us to reach and help more clients. At Citizens Advice Manchester we now offer services using Skype, Webchat, and Facebook Messenger. As an immensely popular social media platform with more than one billion global users, we felt WhatsApp was a natural next step.
The Trust’s Vulnerability Lead Chris Fitch explores concerns over the Financial Conduct Authority’s (FCA’s) proposed new definition of vulnerability.
Yesterday I was pleased to speak at the Financial Conduct Authority’s event on their Consumer Approach paper – and doubly pleased to be invited to speak twice, at two extremely useful breakout sessions on the regulator’s plans for vulnerable consumers.
In 10 years working with vulnerable consumers, I have never known a greater focus from the financial services industry on this issue. My latest research, co-authored with Colin Trend and Jamie Evans, showed the scale of improvement on mental health, in particular. The Money Advice Trust has now trained more than 11,000 staff in over 160 organisations – and demand for training on this broader range of circumstances, such as serious illness and addictions, is increasing all the time.
Relationship charity Relate have published research on the link between debt and relationships. The Trust’s chief executive, Joanna Elson OBE, examines the findings from the research and its recommendations.
We know, from what our advisers at National Debtline deal with day in and day out, the damage that problem debt can have on families and relationships. We also know that relationship breakdown can be a big cause of problem debt itself. Last year, it was the fourth most common reason people we helped gave as the cause for them being in debt – accounting for 15 percent of callers to National Debtline.
The valuable research that Relate has published today examines the link between debt and relationships and the impact both have on each other. The research draws upon a wide variety of information including surveys of people in debt, feedback from debt advisers, focus groups and national polling.
We were pleased to be able to support this work here at the Money Advice Trust. More than 200 debt advisers trained through our Wiseradviser programme were surveyed as part of the research and I was lucky enough to speak at a panel discussion on the subject during the Party Conference season.