In a guest post for Thoughts at the Trust, Councillor Max Schmid explains why Hammersmith and Fulham Council has this week announced an end to the use of bailiffs for council tax arrears.
Along with other public bodies, Hammersmith and Fulham Council has had to deal with unprecedented cuts to its funding from central government. The administration has been determined that these cuts from government do not result in worse services for residents. That means that collection of income is more important now than it has ever been. But not at any price.
We know that poor collection practices (especially in an unregulated sector) cause great distress and harm. There is clear evidence that the use of bailiffs causes increased levels of stress and anxiety and puts families under strain. There are significant correlations between local authority use of bailiffs and incidence of families in temporary accommodation (arising from homelessness).
All these effects result in increased demands on critical public services from mental health, to social services to housing to the NHS. These all bring significantly increased cost to the public sector. Looking through a wider value for money lens, then, using bailiffs can cause great damage. Perhaps more importantly, it is not the purpose of local authorities to cause its residents this kind of harm. Quite the opposite, indeed.
In a guest post on Thoughts at the Trust for Financial Capability Week, we asked Helen Li, Researcher at Behaviour Change to explain what behavioural theory can tell us about people and money.
It all began when Richard Thaler, Dan Ariely and other psychologists began to explore why traditional economic theories consistently failed to explain why people weren’t doing what they were expected to do when it comes to money. Financial products and systems are often built around traditional economic theories, so they tend to operate on the assumption that people make rational decisions about their money.
However, the reality is very much the opposite. People aren’t rational with their money. What people actually do, is often influenced by all kinds of cognitive biases and social and emotional factors. This wasn’t just the case for money – generally there seemed to be a significant gap between what we expect people to do and what they actually do. So Thaler and the others proposed another way of looking at people’s behaviour. This became known as behavioural economics, or broadly speaking, behavioural theory.
For the launch of Financial Capability Week, Claire King, the Trust’s insight and innovation manager, explores the link between debt advice and financial capability.
As Financial Capability Week gets under way, it is a good moment for the debt advice sector to reflect on whether it is doing enough to support the crucial financial capability agenda.
The role of debt advice in increasing financial capability is key, and we make sure that we include a range of measures in our surveys of service users which provide us with information on how our advice really makes a difference to people’s lives.
This is reflected in our organisational Theory of Change model which emphasises the critical nature of outcome measures, including financial capability, rather than just monitoring levels of satisfaction amongst the people we help (important though this is).
One key performance indicator we use is the ability to manage finances longer term. In our most recent annual Impact Survey (asked of people who last used our service over 12 months ago) 89% of respondents agreed that they feel confident that “they are managing their money more wisely now” and 87% that “they feel more in control of their finances”.
The Trust’s policy manager Meg van Rooyen considers the FCA’s recent consultation on creditworthiness, and the urgent need for public policy solution on affordable credit.
Today sees the close of the FCA’s consultation on its rules for assessing creditworthiness in consumer credit lending.
Here at the Trust, we have responded positively to the approach the FCA is taking in many ways. For instance, we support the regulator’s approach to clarifying the meaning of affordability and to make the definition explicit within the rules, and it is also welcome that the FCA is to make it clear within the rules that creditworthiness includes both the risk to the lender and affordability for the borrower.
There is a big dilemma here, however, for anyone who is concerned as we are about the huge problem of financial exclusion in the UK. There needs to be a balance between sensible requirements on lenders to assess affordability and the risk that more people on lower incomes will lose access to credit.
The Trust’s director of external affairs Jane Tully has a first look at the Treasury’s call for evidence on a new ‘breathing space’ scheme for people in debt.
It was a busy day in the world of debt advice yesterday – with a long-awaited Treasury announcement on ‘breathing space’ and the Financial Guidance & Claims Bill returning to the Lords for its Report stage.
Progress on ‘breathing space’ follows pressure form Peers on the government to deliver its 2017 manifesto commitment to implement such a scheme after a long-running campaign from StepChange Debt Charity and others.
The announcement itself is a lengthy call for evidence – with the proposal on the table offering individuals up to six weeks ‘breathing space’ from further interest, charges and enforcement action on their debts, if they seek debt advice, and the introduction of statutory debt management plans. It is, in effect, an extension of Scotland’s Debt Arrangement Scheme (DAS), rather than the ‘extended’, up to 12 month, breathing space that many in the sector have called for.
The Money Advice Trust and Energy UK launched a new guide for energy suppliers on vulnerability and mental health. In this guest post, Audrey Gallacher, Director of Retail Energy Supply at Energy UK, shares her thoughts on the guide and why it is needed.
The energy market is changing at a rapid pace and looks very different to what it did just two years ago. There are more suppliers in the market and more people switching as the market grows more competitive in response to consumer engagement.
Despite this, companies must remain one step ahead in ensuring they’re able to address the needs of all customers. Mental health matters and any one of us, at any time, could have to face the challenges brought on by poor mental health.
That is why energy companies need to ensure they have the right systems, processes and staff training in place to help customers who may suffer poor mental health and experience the challenges that this can bring.
As the Money Advice Trust launches its new Wiseradviser Behavioural Theory e-learning and the Money Advice Service publishes new research on this important subject, Roni Marsh, head of the debt team at South West London Law Centres (SWLLC), shares her learning about behaviour science and its application to advice.
One of the biggest challenges we at SWLLC face, and one I’m sure most free service providers face, is getting people to turn up to their appointments. We’re really busy and missed appointments have a direct impact on other people by increasing their waiting time, as well as having financial implications for us.
How behavioural science helped:
Traditional communications – posters, leaflets, emails, phone calls – are our main method of engaging over-indebted people. But because we are a relatively small organisation we have to produce everything ourselves, and because we’re so busy this means we often just stick with what we’ve done before. This is why working with Ogilvy Change and the Money Advice
Service has been really helpful, as well as interesting.
By applying a behavioural approach to how we communicate with our clients we have reduced the number of missed appointments. We also had a great response from the clients who engaged during the project – they have really appreciated the changes we made.
The Trust’s Vulnerability Lead Chris Fitch, looks at the challenge of supporting customers with gambling, alcohol and substance addictions, and how the Trust’s new face-to-face training can help.
I have been talking to creditors about customers in vulnerable circumstances for the last 10 years – and the good news is that there has never been a greater focus on this agenda than there is now. The better news is that this focus is widening all the time.
As Joanna Elson argued on this blog in March, there was a time when vulnerability was synonymous with mental health, but there is ample evidence that this is changing, Creditors are increasingly looking at the full range other vulnerable circumstances – and gambling, alcohol and substance misuse is near the top of this list.
A quick dip into my latest research, co-authored with Colin Trend, shows why this is the case. More than one in four frontline creditor staff (27 percent) report they find it difficult to talk about addictions with customers – more than any other type of vulnerable situation. We found that staff are often confronted with little or no organisational policy to help them with this issue, and are particularly concerned over how customers will react.
That’s a problem – particularly when you consider that nearly one in ten frontline staff (8 percent) and more than one in four specialist staff (28 percent) encounter customers with an addiction ‘most days’ or ‘every day’.
As this week’s Bank of England figures show, credit card balances continuing to surge, the Trust’s policy manager Meg van Rooyen reviews the Financial Conduct Authority’s new proposals on persistent debt and early intervention.
The latest lending figures from the Bank of England, out this week, show credit card balances are continuing to grow by half a billion pounds each month. With consumer credit across the board surging by 10 per cent a year, here at the Trust we continue to be concerned that many households are leaving themselves exposed to financial difficulty if their circumstances change.
Persistent credit card debt is a key feature of the UK’s household debt problem, with the FCA finding 1.6 million people repeatedly paying only the minimum payments on their credit cards.
In April 2017, the Financial Conduct Authority (FCA) made a series of proposals to address the issue of persistent credit card debt, as part of its overall package of remedies from its credit card market study.
The Trust’s director of external affairs Jane Tully takes a look at the Financial Guidance and Claims Bill as it starts its journey through parliament.
After a rather lengthy process involving no less than three consultations, the government has finally settled on a plan for the future delivery of money, debt and pensions advice. Earlier this month the Financial Guidance and Claims Bill finally entered parliament, starting in the House of Lords, a clear sign that the Government expect the bill to pass without too much controversy.
What does the Bill cover?
The Bill provides the legislative framework for the technocratic sounding ‘single financial guidance body’ – a new Non-Departmental Public Body which, assuming the legislation is enacted, will be in place by mid-2018. This replaces the Money Advice Service, The Pension Advisory Service (TPAS) and PensionWise, and will centralise the government’s pensions, debt and money guidance offer for consumers.