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STEPCHANGE WARNS OF LONG TERM DEBT CRISIS WITHOUT URGENT INTERVENTION

Published on:November 12, 2020Author:Darcey Budsworth

SURVEY FINDINGS

StepChange Debt Charity have commissioned a report by YouGov Plc which was undertaken in September 20 and covered a sample size of 3,297 adults. The findings paint a bleak picture:-

  • Household debt of £10.3BN up from £4.3BN in May
  • 7.1 million people have fallen behind on essentials or borrowed to make ends meet
  • 25 -34 year olds plus low income households most at risk
  • 24% of individuals who have applied for Universal Credit since March are struggling with severe debt problems

ACTION NEEDED

StepChange are calling on the government to extend and strengthen the support for those most vulnerable and experiencing financial difficulties. They suggest the following:-

  • Councils to put in place affordable repayment plans for those experiencing difficulty without resorting to enforcement action
  • Suspend Bailiff visits for the duration of the national lockdown and set up a new binding pre-enforcement protocol to identify and protect financially and other vulnerable groups from council tax enforcement action (Bailiff action resumed in August 20)
  • Provide better protections from eviction where rent arrears have been caused by Covid
  • Enhancing Support for Mortgage Interest Scheme to amend the very strict eligibility criteria
  • Ofgem require utility suppliers to put customers in arrears onto realistic payment plans
  • FCA to ensure that for those who have used credit cards to make ends meet, lenders implement strategies to prevent this debt from developing into expensive and persistent debt.
  • Maintain the £1,000 uplift to Universal Credit/working tax credit from April 21
  • Remove or increase benefit caps including LHA caps and 2 child limit undermine’s the benefit of Universal Credit
  • Extend repayment period to 24 months of overpaid benefits and lower cap on deductions to 25% of the standard allowance
  • Ensure local authorities have sufficient funding to provide crises support to those at risk of hardship

The government has pledged in May that a further £65M would be unlocked from dormant accounts to affordable credit providers. StepChange adds that whilst this is welcome is not adequate and they urge the government to consider direct aid in the form a no interest loan scheme which could be recovered through PAYE and the wider tax system.

Finally, StepChange report that only a fraction of people that they have recommended debt solutions to actually took steps to propose these solutions. The solutions include Individual Voluntary Arrangements, Debt Relief Orders and Bankruptcy. The reasons were the stigma and the intrusive nature of the process. Particularly for those who have ended in difficulty as a result of Covid restrictions, StepChange argue that proposing a debt solution may not only be unattractive but also grossly unfair.

They call upon the government to begin consulting with stakeholders to develop alternative routes out of unmanageable debt.

The Money Advice Trust are calling on the government to carry out an urgent review of debt options for those in financial difficulty including:-

  • Waiving fees for Debt Relief Orders (DROs) and Bankruptcy for those on income-related benefits, and reducing fees for other applicants
  • Making further amendments to the Individual Voluntary Arrangement (IVA) Protocol to help people in existing IVAs continue with their existing solutions
  • Reviewing debt and asset limits across statutory insolvency solutions
  • Considering the role of ‘low and grow’ Debt Management Plans (DMPs)

LOW AND GROW DEBT MANAGEMENT PLANS

Debt Management Plans are informal payment plans managed by FCA regulated DMP Providers. The plan is based on the individual making affordable monthly payments to the DMP provider who manages the plan, makes payments to creditors and liaises with creditors to freeze interest and charges.

The DMP provider needs to ensure that the DMP is appropriate and demonstrate why other debt solutions including IVA, DRO or Bankruptcy may not be more relevant.

A low and grow DMP would allow the payments to start lower and then increase as the individuals affordability improves. At present DMP providers are reluctant to take on DMP’s which demonstrate that repayment would take longer than 10 years unless the individual’s circumstances are likely to change.

Who can you talk to about debt Issues?

Knowing you owe money that you cannot afford to repay can be very scary. The problem will not go away and will only get worse if you ignore the problem. Don’t panic, it’s important that you look after yourself and keep calm.

The Money and Pension Service “MAPS” have secured £38M to fund extra debt advice. This includes £7.5M which has been advanced to StepChange, Christians Against Poverty and Payplan. A further funding stream has been targeted at creating 500 new jobs for debt advisers and this is in both charities and commercial providers.

MAPS have a range of initiatives aimed at getting people to talk about debt and money problems. This includes Talk Money week – 9 – 13 November which features heavily on social media. This links through to Money Advice Service who will help signpost individuals to relevant organizations to get help. They can be contacted via:-

Webchat between the hours of 8am and 6pm  – https://www.moneyadviceservice.org.uk/en#js-chat

Whatsapp – 07701 342744 

Telephone – 0800 138 7777

The Debt Advisor has been in existence for 21 years and we have gained a reputation as the “go to” practice for debt advice and debt solutions and most importantly, we are authorised and regulated by The Financial Conduct Authority “FCA”.

The FCA register  will let you know if the organisation has permission to provide debt advice and are able to help with debt adjusting which is the ability to negotiate with your creditors.

Get Debt Advice Today

For full debt advice and whether any of our available debt solutions would be the best option for you to get out of debt, you can speak to one of our advisors directly on 0800 085 1825 or arrange a callback.

The Debt Advisor Ltd is regulated by the Financial Conduct Authority. This means we are able to offer debt advice and deliver both formal and informal solutions. All debt solutions need to be carefully considered and you must take independent debt advice. We hope that the information and debt advice on this site including Frequently Asked Questions, will help inform you.