Select Committee on Treasury Written Evidence


Memorandum submitted by Leonard Cheshire

INTRODUCTION AND SUMMARY

  Leonard Cheshire (www.leonard-cheshire.org) is the UK's leading voluntary sector provider of support services for disabled people. The charity exists to change attitudes to disability and to serve disabled people around the world. It has been supporting disabled people for almost 60 years and is active in 55 countries. The charity supports almost 20,000 disabled people in the UK.

  The organisation operates globally in three core areas: pioneering new services and projects that reflect the lifestages and lifestyles of disabled people; campaigning to change attitudes in society and for the rights of disabled people; and providing UK operations and activities offering a wide spectrum of services.

  Leonard Cheshire welcomes the opportunity to present evidence to the Committee having recently published a report, In the balance, examining disabled people's experiences of debt. The report comprised in-depth interviews with disabled people experiencing over-indebtedness along with a larger scale survey. Over 50% of interviewees had an annual household income of under £10,000 and many owed significant sums of money: the average household debt for each participant was £8,750 (excluding mortgage arrears) and 37% owed over £10,000. Many participants reported feeling financially vulnerable and said that they lacked sufficient knowledge about financial services.

  Leonard Cheshire believes that ensuring disabled people's financial inclusion requires a multi-pronged approach to; tackle disabled people's poverty, both in work and out; to ensure that disabled people are able to access financial services on the same basis as non-disabled people; and to build financial capability through a programme of education.

1.  ACCESS TO BANKING SERVICES

  1.1  Leonard Cheshire works with many thousands of people with physical impairments for whom financial inclusion is as much a matter of physical accessibility as it is having the confidence and knowledge to make best use of financial services and products. Despite the introduction of Part III of the Disability Discrimination Act (DDA) 1995, covering physical access to goods and services, disabled people with mobility impairments often experience problems with physical access to financial service providers. Given that disabled people are less likely to have access to the Internet, physical access to financial services is particularly important and lack of such access can present a real barrier to disabled people's inclusion. For example, a Leonard Cheshire service user who is a wheelchair user wanted to open a basic bank account. She visited her local bank but found it to be inaccessible. Bank staff came out of the branch to deal with her inquiry and suggested that as the premises were inaccessible they could conduct her banking on the pavement. Understandably she felt this to be an unacceptable solution and felt vulnerable at the suggestion that she conduct her banking in the view of passers by. This is just one example of how physical inaccessibility can instantly prohibit choice, engagement and ultimately wider financial inclusion.

  1.2  In 2004 a formal investigation by the Disability Rights Commission found that eight out of ten websites failed to meet minimum standards for disabled web access[179]. Disabled people with a range of impairments were set a number of tasks to complete on the Internet including opening a bank account, booking a holiday and buying theatre tickets. Blind users were unable to complete 47% of tasks and 24% of all tasks were unable to be completed as a result of inaccessibility.

  1.3  Leonard Cheshire's In the balance report found that many creditors were not sufficiently aware of the scope of their duty under the DDA to make a reasonable adjustment to the delivery of policies, practices and procedures in order that a service is accessible to a disabled person. For example, one participant reported that even when she explained her requirements to her creditor, the company was unwilling to make a reasonable adjustment to accommodate her needs:

    "I have a problem where my jaw dislocates and I can't speak—yet although I've explained this to my credit card company they won't give me a fax number which would allow me to get in touch with them when I'm experiencing this and can't talk."

  1.4  Leonard Cheshire believes that all creditor trade associations should adopt guidance on dealing with disabled customers in financial difficulties. It should be modelled on guidance to the Banking Code and should contain the following directives to ensure that individuals are treated fairly and sympathetically:

Lenders should:

    —  Provide training for all collections staff on disability awareness.

    —  Ensure that those disabled people whose debt problems are likely to be long-term are identified at an early stage in the collection process and are dealt with by specialised units who can provide an individual service.

    —  Be willing to write off debts in the very small number of cases where a customer's change in circumstances as a result of the onset of disability or health problems means that his/her financial circumstances are unlikely to improve even in the long-term.

2.  ACCESS TO AFFORDABLE CREDIT

  2.1  Leonard Cheshire's research into disabled people's experiences of debt found little evidence of people living on low incomes who were able only to access sub-prime sources of credit. Despite the fact that 53% of participants had annual household incomes of under £10,000 no participant reported a specific problem with accessing mainstream credit.

  2.2  Many disabled people in Leonard Cheshire's research were forced to use credit in order to survive week-to-week. Nine out of ten reported running out of money on a regular basis and many of this group were using credit to pay for essential items such as food and fuel. 38% of participants reported that they were dealing with their debts by taking on further borrowing.

  2.3  There remains an urgent need to address reform of the Social Fund. Awareness of the Fund remains low and Leonard Cheshire's research has found that even when disabled people are aware of the Fund's existence, many find it inflexible and chose instead another source from which to borrow. Our In the balance report found that whilst the majority of participants met the Fund's eligibility criteria, only 9% were currently repaying a Social Fund loan. The experience below was echoed by a number of participants:

    "The carpet on my bedroom floor was worn out, and then my wardrobe fell apart. I applied to the Social Fund for a grant, but they weren't much help—they'd only lend me about half what I needed and it wouldn't have been enough."

  2.4  Others, either because they were unaware of its existence or because it didn't meet their requirements, didn't consider borrowing from the Fund:

    "I can just about live week to week [on benefits] but I can't ever find the money to replace big things. That's why I took the credit card—to replace my cooker."

  In contrast to the low take-up of Social Fund loans 48% of participants had debts to catalogue companies, which, many individuals felt offered a greater degree of flexibility with their small, weekly repayments over a long period of time.

  2.5  Leonard Cheshire believes that for the Social Fund to be more useful to disabled people the eligibility criteria need to be extended beyond those in receipt of Income Support. Specifically, eligibility should be extended to those receiving maximum Child Tax Credit or Working Tax Credit as well as to individual's whose sole income is Incapacity Benefit or contribution-based Job Seeker's Allowance. The Fund also needs to be better publicised in order that those eligible are aware of its existence.

3.  FINANCIAL EDUCATION AND ACCESS TO FINANCIAL ADVICE

  3.1  Leonard Cheshire's In the Balance report asked a series of questions relating to the provision of financial advice for those experiencing problem debt. On the whole it found that many people had sought advice, usually from an independent advice bureau, and had also often spoken to their bank about their debt.

  3.2  A number of respondents did feel, however, that they were not properly prepared to deal with more complex financial situations and suggested that a lack of financial capability had been a primary factor in leading to their debt problems. For example, one participant, a wheelchair user who has chronic rheumatism and has never been in paid employment, felt strongly that she did not properly understand the terms and conditions when she signed up for two credit cards and, in particular, she was confused about the rate of interest levied:

    "I have to take my responsibility but I don't really understand the small print. I was paying the minimum payment every month and all the time the interest was adding up and I wasn't even touching the debt….I had a couple of insurance policies and I ended up having to surrender them before they were due because I felt I had a noose round my neck with the debt."

  3.3  Many respondents felt that financial service providers did not fully understand disability and the implications that an individual's impairment might have on their financial situation. This lack of confidence meant that many were reticent to approach a financial institution with an issue relating to their impairment. To tackle this reticence, Leonard Cheshire believes there is a need for a combined approach of developing programmes to enhance the financial education available to disabled people, and a concurrent programme to improve disability awareness within the industry.

  3.4  Some work has already been undertaken in this area—the Finance and Leasing Association and Citizens Advice have produced guidance for lenders about working with people with a mental health condition. Such initiatives need to be expanded to include a broader range of financial institutions and to cover work with disabled people in general. Disability Equality Training across the financial services industry needs to be firmly embedded in all staff training programmes.

  3.5  Leonard Cheshire is particularly concerned about those individuals who develop problem debt as a result of acquiring an impairment, or an existing impairment worsening significantly. In these cases our research found that financial institutions were often ill-equipped for the sudden changes in circumstances and income that this could bring about. In such situations the ability of staff to both offer correct advice and to work through often complex issues surrounding an impairment is essential. The findings from the report led us to conclude that given the complexities of the issues involved this might best be achieved by having dedicated units within large financial institutions to deal with such situations. If financial advice is to be accessible and financial education successful then this is a route that should be considered.

  3.6  With regard to longer-term financial education Leonard Cheshire would recommend that opportunities to link financial education and advice into the provision of social care are considered. Leonard Cheshire's Westminster day service, for example, has a relationship with the local Citizen's Advice Bureau whereby Bureau staff have a dedicated office at the service and visit regularly to provide advice to any service user who requires it. Where possible Local Authorities should be encouraged to investigate the possibility of independent financial advice services being made available, or indeed based, within social care services. Such a system could help the provision of accessible advice for disabled people.

  3.7  The accessibility of advice and financial education remains an issue. Leonard Cheshire's research uncovered a number of occasions in which advice was not made accessible to people whose impairment prevented them from acquiring advice through the usual channels. This included physical access provisions at advice centres and an unwillingness to change practices and procedures to make financial advice more accessible. Whilst the provision of financial advice and financial education through a social care environment might help to address some of these issues, the ultimate solution must be to ensure that financial institutions and financial advice providers are aware of, and fully comply with, their obligations under the Disability Discrimination Act.

4.  INCENTIVES AND BARRIERS TO SAVING FOR PEOPLE ON BELOW AVERAGE INCOMES

  4.1  The links between disability and poverty are well established. The latest Households Below Average Income report, for example, suggests that one third of individuals living in poverty live in families with one or more disabled adults. Leonard Cheshire's In the Balance report has also helped to demonstrate the further links that can exist between disability and acquiring problem debt. In addition the fact that disabled people are seven times more likely than non-disabled people to be out of work and relying on benefits can add further barriers to saving.

  4.2  Understanding these barriers requires an understanding of the disincentives to save that can exist both within the benefit system and the operation of social care charging. For many of those interviewed for Leonard Cheshire's research, benefit provision was not even sufficient to cover basic costs of living, and certainly not enough to allow for saving. Many reported that they were cutting back on essentials such as food, heating or equipment to help manage their impairment. In these circumstances it is clear that saving becomes impossible, and existing assets can be quickly eroded.

  4.3  This can be a particular issue for those that have recently acquired an impairment or have experienced a severe worsening of an existing impairment. Costs of managing a disability can vary, and significant increases at one point are seldom matched by a concomitant increase in benefit payments, this uncertainty can act as a barrier to maintaining assets.

  4.4  A review of the level of benefit payments, in particular Disability Living Allowance, to determine how adequately they cover the basic costs of managing an impairment is required. From this base it should then be possible to also examine how the benefits system could be improved to allow those that rely on benefits to also work towards savings and assets.

  4.5  Another barrier to saving within the benefit system can come from poor decision making. A number of respondents in Leonard Cheshire's research commented that their debt problems had first developed when an incorrect decision with regard to their benefit payments had radically lowered their income. Although decisions were often overturned the financial instability that resulted could cause serious debt problems and impose an immediate barrier on saving. Decision making across the benefits system needs to be significantly improved if this situation is to be avoided.

  4.6  A similar instability can arise if rules around working whilst receiving benefits are unclear, or incorrectly interpreted. Appropriate safety nets are required within the system to ensure that those that attempt to return to, or enter work are not penalised if they find the move unsuccessful. Similarly, attempts to work towards a return to employment should not be inhibited by ensuring that permitted work rules are flexible enough throughout the welfare system.

  4.7  Charging policies for the provision of social care can also have a significant impact on the ability to save. If a person enters residential care, for example, and a vast percentage of earnings or benefits are used to pay for the provision of care then the ability to also develop savings can be severely inhibited. This must be considered carefully in the development and application of charging policies.

5.  THE ROLE OF THE GOVERNMENT, THE FINANCIAL SERVICES AUTHORITY AND OTHER BODIES AND ORGANISATIONS IN PROMOTING FINANCIAL INCLUSION

  5.1  The DTI's Financial Inclusion Fund has recently allocated £45 million to support a significant increase in the capacity of free face-to-face debt advice. The Fund is targeting these resources at geographical areas and social groups characterised by high financial exclusion. Although supportive of this overall approach, Leonard Cheshire thinks it important that the fund also focuses on the concentration of financial exclusion that can exist among certain groups within the population. The particular obstacles that contribute to disabled people being consistently amongst the poorest in society, and consistently being financially excluded need to be addressed directly in any investigations into financial inclusion. In addition, the Fund should support initiatives which provide home-based advice.

  5.2  Leonard Cheshire believes that the credit industry needs to improve the way in which it responds to changes in borrowers' circumstances. Individuals faced with a sudden change in circumstances, such as the onset of disability following an accident, too often find the response of their creditors to be inadequate or unhelpful. Whilst creditors are becoming increasing alert to the problems of can't pay borrowers and to the need to be sympathetic to this group, forbearance procedures often continue to be ad hoc or limited. Lenders need to become more transparent in outlining to borrowers what they can expect if they fall into difficulty.

6.  THE BENEFITS OF FINANCIAL INCLUSION AND THE EXTENT TO WHICH FINANCIAL INCLUSION MEASURES CAN CONTRIBUTE TO COMBATING POVERTY AND REDUCING BARRIERS TO EMPLOYMENT

  6.1  Despite mounting concern about the UK's levels of consumer debt, there has been little research into disabled people's experiences of over-indebtedness, or the extent to which disabled people experience financial exclusion. Given that disabled people are more likely to be out of work and claiming benefits than non-disabled people, and also often face considerable extra costs directly related to their disability, Leonard Cheshire would suggest that there are particular issues surrounding disability and financial inclusion that warrant specific and direct attention in their own right. Specifically, we would be interested to see research into ways in which asset-building programmes might benefit disabled people, both in work and out.

  6.2  Alongside tackling poverty and ensuring that the credit industry is more responsive to disabled consumers, there is a need also to ensure that individuals can respond effectively to financial difficulties they may face. It is essential both that disabled people feel confident about their understanding of financial services and products and that all disabled people are able to access free, independent debt advice when required.

  6.3  The interaction of living with an impairment, low income, poorer educational attainment and a built environment which is not designed with the needs of disabled people in mind can generate systematic social exclusion which itself can give rise to financial exclusion. A strategy, which seeks to increase disabled people's financial capability through a range of mechanisms, would provide a useful addition to policies which aim to alleviate disabled people's poverty, promote employment and tackle debt.

January 2006



179   Disability Rights Commission, The Web: Access and Inclusion for Disabled People, TSO 2004. Back


 
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