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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