Memorandum from AdviceUK (SW 14)
The contents of this briefing paper are based
on information received from the following AdviceUK (AUK) members:
— Bristol Debt Advice Centre (based in
Bristol, BDAC).
— Money Advice South West (based in Plymouth,
MASW).
— Community Money Advice (nationwide network
affiliated with AdviceUK, six members in the South West out of
nationwide membership of 75).
SUMMARY OF
KEY MESSAGES
— All AUK members contacted are reporting
an increase in the number of debt cases over the last 12 months.—
The rate of increase ranges from 33.9% to 300%.
— Client profile is changing, with more
redundant homeowners seeking advice.
— However, the majority of clients seen
by AUK members are from lower income, financially excluded households.
— One member reports that at least 89%
tick two or more of BERR's financial exclusion indicators and
another reports that 97% tick three or more.
— There is evidence that the recession
has resulted in more aggressive debt collection practices and
that members are finding it more difficult to negotiate with creditors.
— Debt problems are becoming more complex.
— AUK members are struggling to cope with
the increased demand.
— There is clear evidence of unmet demand,
with increases in waiting times for debt appointments, more client
referrals and some members closing their doors to new clients.
— Members are trying to cope with increased
demand by working more closely with other advice providers, by
being proactive, and by developing new delivery methods.
— AUK members expect that the demand will
remain high at current levels for the next 6-12 months.
— The surge in debt problems caused by
the economic downturn is only beginning to be felt now and there
is approximately a 6 month time lag between being made redundant
and seeking debt advice.
— Many AUK members serve communities that
don't choose to access high street based services.
— Most clients helped by AUK members are
from lower income households and are often financially excluded.
— The diversity of the AUK membership means
that it can respond speedily to localised demand.
— AUK members need more funding, especially
through efficient and established routes, eg FIF, and using full
cost recovery principles.
— A relatively small amount of funding
will have a significant impact on ability to meet increased demand.
— Members concerned that low income/financially
excluded clients may suffer as a result of increased competition
for advice services
— Members concerned about funding uncertainty
and risk of funding cuts, especially by local authorities.
How many debt cases do AUK Agencies deal with
each year?
— Detailed figures are unfortunately not
available. However, AUK currently has 735 members nationwide and
62 members in the South West. Nationally, 381 provide money advice
(51.8%), with a similar ratio of members providing money advice
in the South West region (32 members).— Total number of
clients seen by AUK agencies is estimated to be in the region
of 2 million per year.
Have AUK Agencies seen a growth in demand for
money advice?
Key messages:
— All AUK agencies contacted have reported
a rise in the number of clients seen over the last 12 months.—
The rate of increase ranges from 33.9% to 300%.
Examples:
— 154% increase in new clients being helped
in 2008; 90% increase in new clients between January and March
2009 (CMA across the country, applies to subsequent stats and
examples).
— Number of calls received on telephone
advice line in the first week of March 2009 was only one less
than for the whole of February (BDAC).
What trends have been observed?
Key messages:
— Client profile is changing, with more
redundant homeowners and more clients seeking insolvency solutions.—
However, the majority of clients seen by AUK agencies come from
lower income, financially excluded households:— One member
reports that at least 89% tick two or more of BERR's financial
exclusion indicators and another reports that 97% tick three or
more.
— Debt cases are becoming more complex.
— There is evidence that the recession
has resulted in more aggressive debt collection practices and
that members are finding it more difficult to negotiate with creditors.
Examples:
— More middle class redundancies with homes
under threat (CMA).— Debt management plans that can't be
maintained due to redundancy (CMA).
— Increasing number of homeowners in negative
equity (BDAC).
— More clients who want to petition for
bankruptcy (BDAC).
— More clients requiring insolvency solutions
(CMA).
— Increase in clients who owe money to
sub-prime lenders (BDAC).
— Debt management departments at mainstream
creditors are swamped and have become very inefficient and prone
to errors (CMA).
— It has become increasingly difficult
to set up debt management plans as creditors are much more aggressive
and ruthless when dealing with our centres and their clients (CMA).
— More aggressive pursuit of catalogue
debts—a reflection of the financial difficulties catalogue
companies are experiencing themselves (BDAC).
— More clients with mental health issues
(BDAC).
— Many clients paying higher than average
prices for financial services, insurances and utility supplies
(BDAC).
— A rise in mortgage repossessions, with
mortgage companies not following the Mortgage Pre-action Protocol
(BDAC).
— Increases in the last year in:
— Couples needing debt advice.
— More people who are working taking out
high interest credit (less available lower interest credit?).
— 4% increase in last year of debts being
passed to debt collection agencies.
— 20% less debt being written off (creditors
being tougher?).
— An indication of financial exclusion
will be someone who ticks two or more of the financial exclusion
indicators as defined by BERR):
A.No bank account.
B.No savings held.
C.User of high interest credit.
D.Priority debts owed.
E.Individual income < £14,500.
F.Individual income < £15,600.
G.No home contents insurance.
— In the 4th quarter of 2008, 93% of clients
seen scored 3+ on the FIF financial exclusion indicators (MASW).
— This quarter (data only for January to
February 2009 available at present) financial exclusion indicators
are higher with 97% presently 3+ FIF indicators and some others
scoring as high as 7 out of seven. (MASW).
— The type of client centres are seeing
has changed radically, often more complex and seemingly hopeless
situations (CMA).
What impact is this increased demand having on
AUK Agencies?
Key message:
— AUK members are struggling to cope with
the increased demand.
Examples:
Key messages:
— There is clear evidence of unmet demand:—
Waiting times have increased.— Some centres are closing
their doors to new clients.
— Increasing referrals from other advice
organisations that are at capacity.
Examples:
— 21.8% of clients attending morning drop-in
sessions were turned away in February 2009—this has been
attributed to decreasing capacity in other local agencies (BDAC).—
Several centres despite working over their allotted hours are
looking at having waiting lists or even closing their doors to
new clients (CMA).
— Of 10 centres surveyed recently, only
one had a waiting list six months ago. Now, nine have waiting
lists and two are shut to new cases, one for at least two months.
Waiting lists vary from one to two weeks to over six weeks (CMA).
— Staff are extremely busy and we have
closed off new appointments for 2008-09 due to already having
exceeded annual targets. We could meet a quota of another FIF
worker if one was available on existing client numbers in the
last two quarters (MASW).
— Presently we are holding appointments
until April where possible or giving people other choices (eg
National Debtline) where the need is more urgent (MASW).
What measures are AUK Agencies taking to deal
with this increased demand?
Key message:
— Centres are trying to deal with increased
demand by:— Working more closely with other local advice
providers.— Being proactive.
— Developing other methods of delivery.
Examples:
— Co-operation over drop-in sessions and
complex case referrals (BDAC).
— Proactive meetings with local authority
to discuss council tax arrears and the use of bailiffs—as
a result opening a council tax debt only clinic on Monday AMs
(BDAC).
— Introducing a self help room, providing
free access to IT, phones and stationery with the support of a
money mentor. This has funding for a limited number of months
(BDAC).
— Re-distributing staff resources to begin
training a new adviser to pre-empt any new funding streams that
may come through as we are aware that it takes time to develop
extra capacity (BDAC).
What predictions are AUK Agencies making about
future demand?
Key messages:
— AUK members expect that the demand will
remain high at current levels for the next 6-12 months—
The surge in debt problems caused by the economic downturn is
only beginning to be felt now:— There is approximately a
six month time lag between being made redundant and seeking debt
advice.
— We envisage that demand for debt advice
will continue to remain high at current levels or above over the
next 6-12 months dependent upon the future economic situation.
We believe we are only now feeling the surge in debt problems
caused by the economic downturn. (BDAC)
— We are only now seeing clients with debt
problems caused by job losses in October so, extrapolating that
we imagine seeing clients who are losing jobs today in approximately
6 months time. This is down to clients trying to manage their
finances by themselves and through credit or burying their head
in the sand, only exaggerating the problem. (BDAC)
Are there any factors that differentiate AUK Members
from other advice providers?
Key messages:
— Many AUK members serve communities that
don't choose to access high street based services.— Most
clients helped by AUK members are from lower income households
and are often financially excluded.— The diversity of the
AUK membership means that it can respond speedily to localised
demand.
Examples:
— MASW is based in deprived neighbourhoods:
hence we serve communities that often do not choose to access
city centre based services. 99% of our advice is in people's homes
or community settings within their locality (within a mile) (MASW).—
In the last full quarter (October to December 2008), MASW's two
FIF workers alone dealt with £1,003,350 of new presenting
debt (on top of open cases) of which less than 16% of this was
secured. Hence focus on lower income households. This is reflected
in that 93% of this debt total was unsecured whereas we know that
80% of all consumer borrowing (debt) is secured (MASW).
— Any further funding as directed by Central
Government could assist with meeting unmet needs from a client
perspective (where current services are extremely busy or reaching
into new pockets where no services exist at present), assist with
financial stability to Advice UK members and allow for careful
targeting by Central Government in order to meet their objectives
(MASW).
What are AUK Agencies asking for?
Key messages:
— More funding is needed, especially through
established and efficient routes, eg FIF (money for CABx was not
available to independent advice organisations such as AdviceUK
members).— Full cost recovery principles should be used.—
AUK as a network and some of its members do not receive any central
or local government funding:
— A relatively small amount of funding
will have a significant impact on ability to meet increased demand.
Examples:
— Our request would be that more funds
are directed via established and efficient routes such as the
Financial Inclusion Fund on a full cost recovery basis (£56,000
p/a). As an independent advice agency we cannot access the extra
funding that went to CABx and are reluctant to draw down more
matter starts under LSC contracts (BDAC).— MASW needs more
advisers, but crucially is also struggling with full cost recovery.
For example, even under the more generous FIF model, one full
time supervisor would need ten debt advisers and one full time
Project Manager would need 20 debt advisers. This places a strain
on the Management Team, particularly when staff are sick and gaps
need to be filled. This limits the ability to plan and develop
services strategically with other agencies where better working
relationships could lead to further economies of scale in locally
configured services as well as regionally/nationally where more
social policy work needs to be done. Hence projects are run on
part time hours and finding people with the appropriate skills
is even more difficult when there is not a full time or even decent
hours for a part time post (MASW).
— CMA currently has 75 centres across England
and Wales. It currently receives no funding from central or local
government. CMA's working model is remarkably cost-effective.
With a current annual budget of £75,000 raised from a mix
of revenues from activities and additional fundraising this equates
to under £1,000 per centre. To sustain current growth CMA's
budget is too small and under its three year plan needs an additional
£450,000 to grow to a size allowing full sustainability of
its everyday activities (CMA).
Have AUK Agencies raised any other issues?
Key messages:
— Members concerned that low income/financially
excluded clients may suffer as a result of increased competition
for advice services.— Members concerned about funding uncertainty
and risk of funding cuts, especially by local authorities.
Examples:
— There is a concern that as clients from
a more affluent background join the pool demanding services, those
on low incomes and traditionally at risk of debt problems due
to financial exclusion may suffer indirectly through increased
competition for advice services. The level of demand from our
traditional client base is undiminished so the added client demand
only adds stress to the already stretched services (BDAC).
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