Debt Management

DM 19

Written evidence submitted by the Money Advice Service

About us

1. The Money Advice Service is a nationwide service that helps consumers understand financial matters and manage their money better. We provide information and advice online, over the telephone and face-to-face. We were set up by Government and are funded by a levy on financial services companies regulated by the Financial Services Authority.

2. Our statutory function is to enhance the understanding and knowledge of members of the public about financial matters (including the UK financial system), and their ability to manage their own financial affairs. This includes providing information and advice to members of the public to help them understand money matters better and take control of their money.

Summary

3. In addition to our current role, from April 2012 the Money Advice Service will be responsible for the coordination of debt advice provision across the UK. We announced this in July this year following the publication of the Government’s response to the insolvency aspects of the Consumer Credit and Personal Insolvency Review.

4. Our role in this area is two-fold:

· To develop a model of debt advice delivery that is as efficient and effective as possible

· To ensure continuity of service delivery during a transitional period while our delivery model is developed and implemented

5. We will aim, over the next two years, to expand the reach of and bring greater consistency to the debt advice landscape. We expect to be in a position to put in place a final model of debt advice delivery by the end of 2013.

6. This new role provides us with the opportunity, over time, to align the provision of debt advice with our existing money advice services, and to help consumers with their money issues before debts become unmanageable.

7. Our current priority is to ensure that high-quality debt advice continues to be available. We will work to raise the profile of the free-to-client advice sector and fund services as appropriate.

8. Subject to receiving funding from the Financial Services Authority (FSA), in 2012-13 we will fund a series of face-to-face debt advice projects across England and Wales that were previously managed by the Department for Business, Innovation and Skills and funded by the Department and the Financial Inclusion Fund.

9. In Scotland and Northern Ireland, we are working closely with the devolved administrations to fund services next year in each country that recognise the particular differences in the debt resolution environment in those countries.

10. We believe that debt advice should be available across all delivery channels but that self-help approaches should be emphasised with as many people as possible accessing self-help resources digitally.

11. We believe that face-to-face advice should be available for clients with particularly complex debt problems and those who are unable to access other channels.

12. Over time, we will integrate our work on crisis debt advice with our existing preventive work to build consumers’ financial resilience.

13. We work closely with the advice sector, creditors and regulators and will continue to do so. Our business plan and budget for 2012-13 is currently out for consultation.

Introduction

14. In July this year we announced that from April 2012 the Money Advice Service will be responsible for the coordination of debt advice provision across the UK.

15. The announcement followed the Government's response to the Consumer Credit and Personal Insolvency Review which stated that we are well placed to take a role in coordination of debt advice services, and to develop a model which ensures that debt advice outcomes can be delivered in an effective, efficient way.

16. The NAO called for greater consistency and efficiency in their report into the previous Government’s over-indebtedness strategy in 2010 and our engagement with a wide group of stakeholders across the advice and creditor sectors has validated the mandate for change we have been given. This is especially important in an environment where there is a widely held expectation that the demand for debt advice will increase in the medium term.

17. We welcome the Government’s move to clarify our role to include the coordination of debt advice. Our vision is that people with unmanageable debt know where and how to access an effective debt advice service that delivers consistent and fair outcomes for them and their creditors.

18. The new role of coordinating debt advice from April 2012 complements the existing remit of the Money Advice Service, which is to offer free, unbiased money advice to help everyone make the most of their money as a matter of course.

19. Over the last year the Money Advice Service has reviewed its range of products and services and is now looking to enhance its service to consumers, making sure that it delivers more, to an even greater number of people. We will continue to offer everyone access to this service through a national network – over the telephone, face-to-face and through digital channels. Our initial debt advice work has been undertaken in parallel to this review and its integration into an holistic Money Advice Service, in due course, should allow us to provide a more efficient, comprehensive and seamless service for people regardless of their position.

20. We already provide a range of tools, information and advice about borrowing and signpost people to the free-to-client debt advice sector as appropriate. We have also had early discussions with BIS about how we can work with them and the financial services industry to promote our service to encourage people to make informed decisions about borrowing.

21. We will continue to promote the free-to-client debt advice sector and as our organisation builds its profile over coming years we expect to increase consumer awareness of the scope of that sector, particularly services available digitally and on the telephone.

Plans for 2012-13

22. Our priority is to ensure resources are available from April 2012, so that people continue to have access to quality debt advice.

23. During 2012-13 we will work with all stakeholders to develop a model of debt advice coordination that builds on the extensive good practice that currently exists with the aim of ensuring that the demand for debt advice can be met in the most efficient and effective way.

24. In England and Wales we intend to take over responsibility for the Department for Business, Innovation and Skills' face-to-face debt advice projects from April next year.

25. We are working closely with stakeholders in Scotland and Northern Ireland – including the Scottish Government and Northern Ireland Executive – to ensure work we intend to fund in those countries is appropriate for their debt resolution environments and is as effective as possible.

26. We are working closely with each of the projects that deliver debt advice services for BIS and are being careful to communicate clearly to them the steps we are taking to ensure continuity.

27. We expect to receive confirmation of our budget for 2012-13 from the FSA in early December. The budget we have presented includes a request for sufficient funds to ensure continuity of face-to-face service delivery while our work with the projects is focussed on helping them support a greater number of people than the 100,000 they currently advise across England and Wales each year. In the context of planned Legal Aid scope changes, we will work with the projects to increase their reach to at least 150,000 people while maintaining a high quality service.

Coordination

28. The final scope of our coordination role will emerge from the detailed development work we have begun and will continue over the coming year. Initial discussions with stakeholders indicate there are a number of key principles however that will be important when designing our operating model:

· There should be a single set of agreed outcomes for debt advice - on the basis of which delivery and evaluation should take place

· People should know where, when and how to access the right debt advice for them

· There should be a standard set of "approved" tools that are well used and well understood by advisers, creditors and consumers

· Consistent responses should be made to similar presenting concerns across the UK, legislation permitting, and as much as possible there should be consistency in consumer experience

· Standardised data collection should allow for better measurement of impact, improved learning and more accurate targeting of resources

· Digital self-help should be the default option for advice. If that is not suitable for an individual then they should be encouraged to access telephone advice

· Face to face advice should be available for service users who have particularly complex debts or have accessibility issues with other channels.

· Referrals between channels should be appropriately incentivised in any contract arrangements.

· The targeting of resources for face-to-face advice should be based on demographic and issue-specific factors built into a triage mechanism

29. We expect to be in a position to put in place a final model of coordination by the end of 2013.

Research

30. We are approaching the end of an extensive programme of research, funded by BIS. This includes a survey of the landscape of advice provision, an assessment of the needs of over-indebted consumers, extensive consultation with creditors, the advice sector and public bodies across the UK and the development of a model for the allocation of funding for debt advice.

31. We will publish the results of our research when the programme of work is complete.

Funding

32. It is Government policy that the financial services industry should pay for debt advice in the future. To help us determine a sustainable funding source for debt advice, we have commissioned research analysing what organisations contribute towards over-indebtedness and what model could be implemented to collect funds efficiently. For 2012/13 it is expected that funding will come exclusively from the FSA levy.

33. We are mindful of existing industry funding for debt advice, particularly the ‘fair share’ [1] model and it is not our intention to displace that funding. The projects we intend to fund next year will not duplicate the service provided by ‘fair share’ funded organisations and we will work with organisations we fund to ensure that the clients they support need to access advice face-to-face and are unable to use other channels.

15 November 2011


[1] The ‘fair share’ model is a voluntary payment arrangement agreed between some creditors and some free-to-client deb t advice organisations. A n agreed sum is paid by the creditor each time a payment is received from a client whose debts are being managed by the advice organisation. The payment is not deducted from the amount paid by the client. Fair share payments make up the bulk of the funding currently provided by the financial services sector to the debt advice sector.

Prepared 30th November 2011