Credit, Collections & Insolvency News
The numbers are interesting. So are the implications for the future of debt advice but that’s for another time.
FCA say: “Financial Lives data suggest that 3% of UK adults used debt advice or debt management services in the last twelve months and, of these, 19% used a paid-for service” (from their “Financial Lives” Survey – 2017). So, given that there are 32.25m working-age adults in the UK (and I reckon there will be relatively few retired people in a debt solution), then that probably means just short of a million people used debt advice or debt management in 2017. And just over 180,000 of these took out a commercial debt management plan – compared to Individual Voluntary Arrangements (nearly 60,000 in 2017 – but rising), which won’t be in these figures.
If FCA’s figures are right, then it’s actually just three percent of those with debt problems who are getting help.
Add the FCA’s numbers to the Insolvency Service’s and you get around 270,000 people doing something about their debt in 2017 (though it’s likely to be less – many who took advice will also have got a solution).
So, as we all know, we aren’t close to meeting the nation’s need for debt advice. In various recent pieces of work, Money Advice Service has estimated that eight to nine million people are in debt difficulties and that roughly one in five are doing something about it. But, if FCA’s figures are right (and we go for the top end of the estimate), then it’s actually just three percent of those with problems who are getting help rather than just advice. Nearly seven times less than MAS’s estimates.
And figures from other agencies add complexity too. So Citizens Advice Bureau, in their latest report “Making the case – the value to society of citizens advice” say they worked with “over 584,000” debt clients (so more than half the total FCA say used advice and debt management). But only 1.5 percent of CAB’s debt clients rescheduled debt and 4.5 percent get debt written off through “insolvency arrangements”. This looks like a very small proportion getting tangible help – CAB schemes are helping just a fifth of those in debt solutions provided by commercial providers.
National Debtline’s latest annual report (2016) says they helped 130,000 on the phone, 34,000 on webchat and had more than a million visits to their website. The first two figures make them significantly smaller than the commercial debt solutions sector (National Debtline do operate solutions, but I can’t find numbers – though their research shows their advice to be very effective; see the link).
Then there’s PayPlan – the commercial company that operates the fairshare scheme where creditors pay. Their clients under management went down from 81,000 to 75,000 in 2016. If a debt management plan lasts six years (an assumption for which I’ve little evidence) then PayPlan may be taking on around 12,500 plans a year.
And StepChange (the charity that provides debt management plans) seems to be advising around 650,000 people annually – based on their 2017 mid-year report (they advised 600,000 (340,000 of which were new in 2016 – according to their previous year’s annual report, which shows they earn just under 10 percent in “fairshare” fees from creditors). The annual report doesn’t give the number of debt management plans StepChange operate (or put in place in a year), But StepChange’s fairshare income is a little less than half PayPlan’s turnover, so maybe Stepchange are putting in place 25,000 debt management plans annually? That’s just under four percent of the clients they advise.
These figures don’t even include AdviceUK, the country’s largest network of independent advice agencies – which must add significantly to the advice figures, if not to the solutions, which will largely be referred elsewhere.
So, we need 8m plus people to get debt advice. From FCA’s figures it looks like around a million are getting it (roughly two-thirds of the figure Money Advice Service say are taking action on their debt). The largest single source of debt advice appears to be the commercial sector (240,000 plans annually – excluding Payplan) and the free advice sector might be providing 75,000 (fewer if you exclude PayPlan – but potentially a lot more given how much of an educated guess this is) debt solutions a year – or roughly a third of those provided by firms that charge fees.
And, as I’ve observed, FCA say nearly a million are getting debt advice. But, add up the figures given by the major agencies and networks and you get around 1.4 million clients advised by free to client networks – and that is without adding the many thousands who will be approaching AdviceUK members. But maybe this is the kind of error one expects in an exercise as vague as this?
Of course – there are so many assumptions here for these figures to be pretty useless other than as a talking point. So that’s what I hope I’m making. Others will know and I’m hoping they’ll come forward and add fact and detail. We need good data to help make things work better.
But the conclusion I’m going to draw from this is that Britain needs a great deal more debt advice capacity and vastly more debt solution capacity. And that isn’t going to happen without huge change.
