Credit, collections & insolvency news
A new study from Citizens Advice reveals the challenges faced by “just about managing families” and says many of the problems are ‘fixable’. The report is based on new analysis of the problems faced by the 700,000 working people helped by Citizens Advice between October 2015 and September 2016. It identifies the most common challenges as:
The analysis also finds that families are experiencing more than one issue, on average people have 2 to 3 problems each. For instance, 4 in 5 people advised about an in-work benefit issue also received help on another matter, with 1 in 3 having a debt problem. This can lead to a domino effect – when one issue becomes a significant problem so do the rest. At least 3 in 4 – and possibly as many as 90% – of working people seeking face to face and phone advice from Citizens Advice are in the bottom half of the income distribution nationwide. Meaning they have a family income of less than £24,600.
Details and statistics on the common issues just managing families seek help for, along with a quote from Chief Executive Gillian Guy are below. The charity has also published 10 ways the government could help just managing families in the Autumn Statement.
The analysis finds aggressive or inflexible debt collection practices, in both the public and private sector, can turn ‘just managing’ into ‘not managing’ overnight. Particularly when people fall behind on council tax, or when spirals of borrowing on credit cards or unsecured loans get out of hand. Citizens Advice helped over 40,000 working people with council tax debt problems – with the majority struggling with debt repayments (41%) or the methods being used by local authorities to enforce council tax debt collection, particularly the use of bailiffs (39%).
It also helped over 50,000 people with credit card, unsecured loan and overdraft issues. In 2 out of 3 cases (68%) people were struggling to keep up with repayments, again debt collection practices are an issue (7%) so too are dealing with court claims for debt (5%).
50,000 people experienced problems with pay and entitlements. Wages and queries about their payslips make up almost a quarter of cases (23%) and difficulties getting sick pay or sick leave over half of the cases (55%). Unlawful deductions – where money is taken from employees’ wage packets for no good reason were a problem for 16% of the working people we helped.
Some working families rely on the welfare system to top up their income in order to help cover day to day costs like housing. For many they are trying to understand what they are entitled to or how a change in circumstance, like a drop in working hours, could affect their claims. Citizens Advice helped with 125,000 issues around in-work benefits in the year to March 2016 – including housing benefits, working tax credits and Universal Credit. Around 40% of working people we support with benefit problems aren’t sure what they are entitled to and 1 in 10 have problems with their changing circumstances, and understanding what this does to their claim.
The study also highlights how not all just managing families will own their own home. Increasing numbers of working families are living in the private rented sector, reliant on insecure, poor quality accommodation with high costs and letting agent fees which make home ownership an increasingly remote aspiration. There are 1.5 million families with children living in private rented accommodation. We helped over 50,000 working people on issues relating to private rented housing.
These working households experience a variety of issues with renting, 18% have problems with the quality of the home they live in, a further 18% face eviction or repossession, 17% have concerns around rent and other charges and 13% have issues with deposit protection.
Energy accounts for over a quarter of the consumer advice we give to working people through our face-to-face network. It is a market where the best deals are reserved for customers with the time and wherewithal to research and switch to the best deals, while a loyalty penalty means that others are exploited with unjustifiably high bills.
Only 15% of energy customers switch suppliers. Yet our evidence suggests that those with the most to gain from switching, either because they are on an expensive tariff or paying via an expensive method (i.e. not by direct debit), are the most likely to face barriers to switching.
Gillian Guy, Chief Executive of Citizens Advice, said “There is a fine line between just about managing and not. As our evidence shows, it is often things beyond people’s control – like aggressive or inflexible debt collection practices, landlords providing poor quality homes and bosses not giving workers the pay and leave they are entitled to – that can make life precarious for these families. The government has rightly identified that there are thousands of families who are just about managing – where one small change could push them over the edge. The problems faced by these families are fixable, simple steps could be taken now that would make a big difference
“This Autumn Statement is an opportunity to deliver the security and stability that these families need. Steps such as reversing the planned cuts to work allowances in Universal Credit, getting a better deal for loyal energy customers and encouraging councils to improve their debt collection practices would be a good place to start.”
Citizens Advice has identified 10 ways the government could help just managing families in this week’s Autumn Statement.