Debt triggered by divorce and redundancy, StepChange reveals

Debt charity, StepChange has published new insight on its clients, revealing that debt problems appear to be particularly acute for certain groups, such as tenants and single-parent families. The charity’s Statistics Yearbook reports that 619,946 new clients contacted the charity for debt advice last year – 3.5% more than in 2016, and 22% more than just four years earlier.

The debt problem remains an urgent and burdensome one for many people and can hit people from all backgrounds, as the charity’s clients demonstrate. However, some notable trends help point the way towards the policy actions needed to help reduce the build-up of problem debt.

There has been a notable increase over recent years in the proportion of young people seeking debt advice from StepChange Debt Charity. Around one in seven new clients, last year was under 25, and nearly two-thirds of clients were under 40.

Other notable findings last year, that suggest where debt problems are most acute, included:

• 80% of clients contacting the charity in 2017 were tenants, though only a third of UK households rent
• 21.5% of new clients were single parents with children, though only 6% of UK households are single parent families
• People experiencing debt problems live all across the UK, but among StepChange clients the highest concentrations of people in difficulty are in the North East and London.
• One in five new clients has a vulnerability alongside their financial difficulty (such as a physical or mental health condition), and such clients are typically older
• Around 40% of new clients are in arrears on at least one of their priority household bills at the point they contact StepChange Debt Charity. Council Tax is the most common priority debt on which clients have arrears.
• Credit card debt remains the most common debt, with more than two-thirds of new clients holding credit card debt.

Around 57% of new clients sought help through the charity’s online Debt Remedy tool, and 43% by phone. Younger clients were especially likely to use the online option, and 72% of online advice was to people aged under 40. However, those under 40 accounted for more than half of all new client phone calls to the charity too.

Phil Andrew, StepChange Debt Charity Chief Executive said “It can be too easy to look at statistics and fail to see the anxious human face of problem debt. But it is both striking and shocking that last year around one in every 100 UK adults contacted StepChange Debt Charity alone for debt advice. Our clients show that the debt problem is far from solved. With the prospect of higher interest rates ahead, it would be a mistake to take too much reassurance from the gradual improvement in the wider economy.”

“Debt charities help clients to pick up the pieces when things have gone wrong. But it’s vital that the Government, regulators and those in the industry do everything they can to head off problems from occurring in the first place. As we work with the Government on the detail of the new debt breathing space scheme, and await the Financial Conduct Authority’s next steps on high-cost credit, we urge policymakers to focus on prevention, not just cure. They must make it a priority to find ways of pump-priming access to better alternatives to high-cost credit, and recognise that for many households, lack of money rather than lack of budgeting is the basic underlying problem.”