Lenders urged to take proactive action to help customers in financial difficulty

30th May 2023

Lenders are being urged to help their customers who are facing financial difficulty to take a proactive approach to the cost-of-living crisis to help prevent unmanageable debt and a deepening of stress-induced mental health crises, before they occur.

TDX and Equifax’s say that it’s recommendations are supported by partners including UK Mortgages and the Centre for Social Justice. The partners are focused on lessening the damning impact upon millennials (those currently aged between 25 and 40) – those under 30 are spending more than any other age bracket on housing costs and food alone at 41% of their income.

The report reveals that millennials are among the most vulnerable to the ongoing cost of living crisis, facing significant challenges in managing their finances.

The study anticipates a further shift in the demographics of vulnerable individuals to include not just millennials under 30 in particular but previously comfortable households who are turning to Buy Now Pay Later (BNPL) and conventional credit to pay for essentials. The recent exposure of these groups to further financial difficulty means that creditors must address a broader range of factors contributing to vulnerability beyond supporting consumers who face challenges accessing digital services, individuals who are victims of coercive and controlling partners, and critically, addressing the impact of mental health struggles on individuals’ daily lives.

The data indicates a significant shift in the demographic of consumers utilising Individual Voluntary Arrangements (IVAs) in 2022. A notable increase in the number of IVAs was observed among individuals earning over £4,000 per month. In 2019, this relatively high-earning group constituted approximately 1% of IVAs, which rose to around 3% by late 2022 and further surged to over 4% in February 2023.

Additionally, the report reveals that in 2022, adults accumulated 4% more debt compared to the previous year, resulting in an additional £1,367 per adult. The financial strain on disposable income cannot be solely attributed to rising energy costs and the increasing price of essential goods. Starting from April 2023, households across the UK will face significantly higher council tax bills than in the previous year. The Centre for Social Justice (CSJ) reports that a record number of UK councils (75%) are planning to raise bills to the maximum limit of 4.99%.

Statistics from the report highlight the concerning impact of financial difficulties on mental health. According to findings from Christians Against Poverty (CAP), a staggering 50% of individuals in debt have contemplated suicide. This revelation underscores the urgent need for the debt industry to step up efforts in safeguarding consumers’ financial and emotional wellbeing.

Phil McGilvray, Managing Director for Debt Services, TDX Group, said  “While our report revolves around unique data insights and statistics, it places consumers and their experiences at its core. Already, this report is influencing our approach at Equifax, shaping our working methods, and guiding our recommendations for the industry.”