Welfare changes mean many councils and housing associations now view debt as a welfare issue rather than a money management problem
It’s Debt Awareness Week. The irony is, once you’re in debt, you’re actually very aware. Continual reminders and calls normally mean you can’t forget or escape your situation.
Evidence of the impact of welfare changes suggests that actions are being taken early on council tax and rent arrears. We recently dealt with a client whose medical certificate had been lost by the jobcentre and so had her benefits cut for four weeks until they found it. During that time the council sent bailiffs to her house for rent arrears. She was lucky that after appeal the additional charges weren’t added to her bill.
Many councils and housing associations now view debt as a welfare problem rather than a debt and money management problem. Resources that could be spent on specialist debt advisers are being shifted to welfare rights.
The root causes of debt have always been the same: changes in circumstances/income and irresponsible borrowing or lending. These are not caused by high-cost credit, welfare changes or low wages but they are made worse by it. Few policy responses have tried to address each of these issues so I can suggest a few here.
Changes in income generally occur when you move home, apply for changing benefits, or start – or lose – a job. Mainstream debt awareness would provide mandatory access to support at these key moments. Being made redundant should include free access to debt advice. Timely intervention can make you “debt aware” before you need to be.
There is no full-proof way to stop someone lying or borrowing irresponsibly, but what’s clear is that having faced legal action there is often no way back. It is unsurprising that people using high-cost credit do so because no one else will lend to them owing to adverse credit histories. That’s not a route back, it’s a route for a life of debt.
Much has been discussed about high rates of interest but the reality is that most problems are caused by people being lent to irresponsibly – by mainstream lenders as well as sub-primes that fail to check potential borrowers’ income or financial commitments. This is a recipe for disaster, as many borrowers are finding. Sadly the burden of the impact falls on them much more than the creditor. The role for an affordable lending principle and sharing the impact more equally is more important than ever before.
Tackling the personal debt crisis in the UK has no short quick fix. It requires a commitment of epic proportions by all parties – creditors, borrowers and regulators – to change their behaviour and give people a way out.
[The Guardian]
