Experiences of Debt
and Debt Advice
Services in Islington
Final Report
Authors: Nilufer Rahim and Sue Arthur
Date: January 2012
Prepared for: Islington Debt Coalition
Content
Acknowledgements......................................................................1
Executive Summary .....................................................................1
1
Introduction ...........................................................................6
1.1
1.2
1.3
1.3.1
1.3.2
1.3.3
1.4
1.5
1.6
Research context........................................................................................................... 6
Research aims and objectives ..................................................................................... 7
Research design ............................................................................................................ 8
Data interactions.............................................................................................................. 8
Sampling and recruitment................................................................................................ 8
Achieved sample ............................................................................................................. 9
Analysis of data ........................................................................................................... 10
Reading this research report...................................................................................... 10
Structure of the Report ............................................................................................... 10
2
Causes of unmanageable debt ..........................................12
2.1
2.1.1
2.1.2
2.2
2.2.1
2.2.2
2.3
2.3.1
2.3.2
2.3.3
Profiles of debt............................................................................................................. 13
Levels and types of debt................................................................................................ 13
Definitions of debt .......................................................................................................... 14
Transitions into problem debt.................................................................................... 15
Transitions into ‘manageable’ debt................................................................................ 15
Transitions into ‘unmanageable’ debt............................................................................ 15
Factors affecting pathways into ‘unmanageable’ debt............................................ 15
Ability to withstand financial shortfalls ........................................................................... 16
Financial capability ........................................................................................................ 17
Conditions of the debt environment............................................................................... 21
3
Responses to debt ..............................................................24
3.1
3.2
3.3
3.3.1
3.3.2
Approaches to dealing with debt ............................................................................... 25
Approaches to reorganising income and expenditure ............................................ 26
Experiences of being in debt...................................................................................... 28
Impacts on day to day life .............................................................................................. 28
Impacts on health and wellbeing ................................................................................... 28
4
Seeking debt advice and support ......................................30
4.1
4.1.1
4.1.2
4.1.3
4.2
4.2.1
4.2.2
4.2.3
Experiences of debt advice services......................................................................... 31
Use and awareness of debt advice services ................................................................. 31
Views and experiences of debt advice services............................................................ 33
Barriers to using debt advice services........................................................................... 35
Use and awareness of financial and credit services ............................................... 38
Negative experiences of loans and creditors ................................................................ 39
Positive experiences of loans and creditors .................................................................. 42
Experiences of bankruptcy and debt relief order........................................................... 43
5
Suggestions for preventing debt and improving debt services
45
5.1
5.2
Lessons learnt from being in debt............................................................................. 46
How support should be designed to address people’s needs ............................... 47
5.2.1
5.2.2
5.2.3
5.2.4
Ensuring that advice services address customers’ needs around managing debt ....... 47
Increasing awareness of advice services and encouraging use ................................... 48
Suggestions for customer-focused service delivery ...................................................... 50
Suggestions for government level interventions............................................................ 51
6
Conclusion...........................................................................53
6.1.1
6.1.2
6.1.3
6.1.4
6.1.5
Definitions of debt .......................................................................................................... 53
Underlying causes of unmanageable debt .................................................................... 54
Emerging advice and support needs ............................................................................. 55
Key learning about specific groups................................................................................ 57
External structural influences ........................................................................................ 58
Appendix A
Approach Letter ................................................60
Appendix B
Information Leaflet............................................61
Appendix C
Opt-in form.........................................................63
Appendix D
Depth Interview Topic Guide............................64
Appendix E
Focus Group Topic Guide ................................69
Appendix F
Consultation Group Topic Guide.....................74
Appendix G
Sample breakdown ...........................................78
Tables
Table 1.1
Table 4.1
Characteristics of total sample ........................................................................................... 9
Sources of debt advice..................................................................................................... 31
Appendix Table F.1
Appendix Table F.2
Appendix Table F.3
Appendix Table F.4
Characteristics of depth interview sample ....................................................... 78
Characteristics of consultation group sample .................................................. 78
Characteristics of focus group sample ............................................................ 79
Ethnic group as defined by participants........................................................... 79
Figures
Figure 2.1
Figure 2.2
Figure 4.1
Figure 4.2
Definitions of Debt ............................................................................................................ 14
Debt spiral resulting from low income and charges and fines .......................................... 22
Barriers to accessing debt advice .................................................................................... 36
Debt spiral resulting from negative emotional and psychological impacts of debt............ 37
Acknowledgements
This study was funded by Islington Council, on behalf of the Islington Debt Coalition. We
are extremely grateful to Ken Biswell and Bob Outram who managed this research as well
as Leo Trinick for their direction and guidance.
We are also grateful to the services on the Islington Debt Coalition who helped to recruit
participants to the study. In particular, we’d like to thank Parija Begum and Alison Lamb at
the Citizen’s Advice Bureau, Ken Kanu at Help on Your Doorstep, Hannah Fitzgibbons
and colleagues at the Margaret MacMillan Children’s Centre, Glenn McKorkindale at
Homes for Islington, Martin O’Donnell at Peabody Trust, Diana Fitzwilliam and Lindsay
Wake at Hyde Housing, Jon Fairey at City and Islington College, Gerard Omasta-Milsom
at Islington People’s Rights, Katie Commons at Islington Law Centre, Lauren Law, and
Martin Groombridge at the Haringey, Islington & City Credit Union.
At the National Centre for Social Research we would like to thank the following
colleagues: Jenny Graham for her direction in the early stages of the research and
Catherine O’Donnell, Rachael Owen, Chris Farrell and Steve Coutinho for their assistance
in recruitment, fieldwork, and data analysis.
Finally and we are enormously grateful to the 87 Islington residents who gave their time in
interviews and discussion groups for this study.
Experiences of Debt and Debt Advice Services in Islington
Executive Summary
This study has been commissioned by Islington Council, on behalf of the Islington Debt
Coalition (IDC). The IDC is a partnership of various statutory and voluntary sector
organisations from across Islington working to tackle the issue of indebtedness in the
borough. The aim of this research is to develop the IDC’s understanding of the attitudes of
Islington residents to debt, their related behaviours, and their views on and experiences of
debt help and advice services.
Experiences of debt
•
Living on low incomes and lacking surplus money made withstanding financial
shortfalls difficult and caused problem debt. Shortfalls were caused by delays in the
receipt of income such as wages or benefits, having to cover unexpected expenses
such buying a replacement fridge, and also by increasing costs of living.
•
While all experiences were of ‘problem debt’, some were ‘manageable’ debt situations
and others were ‘unmanageable’. Manageability depended on each individual’s
circumstances, including whether they could afford their debts and the repayments;
the severity of the repercussions if they couldn’t; and their own financial capabilities.
•
Debt experiences either had specific triggers or were made up of numerous debts
that had accumulated over time without any specific cause. Debt experiences had
been triggered by a range of personal and financial circumstances such as:
o
o
o
o
o
o
•
Redundancy
Relationship breakdown
Bereavement
Overpayment of benefits
Wages not being paid on time and
Late payment of benefits.
The extent to which debt experiences became unmanageable appeared to depend
on:
o
Financial capability: how effectively individuals managed their personal finances
influenced how manageable their debts became. A lack of budgeting and saving
as well as overspending, over-borrowing and ignoring bills and debts were
characteristic of unmanageable debt. Participants with good levels of financial
literacy and awareness had more manageable debts. They were aware of
sources of affordable credit and of the risks of borrowing from high interest
money lenders.
Experiences of Debt and Debt Advice Services in Islington
1
o
•
The external conditions of the debt environment: charges, penalties and fines
associated with debt made it difficult to repay debts particularly for people on low
incomes that stretched only so far as essential expenses and caused debts to
spiral out of control. Misleading invitations to access ‘help’ with debts by high
interest money lenders, if taken up, were also seen to lead to unmanageable
debts.
Choices about borrowing were felt to be very restricted and participants felt that they
were vulnerable to the offer of ‘easy’ credit from loan companies, and the
accompanying conditions and charges, although they valued the opportunity to
access relatively easy credit. Taking control and responsibility for their debt situation
made it seem more manageable, including negotiating directly with their creditors and
consolidating their debt.
Responses to debt
•
Responses to debts included avoiding them or addressing some or all of them. There
were three key factors influencing whether participants took action to address their
debts or not:
o
Perceived repercussions of being in debt: such as debts eventually being wiped
clean, or leading to repossession either prevented or prompted action.
Communications about sanctions from creditors often prompted action and these
debts were prioritised. However they were not necessarily ‘priority’ debts, as
defined by the CAB.
o
Perceptions of the manageability of debt: While smaller debts were more likely to
be being repaid, larger debts were automatically seen as unmanageable and
their repayments unaffordable. This paralysed action to address them.
o
Individual attitudes toward debt: Participants who expressed the strongest
discomfort and aversion to the idea of owing money had instigated repayment.
•
The reorganisation of income and expenditure was a further response to living in
debt. This was achieved by prioritising different types of household expenditure,
limiting overall expenditure and trying to increase household income. The extent to
which individuals implemented these strategies varied. There was evidence to
suggest that they were most effectively implemented by those who kept their debts
manageable.
•
Living in debt was associated with considerable financial hardship which limited
participants’ day to day lives. It led to feelings of shame, embarrassment, guilt and
inadequacy as well as social isolation. Living in debt also impacted negatively on
health and wellbeing. Concern over ability to repay debts, experiences of being
Experiences of Debt and Debt Advice Services in Islington
2
chased by creditors and being threatened with bailiffs caused issues such as clinical
depression, stress, anxiety, worry, sleeplessness, fear and paranoia.
Seeking debt advice and support
•
Awareness of debt advice services was generally low, with the CAB being the
exception to this, although participants were not necessarily aware that the CAB
offered specialist debt advice. Awareness about where to find advice and support was
limited, as well as what kind of services might be offered.
•
Participants were more likely to seek help with their debt if an organisation or service
was easy and convenient to get to, and if it was somewhere they could trust: this
meant that it should be free, independent, and non-profit-making.
•
There were three different types of barriers to be overcome in getting (or keeping) in
touch with an advice service:
o
o
o
•
Practical issues around the cost and time of using a service
Negative perceptions of the helpfulness of an advice service and
Personal or psychological issues such as depression, anxiety, or
embarrassment making people reluctant or demotivated to seek help or
support. The latter set of barriers could cause debts to spiral and become
unmanageable.
Advisers were valued if they were empathetic and understanding, knowledgeable
enough to tailor their advice, and able to spend time helping with budgeting or
managing bills, or negotiating affordable repayments. This kind of practical ongoing
help tended to be valued more than the provision of information.
Suggestions for preventing debt and improving debt services
•
Participants reflected on four main areas where they felt they had learnt from their
experience of being in debt, and that they felt would be helpful advice for others:
o
o
o
o
•
Learning how to manage finances, in particular how to budget and manage bills
and the importance of saving rather than borrowing
Increasing awareness about ways of dealing with debts, particularly negotiating
with creditors and consolidating debt
Increasing awareness about financial products, the conditions and charges of
loans, and more affordable sources of credit such as the Credit Union and
Seeking advice and acting as soon as possible rather than ignoring debts
Advice services were felt to have an important role to play in helping to support
people in relation to these issues, particularly in building financial awareness and
capability.
Experiences of Debt and Debt Advice Services in Islington
3
•
The key elements identified for an effective advice service included: a choice of faceto-face or telephone advice (freephone numbers to be used); ongoing support from a
case-worker; group advice sessions including practical advice from people who have
been in debt themselves; providing advice at key life stages, such as young people
leaving home or full-time education, having a child, or crisis points such as job loss or
relationship breakdown; and longer opening hours and shorter waiting times.
•
Participants felt that advice services should promote themselves by emphasising their
difference from commercial debt companies, in providing a free, independent and
non-profit making service. Another key message to encourage people to use advice
services was the importance of communicating the practical help that can be provided
in a confidential and non-judgemental setting and letting people know that debt is a
common experience.
•
There was a call for action to be taken against pay day loan companies, for example
banning advertising of high interest loans aimed at people in financially vulnerable
situations, encouraging loan companies to behave more responsibly in offering
access to unaffordable credit and to be flexible about reducing payment levels.
•
A number of areas of development were identified that would be worth addressing.
These include:
o Promoting awareness of existing sources of advice and support
o Improving engagement with advice and support services
o Improving the service provided to residents by advice and support services
o Helping to build residents’ financial capabilities
o Providing more holistic support
o Timing support with key life stages or crisis points and
o Utilising the advice capacity of existing support roles e.g. social workers
Key learning about specific groups
Young people
• Young people with unmanageable debts felt pressure to prioritise spending on social
life and appearance. A key life stage at which they appeared to be most at risk of
getting into problem debt was when they left home to live independently.
•
Young people lacked financial literacy and were vulnerable to accessing unaffordable
credit. They also had low levels of awareness of advice services. Increasing their
financial capability and encouraging saving were considered important in order to
establish a lifelong healthy approach to money.
•
A suggestion for promoting debt advice to young people was through the media and
social media like Facebook and Twitter or face to face in places such as the Angel
centre. Social activities or meetings were suggested as good opportunities to increase
awareness of the risks of getting into debt.
Experiences of Debt and Debt Advice Services in Islington
4
Parents
•
For parents, particularly those with more than one child, costs such as buying nappies,
baby food and school uniforms put considerable strain on budgets. Parents were
particularly vulnerable to overspending on birthdays, at Christmas and during holidays.
Overspending was a particular struggle for lone parents and was made more difficult
where child support was not being paid by absent parents, causing additional financial
strain.
•
Parents distinctly prioritised their children’s needs to the sacrifice of their own when
making decisions about spending. Skipping meals so that their children could eat was
not uncommon if food was low. Parents described feeling guilt and shame about
putting their children through financial hardship and denying them small luxuries as a
result of their debt problems.
Residents with ‘manageable’ debts
• Residents with ‘manageable’ debts had stronger money management skills and
greater financial awareness; they were aware of the risks of borrowing from high
interest loan companies, were generally more credit averse, and only borrowed from
affordable sources of credit such as friends and family. They were also able to limit
their expenditure more effectively.
•
Help from support workers such as social workers, student welfare advisers and
housing office outreach workers as well as strong parental examples of credit
averseness or bad experiences with credit appeared to have built the financial
capabilities of this group.
Research design
This study used a qualitative research methodology to hear the views of residents. It was
comprised of 18 in-depth interviews, nine focus groups and one consultation group.
Residents who took part had recent or current debt, excluding mortgages. People taking
part in the study had experience of a range of different kinds of debt and credit, some had
experience of using advice services but some had not been in touch with any advice
services.
Experiences of Debt and Debt Advice Services in Islington
5
1 Introduction
1.1 Research context
This study has been commissioned by Islington Council, on behalf of the Islington Debt
Coalition (IDC). The IDC is a partnership of various statutory and voluntary sector
organisations from across the borough of Islington working to tackle the issue of
indebtedness in the borough. The Islington Fairness Commission has described debt as a
significant issue in Islington that disproportionately affects the lives of people on low
incomes1. This study informs one aspect of the IDC’s 2011 strategic goals2, which is to
develop their understanding of the attitudes of Islington residents to debt, their related
behaviours, and their views on and experiences of debt help and advice services.
This study builds on previous work portraying debt in Islington carried out by Rocket
Science. This includes Invisible Islington3, a Cripplegate Foundation study into
experiences of poverty in the borough and Consumer Debt in Islington commissioned by
the IDC. Consumer Debt in Islington is a 2010 analytical report that used consumer data
to analyse and map the extent, location and type of consumer debt across the borough. It
found an even spatial distribution of debt across the borough, little correlation between
levels of income and consumer debt and similarity between the characteristics of Islington
residents in debt and those living elsewhere in the UK.
According to Credit Action’s debt statistics4 personal debt in the UK stood at £1,451 billion
at the end of September 2011. Calculations by the same source quoted household debt
(excluding mortgages) at £8,025 per household. On the basis of the governments’
economic projections personal debt is set to increase from £1.5 trillion in 2010 to £2.1
trillion in 2015. While personal debt is acknowledged as an effective financial tool, a
growing body of research indicates that for many, and particularly low income and
financially excluded households, personal debt is increasingly crossing the line from being
functional to problematic.
There are mounting concerns that problem debt will be further exacerbated by reforms to
the welfare system, more specifically caps on housing benefit and the introduction of
Universal Credit, and compounded by persistent unemployment, stagnant wages,
increasing costs of living and soaring energy prices5. These circumstances may further
1
2
3
4
Islington Fairness Commission (2010) Closing the Gap. London: London Borough of Islington
Debt Coalition Strategy (2010) Islington Debt Coalition
Cripplegate Foundation (2008) Invisible Islington: Living in Poverty in Inner London, Rocket Science UK Ltd
Credit Action Debt Statistics [Accessed 21 Oct 2011 http://www.creditaction.org.uk/helpful-resources/debt-statistics.html]
5
Joe Cox, Kevin Gulliver and John Morris (2011) On the Margins Debt, Financial Exclusion and Low Income Households.
London: Compass
Experiences of Debt and Debt Advice Services in Islington
6
fuel the use of unaffordable sources of credit among low income households, who are
finding themselves increasingly excluded from accessing affordable credit6, trapping them
into a perpetual ‘cycles of debt’7. Further to this the Islington Fairness Commission has
warned that within the context of increasing unemployment, rising personal debt could
serve to exacerbate poverty and inequality in the borough.8
For organisations providing debt advice, public-sector funding cuts are also creating new
challenges at a time when demand for such service is on the increase. Government
spending cuts have resulted in a decline in the advice and support available to people
experiencing problematic debt on a national and local level9. Research carried out for a
2009 Citizens Advice report10 found that enquiries about debt had doubled in the previous
10 years, and also highlighted the prevalence of different types of debt (arrears on
housing costs, Council Tax, essential household bills) and of individuals with large
numbers of credit debts (overdrafts, credit cards, HP, personal loans).
This research study will help inform IDC’s aim to minimise the impacts of the spending
cuts on the quality of debt advice and support provision in the borough. It contributes
residents’ perspectives of debt advice needs, the quality and gaps in service provision and
ideas for debt prevention and service design. While this is an Islington focussed piece of
research, the findings of this study bear some similarities with other research into
experiences of debt (particularly chapter 2 findings) and may hold wider inference in other
urban or even national contexts.
1.2 Research aims and objectives
Within this context, the study sought to develop the IDC’s understanding of the attitudes of
Islington residents to debt, their related behaviours, and their views on and experiences of
debt help and advice services. The experiences of young people living in social housing
with debt or money troubles were of particular interest in the study, due to the emerging
Increasing Finance Confidence priority.
The key objectives for the research are to:
6
7
8
•
Map residents’ attitudes and behaviour in relation to debt
•
Describe how household finances are managed
•
Describe what help and services have been sought and
•
Identify barriers that prevent help and advice being accessed
ibid
A term expounded in Dearden et al (2008) Credit and Debt in Low-Income Families. Joseph Rowntree Foundation
Islington Fairness Commission (2010) Closing the Gap. London: London Borough of Islington
9
There has been a significant reduction in revenue funding for local government settlements from which many specialist
projects have derived funding. In addition to this prohibitions to legal aid have impacted on the provision of advice and
support for residents facing difficulties.
10
Citizens Advice (2009) A life in debt: The profile of CAB debt clients in 2008
Experiences of Debt and Debt Advice Services in Islington
7
1.3 Research design
1.3.1 Data interactions
A qualitative methodology was designed for this study. The achieved design comprised 18
in-depth interviews, nine focus groups and one consultation group. A total of 87
participants were included in the study.
All data interactions were conducted using a topic guide to ensure similar sets of issues
were discussed. Interviews were conducted using responsive questioning and probing so
that all relevant issues were explored as fully as possible. The topic guides were
designed in collaboration with IDC and are shown in Appendices C, D and E. Participants
received £20 for taking part in interviews and focus groups and £50 for participating in the
consultation group.
In depth interviews were used to gain detailed individual accounts of getting into debt,
addressing debt problems and preventing debt as well as experiences and views of
accessing help and debt advice. Interviews lasted up to an hour and half and were held in
participants’ homes or in quiet local spaces.
Focus groups were aimed at exploring individuals’ views and experiences of available
help and advice services as well as barriers to accessing and continuing contact with
services. In addition, focus groups provided an understanding of what had been helpful to
service users and of the ways in which participants thought services could be improved.
Focus groups lasted up to an hour and a half and were held in venues across Islington.
The consultation group was held after the conduct of interviews and focus groups. It
aimed to reconvene study participants to present key research findings to them and to
brainstorm ways in which debt advice services could better meet the needs of Islington
residents. This session focussed on generating ideas for preventing debt, promoting debt
advice services, improving the customer experience and designing service provision and
promotion for young people.
1.3.2 Sampling and recruitment
An opt-in approach was used to generate the study sample. Residents who were eligible
for the research were required to have been in recent or current debt, excluding
mortgages. The study sought to include residents who were experiencing problems with
their debts and a screening questionnaire was used to ascertain this. It asked whether
potential participants had missed any payments on rent, bills, credit cards etc, whether
their debts were a source of worry to them, and whether they felt unable to repay their
debts. A further group targeted for inclusion in the study were residents who had not yet
accessed any services for advice or support about debt. The sample aimed to achieve a
diversity of characteristics including gender, age, ethnicity, debt level, household income,
housing status and employment status.
Experiences of Debt and Debt Advice Services in Islington
8
Participants were invited to opt-in to participate in the study by freephone, email or by
returning a form to the research team. A number of different approaches were used to
engage residents. These included:
•
Sending letters followed by doorstep recruitment to residents in four areas in
Islington which featured in the 618 ‘worst’ postcodes, identified in the Consumer
Debt in Islington report. The areas included social housing as well as privately
owned addresses
•
Sending letters out to 400 housing benefit recipients in rent arrears and
•
Enlisting the help of a range of advice services and housing offices in Islington
who promoted the research among residents known to be experiencing debt.
1.3.3 Achieved sample
The ability to draw wider inference from qualitative research depends, in part, on the
nature and quality of sampling. The rationale in selecting those to be interviewed is to
ensure diversity of coverage across certain key variables rather than to select a sample
that is statistically representative of the wider population. Purposive sampling of this kind
provides the opportunity to identify the full range of factors, influences and experiences
underlying the research questions.
Table 1.1 breaks down the total sample according to the sampling criteria.
Table 1.1
Characteristics of total sample
Gender
• 47 female
• 40 male
Ethnicity
• 44 white
• 43 BME
Housing
• 65 council housing
• 3 home owner
• 19 private renter
Income
• 78 below 20k
• 9 above 20k
Employment Status
• 51 on out of work benefits
• 17 employed full time
• 8 employed part time
• 4 student
• 7 retired
Disabilities
• 81 not disabled
• 6 disabled
Parental Status
• 17 couple
• 29 lone parents
• 41 non-parents
Debt Level
• 9 no current debt
• 46 below 5k
• 23 between 5-15k
• 9 above 15k
Age
• 9 18-24
• 57 25-55
• 21 over 55
Full sample details are provided in the Appendix F at end of this report.
The final achieved sample was reflective of the characteristics of residents identified in the
Consumer Debt in Islington report as likely to be experiencing debt. This found Islington’s
indebted population to represent a high prevalence of females; black and minority ethnic
(BME) groups; lone parent households; and social renters. Almost forty per cent of
Experiences of Debt and Debt Advice Services in Islington
9
participants (33 in total) said they had not accessed a debt advice service when they
opted into the research11.
1.4 Analysis of data
Verbatim transcripts of the interviews were analysed using ‘Framework’, a method
developed by the Qualitative Research Unit at NatCen (Ritchie, Spencer and O’Connor,
2003). The first stage involved familiarisation with the transcribed data and identification
of emerging issues. This informed the development of a ‘thematic framework’, which
produces a series of thematic matrices or charts, each chart representing one key theme.
The column headings on each thematic chart related to key sub-topics and the rows to
individual participants. Data from each case was then summarised in the relevant cell.
1.5 Reading this research report
Verbatim quotations and case illustrations are used to illuminate findings. Each label
begins with the type of research interaction, i.e. interview, focus group or consultation
group, followed by the interview or group serial number, the participants’ gender, age
group and debt level. Further information is not given in order to protect the anonymity of
research participants. Quotes and case studies are drawn from across the sample.
Names have been changed in case studies as have any other details needed to preserve
anonymity.
The report deliberately avoids giving numerical findings, since qualitative research cannot
support numerical analysis. This is because purposive sampling seeks to achieve range
and diversity among sample members rather than to build a statistically representative
sample, and because the questioning methods used are designed to explore issues in
depth within individual contexts rather than to generate data that can be analysed
numerically. What qualitative research does do is to provide in-depth insight into the
range of experiences, views and recommendations.
1.6 Structure of the Report
The next four chapters of this report examine the main objectives of the study.
Chapter 2 begins by profiling the experiences of debt and then goes on to discuss the
nature of participants’ transitions into debt and the factors that affected how manageable
debt experiences were.
Chapter 3 explores the ways that participants responded to being in debt in terms of
dealing with their debts and reorganising their finances and describes the impacts of living
in debt on day to day life and health and wellbeing.
11
It transpired in interviews that some of these participants had in fact accessed a debt advice service in the past.
Therefore this figure may in reality be smaller.
Experiences of Debt and Debt Advice Services in Islington
10
Chapter 4 presents the ways in which participants had used different types of service or
financial support to try to help their debt situation and describes participants’ views and
experiences of using available support.
Chapter 5 presents key learning from debt experiences and recommendations from a
resident focussed perspective.
The final chapter draws conclusions from the findings of the study and discusses
participants’ recommendations for improvement to debt advice and support in the
borough.
Experiences of Debt and Debt Advice Services in Islington
11
2 Causes of unmanageable debt
Chapter 2 Summary
•
While all experiences were of ‘problem debt’, some were ‘manageable’ debt
situations and others were ‘unmanageable’. Manageability depended on each
individual’s circumstances, including whether they could afford their debts and the
repayments; the severity of the repercussions if they couldn’t; and their own
financial capabilities.
•
Debt experiences had been triggered by a range of personal and financial
circumstances however not all debt experiences had specific triggers. Some were
made up of numerous debts that had accumulated over time.
•
The extent to which debt experiences became unmanageable appeared to depend
on:
o
Ability to withstand financial shortfalls: living on low incomes and lacking
surplus income made withstanding shortfalls difficult and caused problem debt.
Shortfalls were caused by delays in the receipt of income such as wages or
benefits, having to cover unexpected expenses such buying a replacement
fridge, and also by increasing costs of living.
o
Financial capability: how effectively personal finances were managed
influenced how manageable debts became. A lack of budgeting and saving as
well as overspending, over-borrowing and ignoring bills and debts were
characteristic of unmanageable debt. Participants with good levels of financial
literacy and awareness had more manageable debts. They were aware of
sources of affordable credit and of the risks of borrowing from high interest
money lenders.
o
The external conditions of the debt environment: charges, penalties and fines
associated with debt made it difficult to repay debts particularly for people on
low incomes that stretched only so far as essential expenses. Misleading
invitations to access ‘help’ with debts by high interest money lenders, if taken
up, were also seen to lead to unmanageable debts.
Experiences of Debt and Debt Advice Services in Islington
12
This chapter starts by profiling the debt experienced by participants of the study. It goes
on to discuss the nature of participants’ transitions into debt and the factors that affected
how manageable debt experiences were.
2.1
Profiles of debt
2.1.1 Levels and types of debt
Participants of this study were Islington residents who were currently experiencing or had
recently been in debt. A small number of participants did not have any current debt: this
group consisted of young people, aged 18-24, who had previously fallen into arrears and
who had borrowed small amounts of money in the past. This group also contained a
person who following bankruptcy was no longer in debt.
Of those with current debts, these debts were made up of multiple amounts owed to
different sources. They included:
•
Fines such as parking tickets
•
Arrears for energy bills, rent, council tax, phone bills, mortgages and car insurance
•
Unpaid fees including educational course fees and lawyers fees
•
Sums owed to banks such as overdrafts, credit card bills and bank loans
•
Loans including personal loans borrowed from friends and family, student loans,
credit union loans and short term loans acquired through companies such as
Provident, payday loans companies, Cash Convertors, pawn shops, the
MoneyShop and Wonga.
•
Amounts owed to the government due to benefit overpayment, benefit fraud and
crisis funds/ social security loans and
•
Store and catalogue credit.
Included in this group were residents who had been through bankruptcy and had since reentered debt as well as individuals who had repaid some debts in the recent past but still
had others.
Previous and current debts ranged from amounts worth £20 to those worth over £40,000.
Larger debts tended to be those owed to personal banks and consisted of overdrafts,
bank loans and credit card bills as well as student loans. Where young people had
substantial debts e.g. £23,000, these were made up largely by student loans. Smaller
debts were generally those owed to family and friends and short term or payday loans
companies.
Being in debt was relatively new to some people while others had been in debt for at least
10 years. Pinpointing the length of time individuals had been in debt was sometimes
difficult because it was not always clear to participants when they had got into debt,
Experiences of Debt and Debt Advice Services in Islington
13
particularly if they had several debts or if they could not isolate particular trigger points or
causes for their debt situation.
2.1.2 Definitions of debt
Two key definitions of debt (as illustrated in the diagram below) have been formulated by
the authors for the purposes of this study and are referred to throughout the report. These
definitions are based on discernible differences between the debt experiences of study
participants. The first definition is of ‘problem debt’ which is any debt that has negative
impacts on the owner, whether financially or in terms of health and wellbeing. In contrast,
‘functional debt’ causes relatively little or no negative impact on the owner. For example
owing and repaying a mortgage or student loan may cause no anxiety to the individual
and have little or no negative financial impact.
Due to the way participants were sampled12 negative impacts were experienced across
the study sample therefore all debt experiences relayed in this study could be defined as
‘problem debt’. The extent to which debts were problematic naturally ranged in severity.
Participants in our sample, who were all experiencing problem debt, can be divided into
two further types: those in manageable debt and those with unmanageable debt.
Manageability depended on the individuals’ circumstances rather than the type or level of
debt. Defining factors are based on:
•
How affordable debts were for the individual in terms of the costs of borrowing
•
The severity of sanctions available to the creditor should repayment become an
issue for the individual
•
The affordability of repayments for the individual, and
•
The financial capabilities of the individual.
Figure 2.1
Definitions of Debt
12
With a focus on people experiencing problems with debts such as falling into arrears, worrying about their debts or
feeling unable to repay their debts
Experiences of Debt and Debt Advice Services in Islington
14
2.2
Transitions into problem debt
This section describes participants’ transitions into manageable and unmanageable debt.
Factors contributing to the manageability of debt situations are discussed in the following
section.
2.2.1 Transitions into ‘manageable’ debt
Participants with manageable debt experienced specific triggers to debt, before which
they had had little or no prior experience of debt. Debt in this group was triggered by the
overpayment of benefits, or administrative errors such as wages not being paid on time
and for one participant a delay in receiving her 16+ oyster card. Such errors could have
resulted from participants not providing accurate or timely information as well as office
errors. Other causes of debt included temporary difficulties finding work after moving to
the UK, and paying university costs. Where these initial debts were not repaid swiftly they
led to one or two other debts that participants were repaying such as rent, council tax or
utility bill arrears or overdrafts. Borrowing was restricted to loans from friends or family or
social security funds rather than short term money lenders while larger amounts consisted
of student loans. These sources of credit helped to keep participants afloat and their debts
manageable.
2.2.2 Transitions into ‘unmanageable’ debt
Participants who made transitions into unmanageable debt fell into two further groups,
those whose debt experience was triggered by a specific event, such as a change in
either personal or financial circumstances, and those who accumulated numerous
unrelated debts sporadically without a discernible cause or trigger point.
For those participants whose debt experiences followed on from a particular point, triggers
included late benefit payments, redundancy, unexpected healthcare costs, falling victim to
fraudulent activity and bereavement. The types of debt incurred included arrears for rent,
council tax, fuel debt (utility bills) and mortgage repayments as well as credit card bills and
overdrafts. This group borrowed from family and friends as well as short term money
lenders. Borrowing money from the latter source contributed to unmanageable debt.
Where debts were not triggered by specific events, debt histories were longer and more
sporadic and resulted in multiple debts being incurred for different and sometimes
unrelated purposes. These included a range of different debt types such as arrears on
rent and bills, credit cards, overdrafts, bank loans and high interest short term loans,
which when totalled equalled significant amounts.
2.3
Factors affecting pathways into ‘unmanageable’ debt
For study participants, being in debt, whether defined as manageable or not, had serious
repercussions on individuals’ day to day lives and health and wellbeing (see chapter 3).
Therefore debt for all study participants had in some way impacted negatively on their
Experiences of Debt and Debt Advice Services in Islington
15
lives. However the extent to which debt experiences became unmanageable appeared to
depend on three main issues, explored below:
•
Individuals’ ability to withstand financial shortfalls;
•
Individuals’ financial capability; and
•
The external conditions of the debt environment.
It is important to note that individual experiences of debt were complex and multi-faceted
and may have been compounded by a number of factors described in turn below.
2.3.1 Ability to withstand financial shortfalls
Some debt situations were caused by participants’ inability to withstand sometimes
unexpected financial shortfalls such as late payment of wages or benefits or unanticipated
expenses such as replacing a broken refrigerator. Inability to cope financially with such
circumstances, even when they were temporary, was underpinned by living on low
incomes and lacking surplus income to cover variable expenses such as monthly phone
bills or direct debit payments, as well as the overdraft charges imposed for failing to meet
these costs. This is demonstrated by the following case illustration:
Case illustration Interview 12
Michelle was an NHS bank worker whose hours of work were accidentally not
logged one month which meant she did not receive her monthly pay. As a result
her direct debit payments for various bills failed to go through. She was charged
by the bank for the failed direct debits, lived off her overdraft for the month and
also fell behind on her phone bills. Although her wages were paid to her the
following month she was now already in debt.
This example may also serve to highlight the impact of being in temporary, flexible work
with a risk of administrative errors such as wages not being paid on time and therefore the
likelihood of getting into debt. In another example a participant in short term acting work
described having to reapply for housing benefit every time he became unemployed. It was
during the six week wait for payment that he tended to get into debt. Due to delays in
benefit payment and irregular income associated with short term, flexible employment,
being in work was seen to lead to worse debt than being on benefits,
Every time I get in to a job and I come out of it I get in to more debt than when I'm
not working. When I'm not working housing benefits takes care of it. (Focus Group
7)
Financial shortfalls were also attributed to increased costs of living triggered by recession.
Being able to deal with such costs was said to be increasingly difficult because benefits,
such as Jobseekers Allowance and Income Support, and wages were not keeping up with
inflation. Amongst the unemployed finding work was thought to be getting harder.
Experiences of Debt and Debt Advice Services in Islington
16
Participants, regardless of whether they were in full time work or not, described struggling
with the costs of everyday items such as food and with fuel debt, in the form of rising
energy bills. This had led to some participants putting off turning the heating on. For those
who felt Islington was a particularly expensive borough in terms of rent and food these
increases caused further debt. One participant who was already in full time work felt
getting a second job was the only route out of debt and financial hardship.
2.3.2 Financial capability
Individual financial capability, which includes people’s ability to manage finances as well
as financial literacy, was a further factor influencing whether participants accumulated
unmanageable debt.
Approach to money management
Participants who were experiencing manageable debt tended to limit their spending, knew
about and used money saving techniques, such as shopping near closing times when
more items would be reduced, and borrowed money from affordable sources only such as
friends and family, personal banks, the Salvation Army or crisis loans. The following case
illustration provides an example of this approach.
Case illustration Interview 5
After losing her husband Claire claimed a one-year Bereavement Allowance.
Her notification that the year had ended was not recorded she was later told
she owed the council £200-400. The monthly repayment caused her to struggle
to meet her monthly expenditure and she could not work any additional hours
due to sickness. In the year it took her to repay the debt she budgeted her
money carefully and only borrowed money from family members to cope
financially. She explained, “I just budget quite well. [By]Spending as little as
possible […] I will get the bargains and by the cheapest of things that I can. ”
Poor money management, characterised by a lack of budgeting, overspending, overborrowing and ignoring bills, caused and compounded unmanageable debt situations.
While overspending occurred across participant groups it affected two groups in particular.
First, parents and particularly those with more than one child experienced difficulty
meeting costs such as buying nappies, baby food and school uniforms which were felt to
be costly. Parents felt pressure to buy children expensive items such as designer clothing
and worried that they would otherwise be bullied at school. Christmas, birthdays and
holidays also placed pressure on parents to spend beyond their means. Overspending
was a particular struggle for lone parents and was made more difficult where child support
was not being paid by absent parents.
Young people described feeling pressure to spend money on their appearance and to
maintain an active social life. The 18-24 year olds in this study were conscious that young
Experiences of Debt and Debt Advice Services in Islington
17
people faced temptation to live beyond their means due to the influence of their peers and
examples of celebrity lifestyles in the media. A further view expressed was that young
people had faster paced lives that made it difficult to manage spending. There was a
perception among young people that they had less predictable incomes and more
spontaneous social demands compared to adults with stable jobs who had ‘settled down’.
However, young participants’ debt experiences were also very much related to their ability
to manage money and prioritise spending. Young people who were experiencing
unmanageable debt tended to prioritise spending on social life and appearance. They
were not working and borrowed money from friends as well as short term money lenders.
One participant explained,
It’s easy to get in debt because you want to enjoy yourself and not go without, so
you want to go and buy things. You know, you probably get in debt but it’s all for
the moment, innit, rather have than not (Interview 17 Male, age 18-24, debt below
£5k).
In contrast those young people with manageable debt avoided money lenders and instead
borrowed small amounts from friends and family (this is discussed further in chapter 4).
They were also working, budgeting and consciously avoided spending money on
appearance and social activities as shown in the following two case study examples.
Case illustration Interview 15
Sara, 18 works part-time while studying A Levels. Sara wanted to get a job as
soon as she could to help her parents as they had been struggling financially for
some time. Every month Sara keeps travel and food money from her wages and
Educational Maintenance Allowance and gives the rest to her parents. Unlike her
friends Sara only buys clothes that are reduced and shares clothes with her
mum to save money. When she has needed expensive items, such as software
for her college course, she saved a small amount every month until she could
afford it, on the advice of her student welfare adviser.
Case illustration Interview 18
Caroline, 24 recently moved back to Islington after graduating from university.
Her student debt includes a loan and a student overdraft. Although she works full
time she struggles to pay off her overdraft and to meet the costs of rent in
Islington. To keep her spending low she avoids going out and invites her friends
round instead. She also tries to shop for food out of the borough where she finds
she can get more for less, in markets rather than grocery chains. When money is
short she borrows from friends and family.
There were a number of factors that made it difficult for individuals to manage their
finances. Substance misuse, gambling, and mental health problems reportedly led to
Experiences of Debt and Debt Advice Services in Islington
18
problematic spending and borrowing and prevented staying ‘on top’ of finances. Spending
time in hospital as a patient or a carer diverted participants from paying bills or
repayments on debts and led them to further debt.
Poor money management also occurred among individuals who were taking up
responsibility for finances for the first time and were unfamiliar with managing money. It
affected two key groups:
•
Individuals who following divorce or bereavement became responsible for money
management for the first time; and
•
Young people making the transition from living with parents or guardians to living
independently for the first time. Leaving home to live out at university caused some
young people to spend more and led to borrowing from loan companies and
incurring credit card bills.
Both groups experienced difficulty acclimatising to planning and managing spending and
keeping up with bills and rent.
Addressing debt
Putting debts off resulted in them growing to unmanageable levels due to the accrual of
charges and interest rates. For one participant with parking fines, ignoring them and
missing repayments caused the money she owed to accumulate to almost £700.
Participants who addressed their debts quickly and prioritised repayments over other
expenditure tended to end up with debt which was more manageable. One participant
explained that to her it was,
Just a case of well, okay I've got to pay the money back. I can't say I can have a
new coat I just have to keep the scruffy one until I can afford a new one…... As
soon as I had the money, 'cause I would sort of keep a check and a book, right,
okay I've borrowed that, borrowed that, okay I can pay that bit back. Um, so I
mean over the years yeah they've all got it back. (Interview 5, female, age 25-55,
below £5k)
Financial literacy and awareness
A final factor relating to financial capability that influenced whether participants ended up
with unmanageable debt was individuals’ financial literacy and awareness. As mentioned
earlier participants whose debts appeared more manageable chose to borrow money only
from affordable, low or no interest sources such as family and friends, banks and social
security funds. These choices were underpinned by an awareness of sources of
affordable credit and of the risks of borrowing from high interest money lenders.
In contrast, decisions to take out high interest loans were sometimes supported by low
levels of financial literacy and awareness and a lack of understanding of conditions for
credit. There were also examples of participants who entered their overdrafts without
Experiences of Debt and Debt Advice Services in Islington
19
being fully aware of the extent of charges and individuals whose credit limits increased
without their knowledge. Advertising for short term loans was seen to be deliberately
misleading with companies claiming to offer ‘free money’ or ‘help with clearing debts’.
Lack of awareness of the implications of buying into such products was seen to result in
part from full details being written in small print which was rarely read. In addition the
language used to explain terms and conditions was felt to be confusing for customers with
low financial literacy and learning disabilities.
There was evidence to indicate that some young people lacked financial literacy,
particularly in relation to their benefit entitlements and the meaning of financial language
in correspondences from creditors.
[It’s been] two years now [that the participant has lived independently] and I'm still
confused, I am baffled, I am actually, they send me a letter saying this, I'm like
what? Why am I getting this kind of letter, I don't understand what this is, what's
the percentage on blah, blah, what's the interest on blah, I don't know. (Focus
Group 7)
There were also cases of young people seeming particularly vulnerable to accessing
unaffordable credit. As shown in the following case illustration, young people could be
attracted to products offered by companies who targeted adverts at them and were not
fully aware of the repercussions of accessing high interest credit without the means to
repay it.
Case illustration Focus Group 1
Emma moved into her own council flat at 16 after her grandmother died. She
was approached by catalogues, TV, phone and internet companies and took up
their services. As she wasn’t working she couldn’t pay her bills. She is still in
debt with catalogues over 10 years later.
A lack of awareness of the conditions for financial products could also lead participants
into unmanageable debt, as demonstrated by the following case illustration.
Case illustration Interview 9
Mehmet’s took out five loans to pay the costs associated with his wife’s and
mother’s ill health. He then had a serious road traffic accident and was signed off
work. He was not previously aware of the small print stating his repayments
would be not be covered by his insurance policy if he was not working. Due to
interest charges his debts escalated to £40,000 and feeling he couldn’t repay
them, he filed for bankruptcy.
Experiences of Debt and Debt Advice Services in Islington
20
Although unmanageable debt was partly due to a lack of financial literacy and naivety
around the costs of credit, it also sometimes resulted from conscious and informed
decisions to access unaffordable sources of credit. These decisions were underpinned by
a real need for money with nowhere else to turn and also by individual character traits that
were attracted to instant money and enabled individuals to borrow without thinking about
the consequences. In these cases entering unmanageable debt was attributed to being
‘lazy’ and ‘reckless’; by one participant’s admission,
I'm very, very bad with money, very, very bad […], I'm just, probably reckless.
(Interview 7, male, 25-55, above £15k)
This is exemplified by the following case illustration.
.
Case illustration Interview 10
Hayley, a lone parent of two, was not paid her Income Support one month.
Although she wanted to avoid taking out a short term loan because of the high
interest rates she felt this was the only option available to her. She could not
repay after the stated 24 days and due to interest charges and fines the sum
reached £700 and continues to grow. Although this loan was taken out of need
Hayley has since borrowed money totalling over £4000 from a variety of different
sources including Wonga, Provident, Oakham, a debt collection agency, and a
friend. Hayley blames her first debt on her lack of financial knowledge, "I actually
took it out knowing the money wasn’t going to be there. I was stupid like that at
that point." However she continues to try to borrow money to maintain the
lifestyle she wants, "I was short this week and I’ve got somewhere to go on
Friday, I’ve got a party to go to. And only the other day I went online to see if the
company QuickQuid would lend me some money."
2.3.3 Conditions of the debt environment
The external conditions of the debt environment such as the costs associated with getting
into debt as well as the conditions through which credit was provided also affected how
manageable debt became.
Costs of debt
A key factor leading to unmanageable debt was the cost associated with getting into debt.
This included charges or fines for overdrafts, missed direct debit payments and missed
loan repayments, phone call charges for ringing up creditors made worse by being put on
hold, bailiff charges and the accrual of interest. Additional charges were seen as a key
reason for remaining in debt and not being easily able to pay it off. For participants on low
incomes whose incomings stretched only as far as essential outgoings, paying off these
charges was beyond them and was thought to lead to spiralling debt as illustrated in the
diagram below (figure 2.2).
Experiences of Debt and Debt Advice Services in Islington
21
In one participant’s words,
Because then you try and get yourself out of debt by paying your actual debts off,
but then you have this added amount then of the interest. (Focus Group 5)
Figure 2.2
Debt spiral resulting from low income and charges and fines
Bank charges for overdrafts and missed direct debit payments were seen as unfair by
participants who felt banks were
Allowing me to go one pound overdrawn and then charging me, you know, 25- 30
quid […] it's stealing my money. A sort of multi-million, mega, mega, mega-trillion
thing against me, it's disgusting, it's absolutely appalling. (Interview 12 female, age
55+, debt below £5k)
This was seen as particularly unfair where charges had resulted from administrative errors
which were beyond participants’ control such as wages not being paid on time and
alongside the view that banks actively encouraged payment by direct debit. There was
evidence of banks sometimes retracting these charges, but participants did not always
feel they had the energy to appeal against bank charges.
I'm asking, I'm begging for them to give me my money back that they've stolen off
me […] when you're working full time you're so exhausted you don't want to go
running around banks and arguing and stuff like that, you [...] want to get stress out
of the way. (Interview 12 female, age 55+, debt below £5k)
Another constraint faced by participants was not being permitted to withdraw from long
term contracts, despite not being able to pay bills. For example when one participant lost
Experiences of Debt and Debt Advice Services in Islington
22
her job and struggled to pay her phone bills she wasn’t allowed to end her 12 month
mobile phone contract. As a result, missing payments got her deeper into debt. She
explained
There’s no way of getting out of it. You can't give them, like a month's notice to
say, you know, 'I've recently lost my job; I can't afford this anymore'. It's like, 'Well,
you've signed up to a 12-month, 18-month contract; you're obliged to pay it’ (Focus
Group 2)
Access to unaffordable credit
Participants felt there had been a recent rise in companies offering short term loans at
high interest rates (for example payday loans) and efforts by these companies to attract
customers were seen to make it easier to get into highly unmanageable debt situations.
Participants described being contacted directly by such companies by phone or SMS and
seeing adverts for them on television. For those who had engaged with these services, it
had been easy to access short term loans quickly without having to answer many
questions,
I just went on the site, filled out the application form, and then you press submit
and they come back with ‘yeah, the money will be in your account within an hour’.
(Interview 10, female, age 25-55, debt below £5k)
While the choice and responsibility of individuals who access such loans cannot be
ignored, it was felt that companies granted access to funds fully aware that consumers
would struggle to repay them. This did not just apply to payday loans companies; a homeowner felt that a bank had offered him a mortgage knowing that based on his salary he
would not be able to afford the repayments.
These issues are discussed further in chapter 4.
Experiences of Debt and Debt Advice Services in Islington
23
3 Responses to debt
Chapter 3 Summary
•
Responses to debts included avoiding them or addressing some or all of them.
There were three key factors influencing whether participants took action to
address their debts or not:
o
Perceived repercussions of being in debt: perceived repercussions such as
debts eventually being wiped clean, or repossession either prevented or
prompted action. Communications about sanctions from creditors often
prompted action and these debts were prioritised. However they were not
necessarily ‘priority’ debts, as defined by the CAB.
o
Perceptions of the manageability of debt: While smaller debts were more likely
to be being repaid, larger debts were automatically seen as unmanageable
and their repayments affordable. This paralysed action to address them.
o
Individual attitudes toward debt: Participants who expressed the strongest
discomfort and aversion to the idea of owing money had instigated repayment.
•
The reorganisation of income and expenditure was a further response to living in
debt. This was achieved by prioritising different types of household expenditure,
limiting overall expenditure and increasing household income.
•
Living in debt was associated with considerable financial hardship which limited
participants’ day to day lives. It led to feelings of shame, embarrassment, guilt and
inadequacy as well as social isolation.
•
Living in debt also impacted negatively on health and wellbeing. Concern over
ability to repay debts, experiences of being chased by creditors and being
threatened with bailiffs caused issues such as clinical depression, stress, anxiety,
worry, sleeplessness, fear and paranoia.
This chapter looks at the ways that participants responded to being in debt: the ways in
which participants dealt with their debts (3.1) and then the ways they reorganised their
finances as a result of being in debt (3.2). Section 3.3 describes experiences of living in
debt, in particular, the ways in which debt has impacted on day to day life and health and
wellbeing.
Experiences of Debt and Debt Advice Services in Islington
24
3.1
Approaches to dealing with debt
Responses to debts included avoiding them or addressing some or all of them. There
were three key factors influencing whether participants took action to deal with their debts
or not, as well as which debts they addressed and which they ignored:
•
The perceived repercussions of being in debt
•
Perceptions of the manageability of debt and
•
Individual attitudes toward debt.
Responses to debt were influenced by what participants thought the repercussions of
being in and remaining in debt would be. There was a sense that not addressing debts
was easier than facing up to them and a belief that not repaying debts could in time result
in them being wiped clean
So obviously sometimes it's better to just run away from it and to ignore it and hide
away than to actually face it and stuff. Especially when, like, people tell you as
well that if you, like, aren't contacted or got hold of for, like, six, seven years they'll
wipe it clean anyway. So it's like, you know, keep running in the hope that you
won't get caught in them six to seven years. (Focus Group 1)
However ignoring debts did not appear to be easy. Communication from creditors about
the negative repercussions of owing money also prompted participants into action
And I think it's when you start realising that you're going to be... you know, that it's
going to debt recovery, you're going to be blacklisted, then you start getting a fear
about it, and I think until then it's just like easy money, isn't it? If I get a credit card
today that's brand new, I mean, you know, I will go and use it and feel quite
comfortable about it, but then when I get the letter saying, 'You owe this', 'Oh no!'
It's almost... it's deceiving. (Focus Group 7)
A sense of the seriousness of the repercussions of different debts led to a ‘pecking order’
for which debts were addressed. There was some evidence that repayments being
prioritised, such as rent arrears, tended to be those believed to lead to more serious
consequences, for instance eviction or repossession of belongings13. Debts considered
less of a priority included those owed to loans sharks who were believed to be powerless
to enforce repayment. However, debts were also prioritised if companies chased
participants, threatened to pass on debts to debt collection agencies or threatened bailiffs,
even if it may not actually have been within their power to take such action.
How manageable debts felt to participants affected decisions to address or ignore
them. Views about how manageable debts were depended in part on the size of amounts
13
This reflects the money advice sector’s advice about priority debts, which include mortgage and rent arrears, gas and
electricity arrears and council tax arrears, court fines, arrears of (child) maintenance, income tax or VAT arrears and TV
licence arrears.
Experiences of Debt and Debt Advice Services in Islington
25
owed. Debts that were being repaid included smaller debts which were viewed as more
manageable amounts. Where debts were large, participants did not always know how to
go about addressing them and this paralysed action to address them because they
imagined repayments would be set too high and repayment periods would be too long.
Case illustration Interview 3
Michael has numerous debts totalling over £15,000. He has just finished paying
off his phone bill arrears which had accumulated because he ignored them. He
feels they took a long time to repay. His largest current debt is to his bank and is
worth £10,000. He got into this debt because he paid some of his previous debts
using cheques from his bank account. He’s avoiding this debt and describes the
situation as “one of those things where you're scared to open letters”. Because
it is a large sum he does not know how to go about addressing it and this is
concerning him.
How manageable debts felt also depended on the affordability of minimum repayments.
There were examples of individuals who felt powerless to repay their debts, because they
felt they had no money to contribute to repayments at all. Debts that were being
addressed included those where instalments were agreed by the creditor and consumer
and set at affordable minimum amounts. Some participants were unaware they could
request smaller repayments. There were examples of repayments from benefit
overpayment, which are automatically deducted from benefit payments, being too large
and leaving the resident with very little to live on.
Decisions to address debts with Debt Relief Order (DRO) or bankruptcy were based on no
longer being able to cope with being in debt, both in terms of managing repayments and
dealing with daily contact from creditors.
Student loans were an interesting variation to this finding. In general they were not a
cause of concern due to the condition that repayments would be deducted only when
salaries exceeded a certain amount. This arrangement meant that repayments would
therefore be affordable. However particularly large student loans, for example one worth
£23,000, were felt to be burdensome and did cause concern because of the size of the
total value and potentially lengthy duration of payment.
Attitudes towards debt also appeared to influence decisions to take action to address
them. Participants who expressed the strongest discomfort and aversion to the idea of
owing money had instigated repayment.
3.2
Approaches to reorganising income and expenditure
The ways in which participants had or were considering reorganising their income and
expenditure included:
Experiences of Debt and Debt Advice Services in Islington
26
•
Prioritising different types of household expenditure
•
Limiting overall expenditure and
•
Trying to increase income.
Regardless of whether participants were experiencing manageable or unmanageable
debt, being in debt caused them to prioritise particular expenses. Priorities were based
around perceptions of essential and non-essential items where for example, rent was
prioritised over utility bills, in response to rising fuel debt: “I'd rather have a cold house
than no house!”. There was however little agreement about which items were essential;
whereas some participants regarded food and heating as essential, others considered
them expenses they were willing to forego.
Parents’ spending priorities distinctly prioritised their children’s needs to the sacrifice of
their own. There were examples of parents skipping meals if food was low so that their
children could eat, of ‘going without’ if their children needed help financially and of
focusing spending on their children rather than themselves. One participant explained,
You're going to put your kids first; you're not going to buy clothes for yourself,
trainers for yourself, you're not going to make yourself feel nice, isn't it, 'cause
you've got debts and you, obviously your kids come first. You've got to buy [for]
them instead of yourself.
(Focus Group 1)
Some participants changed their spending patterns more than others. Closer money
management and restrictions on spending were apparent among participants who had
ended up with manageable debt (as noted in chapter 2). These participants lived very
frugally in order to manage financially. One participant described buying only reduced
foods and second hand items and shopping at car boot sales in order to spend less and to
afford small treats for her grandchildren. These participants also described choosing to
live ‘pay as you go’ lifestyles which involved using pay as you go mobiles rather than
mobile phone contracts and landlines and metered energy rather than quarterly bills.
Although known to be more expensive, these arrangements were seen as preferable
because they meant participants would avoid large and possibly unpredictable monthly or
quarterly bills.
I mean I've got a kind of pay-as-you-go lifestyle anyway, I like pay my electric as I
go, and I pay my gas as I go. […] And I possibly pay a little bit more for that, but
I've got peace of mind […] (Interview 12 female, age 55+, debt below £5k)
Participants who experienced problem debt also attempted to limit their overall
expenditure by changing their personal circumstances. True to today’s ‘boomerang
generation’, young participants had or were considering moving back in with their parents
to save money spent on rent and bills. There was also an example of an older participant
in her 40s wishing to do this but who couldn’t because she had dependents to care for.
Experiences of Debt and Debt Advice Services in Islington
27
Trying to increase income was a further strategy used to cope with debt. Pawning
personal items and looking for work were ways in which participants sought to do this.
3.3
Experiences of being in debt
As mentioned earlier living in debt impacted negatively on all respondent groups,
regardless of how manageable their debt situations were. Impacts on day to day life and
health and wellbeing are discussed separately below, although there is a clear crossover
between the two.
3.3.1 Impacts on day to day life
A key aspect of living in debt for participants of this study was the experience of financial
hardship. It would be fair to say that regardless of whether they addressed or avoided
debt, living under considerable financial strain limited their day to day lives and impacted
on their health and wellbeing (as discussed below).
Feelings associated with being in debt included shame, embarrassment, guilt and
inadequacy. These feelings were linked to participants’ relationships with others, for
example putting family members, particularly children, through financial hardship, not
being able to help others out financially when the need arose and having to borrow money
from family and friends. These experiences had detrimental impacts on relationships.
Embarrassment at appearing poor and feeling too ashamed to discuss debt problems with
friends and family also caused participants to isolate themselves, at a time when they
probably needed the support and confidence of friends and family. Fear of creditors and
bailiffs made social isolation worse, with participants describing hiding themselves away
and not answering the phone or door to callers.
Participants who had applied for bankruptcy or DRO described a combination of relief and
feelings of failure for having to go down this route. Rules limiting subsequent access to
financial products such as basic bank accounts and credit cards were also a cause for
concern.
3.3.2 Impacts on health and wellbeing
While impacts of living in debt on health and wellbeing were overwhelmingly negative,
they ranged in severity. The main factor influencing this was how manageable participants
felt their debt was: how easily it could be repaid; the approach of creditors; and the
repercussions of particular debts such as eviction. Their attitudes towards debt also
influenced how much it affected them.
Impacts ranged from serious mental health issues such as depression, which in an
exceptional case required hospitalisation14, post-traumatic stress and thoughts of suicide.
14
This participant had become unemployed and it may that this as well as other factors contributed to her depression.
Experiences of Debt and Debt Advice Services in Islington
28
Participants with these symptoms described being recommended counselling and therapy
as a result (as described in the case illustration below).
Case illustration Interview 9
As detailed earlier, Mehmet’s debts totalled over £40,000. At the time of taking
out his loans Mehmet had not imagined being unable to repay them. Nearly a
third of his income was spent on repayments and he and his family experienced
severe financial hardship as a result. He received daily phone calls from his
creditors demanding repayment and in response he began rejecting calls from
unrecognised numbers. He could not cope and applied for bankruptcy. He felt
guilty about not repaying his loans because he felt he was going against his
word. His GP recommended counselling as the impact on Mehmet’s health and
wellbeing, which he compares to post-traumatic stress, was severe.
Experiencing mental health issues such as depression appeared to prevent participants
from addressing their debts, and caused them to get further into debt.
Less severe impacts included feelings of stress, anxiety, worry, sleeplessness, fear and
paranoia. These feelings were associated with financial hardship, concern over ability to
repay debt, being chased, and for some feeling harassed, by creditors and being
threatened with bailiffs.
For those who were repaying their debts, addressing the problem caused some relief and
removed anxieties around owing money. However repaying their debts, particularly if
repayments were higher than they had wished, resulted in severe financial strain and this
in turn impacted on mood and happiness.
Experiences of Debt and Debt Advice Services in Islington
29
4 Seeking debt advice and support
Chapter 4 Summary
•
Awareness of debt advice services was generally low, with the CAB being the
exception to this, although participants were not necessarily aware that the CAB
offered specialist debt advice. Awareness about where to find advice and support
was limited, as well as what kind of services might be offered.
•
Participants had been encouraged to seek help with their debt if an organisation or
service was easy and convenient to get to, and if it was somewhere they could
trust: this meant that it should be free, independent, and non-profit-making.
•
There were three different types of barriers to be overcome in getting (or keeping)
in touch with an advice service:
o
o
o
Practical issues around the cost and time of using a service
Negative perceptions of the helpfulness of an advice service and
Personal or psychological issues such as depression, anxiety, or
embarrassment making people reluctant or demotivated to seek help or
support. The latter set of barriers could cause debts to spiral and become
unmanageable.
•
Views on different kinds of borrowing were mixed, and appeared to depend in part
on how much in control someone felt about their situation. Choices about
borrowing were felt to be very restricted and participants felt that they were
vulnerable to the offer of ‘easy’ credit from loan companies, and the accompanying
conditions and charges, although they valued the opportunity to access relatively
easy credit. Taking control and responsibility for their debt situation helped debt
feel more manageable, including negotiating directly with their creditors and
consolidating their debt.
•
Advisers were valued if they were empathetic and understanding, knowledgeable
enough to tailor their advice, and able to spend time helping with budgeting or
managing bills, or negotiating affordable repayments. This kind of practical ongoing
help tended to be valued more than the provision of information.
This chapter presents the ways in which participants had used different types of service or
financial support to try to help their debt situation. The different types of support are
divided into two broad types: debt advice services (discussed in section 4.1) and financial
and credit services (section 4.2). The chapter will describe participants’ views and
Experiences of Debt and Debt Advice Services in Islington
30
experiences of using available support, setting out the range of factors that made an
experience positive or negative, as well as what puts people off using different types of
support.
4.1
Experiences of debt advice services
4.1.1 Use and awareness of debt advice services
Across the sample, a wide range of different debt advice services had been used. Not all
of these services had been initially approached to help with debt, but they had
nevertheless provided debt advice and support.
As described in chapter 1, some participants were recruited to the sample via advice
services (e.g. Islington CAB, Islington Law Centre), so we anticipated hearing about views
and experiences of these services. However, there were also widespread experiences of
a number of other services, and participants who had no contact at all with any advice
services. This latter group included young people who had relatively manageable debt,
but also included participants with significant debt problems.
The following list gives an indication of the range of local and national advice services
which were discussed in the research. On the whole participants had not had contact with
more than one or two services:
Table 4.1
Sources of debt advice
Sources of specialist debt advice
Citizens Advice (national) and Islington CAB
Sources of general advice
15
Age UK
Consumer Credit Counselling Service
Carers Support Services
Help on your doorstep/EC1
Housing Office Outreach Workers
Islington People’s Rights
Islington Council
Islington Law Centre
Local community centres
Legal Aid
Social workers
National Debtline
Commercial debt helpline(s)
Student advisers
16
Solicitors
Family and friends were also sometimes discussed as having given information or advice
about dealing with debt.
15
The Islington CAB was opened in April 2011. Respondents’ comments about the CAB related both to the national
telephone advice service or use of other local services, prior to April 2011, as well as the Islington offices.
16
National Debtline and National Debt Helpline appeared to be used interchangeably among participants on occasion,
although the first is a government website/helpline and the second could be a number of different commercial organisations
who advertise with this strap line.
Experiences of Debt and Debt Advice Services in Islington
31
Similarly, a wide range of types of contact with services were represented, from people
who had made just one or two phone calls and received some information, to people who
had ongoing case-work help with phone calls or letters, and people who had been helped
through a process of obtaining a Debt Relief Order or declaring bankruptcy.
Echoing previous research17, awareness of debt advice services was generally fairly low,
with the CAB being the exception to this. The CAB appeared to be seen as a ‘catch-all’ or
‘default’ advice organisation, where people knew they could go if they needed help:
Most people know about the CAB. They might not know that that's an option for
their debt, you know, that they might be able to go there and have some kind of
scheme where they can consolidate their debts, or whatever. (Interview 12,
Female, age 55+, debt below £5k)
As a result, participants tended to have heard of and have views about the CAB,
regardless of whether they had used it or not, in a way that was not true of other
organisations.18
Participants had heard of debt advice services through methods such as leaflets delivered
to their home, adverts on TV or the internet, through internet searches, having been made
aware or referred from another service (for example, a GP, a creditor, a social worker),
from word of mouth, or just walking past.
However, not knowing what services were available, or how to find them, or what help or
support they offered was a recurrent theme. In particular, it was felt that young people
were unaware of what was available to them in the way of help or advice. There was
reluctance among some to approach services if they felt they would just be handed more
information, which was linked to a lack of awareness of the more practical help that could
be on offer.
There's so much help out there for people but people just don't know where to get
it and that's what they need (Focus Group 4)
But there is no advice that you can get out there, there is no advice that you can
get that says oh this is what happens, or banks deal like this and you need to look
after that, or housing benefit. (Focus Group 6, 18-24 year old)
Ideas for effective ways of promoting awareness of advice services and what they offer
were discussed during the research (particularly in the final consultation group) and these
are reported in chapter 5.
17
Turley, C and White, C (2007) Assessing the Impact of Advice for People with Debt Problems. London: Legal Services
Research Centre
18
This was reflected in our interviews and group discussions, but in presenting findings we have talked in general terms
rather than about any specific organisation.
Experiences of Debt and Debt Advice Services in Islington
32
4.1.2 Views and experiences of debt advice services
The aim of this section is to present the views of participants who had used one or more
debt advice service. It is not intended to be an evaluation of any individual service, but
rather to draw out general factors which result in a better or worse experience. Aspects
which discouraged or put participants off using services are discussed in the section 4.1.3.
Two main factors were identified which had encouraged participants to approach and use
a service:
•
The location being convenient to get to: either local and near to them, or central
and therefore easy to find and/or travel to (although some participants were put off
by the cost of bus fares to travel to advice services – see 4.1.3).
•
An organisation that they can trust: somewhere that is independent, with a public
service ethos, and which provides a free service. Although not a dominant view,
some felt that the location of the Islington CAB in the Council Offices damaged
their image of impartiality; for others this made no difference provided that the
service was helpful.
Once they had used a service, the extent to which participants had a positive experience
appeared to be underpinned by two key issues, and these are explored in detail below:
•
Whether their needs / expectations were met and
•
Their view of the individual staff member they dealt with.
Meeting needs and expectations
Not surprisingly, a key factor which shaped how participants felt about their use of debt
advice services was how well their needs had been met. A distinction can be made here
between needs relating to information or advice, versus more practical direct help with
managing their debt situation.
Information-giving tended to be seen as the main service offered by debt advice services,
such as Citizens Advice. Where participants’ needs were not particularly complex, and
information was the main help they were looking for, then they generally found the
information they received useful. For example, one participant received helpful information
about bankruptcy and was given a list of solicitors to pursue this option.
However, criticism of an information-giving approach centred on two aspects: first, that the
information provided was nothing that participants didn’t know already or they would be
happy to find out themselves, via the internet for example. Second, that the information
was too generic or too simplified to be useful for their particular situation. One participant
was receiving ongoing one-to-one help with writing letters to his creditors, but nonetheless
felt that his situation (which involved a divorce, issues around disability, and foreign
assets) was too complicated for the adviser to deal with.
Experiences of Debt and Debt Advice Services in Islington
33
Where participants had more complicated or multiple debts and felt unable to manage
their situation, they felt strongly that they needed more practical and direct help provided
on a one-to-one basis. Some felt this practical help had been provided in a single
intensive session where tailored individual advice was given around money management.
Others felt the need for this kind of support to be on an ongoing basis. This type of help
included:
•
Making phone calls and writing letters on their behalf
•
Negotiating affordable repayments with creditors
•
Helping sort out an application for a debt relief order or bankruptcy and
•
Looking in depth at budgeting, managing payment of bills, and sorting out
paperwork.
There were examples of this kind of help having been received from a range of different
organisations, including the Islington CAB, Islington People’s Rights, and the governmentsponsored National Debtline, as well as solicitors. This shows that the perception that
debt advice services only or mainly offer an information service was not accurate. This
kind of help was valued because it made a real difference to their situation, by making
their financial situation more manageable, or by taking away the stress of having creditors
chasing them on a day to day basis. Participants felt that advice services were more likely
to get a response from creditors than they were themselves, because they had some
authority:
They speak on your behalf and they do try to negotiate a time that, yeah, you can
pay what you can afford, you know. And it’s very, very personal, you know. You
get regular updates and newsletters. So I found them more useful than [xx] for me,
It seemed a bit more personal. They actually deal with you as a, rather than a
number they deal with you as a person. (Focus Group 9)
This last point, dealing with someone ‘as a person’ is explored more below.
The approach of their adviser
A key theme throughout the research was the important role played by advisers or
members of staff seen at advice services. This tended to shape participants’ overall views
about the service and about the usefulness of their experience. Participants’ views of the
adviser they had seen were mixed, with the key factor influencing their views seeming to
be how engaged they felt the adviser was with their situation.
Where participants were satisfied with their interaction with an adviser, there were a
number of attributes or actions that they described:
•
Engaged or involved with their situation
•
Empathetic and understanding, ready to listen
Experiences of Debt and Debt Advice Services in Islington
34
•
Knowledgeable about debt issues, so that they can tailor their advice and make
clear actionable suggestions and
•
Taking time to provide practical help, such as make phone calls or go through
paperwork.
All of these aspects were linked with the idea of having continuity of support from one
person who understood and empathised with their circumstances, their abilities and their
limitations, for example the effects of a disability. Support workers, for example social
workers, student welfare advisers or housing office outreach workers were able to do this
well because of their existing relationship with their clients and the ongoing support they
provided. Examples of previous experiences of contact with services were given with
advisers who did or did not meet these criteria:
I've had dealings with the [xx] and they've been really, really good because they sit
down and they listen to you and they sit and take action. (Focus Group 3)
It depends who you meet [in xx], because the first time I went, I met one bloke and
they were just telling me, 'Just chin up and it will all be all right, old boy'. I was
going, 'What?', nothing but then, then I met someone else...in the same office and
he was fantastic, I mean he knew what to do, how to answer, I mean there's many
people who work [in xx] but finding a good person who can think outside the box.
(Focus Group 4)
The idea of ‘engagement’ encompassed two concepts: the ability or willingness to commit
time to their case and a non-judgemental attitude. This latter aspect is important in light of
helping people get over one of the significant barriers to seeking help, described in the
next section.
4.1.3 Barriers to using debt advice services
In addition to not being aware of advice services or what help and support they can offer
(see above), a number of other key barriers emerged from the research. These related
both to approaching advice services in the first place, and maintaining or persevering with
contact once it had been established. Barriers were experienced in three broad
categories:
•
Emotional or psychological barriers
•
Practical resources – cost and time
•
Negative perceptions of services.
The diagram below (figure 4.1) illustrates the way in which these barriers appeared to
work, with emotional barriers at the bottom being more pervasive and deeper set, the
barrier of practical resources next and negative perceptions of services forming a more
superficial but nonetheless important topmost layer.
Experiences of Debt and Debt Advice Services in Islington
35
Figure 4.1
Barriers to accessing debt advice
Negative
perceptions
of services
Practical
resources
Emotional and
psychological
barriers
Emotional or psychological barriers
As described in chapter 3, there were a number of links between being in problematic
debt and ill-health, particularly mental health. Depression and anxiety were described by
some participants as an effect of being in debt, as well as contributing towards escalating
debt through an increased sense of lack of control over their life. These and other aspects
of ill-health, such as restricted mobility, meant that some participants had significant
barriers to approaching advice services, linked to a reluctance to leave the house and low
self-esteem in making contact with others:
The thing is, when people are in debt they kind of get a kind of running scared,
anxious, thing about things, and it can seem impossible. (Interview 12, Female,
age 55+, debt below £5k)
Related to this were feelings of embarrassment or shame, which were common across the
sample, where participants felt that approaching an advice service would mean that they
would end up being judged, and that advisers would make them feel at fault for not being
able to control their spending. This was also underpinned by the idea of feeling that it
should be their own responsibility to sort out their debt situation, and not something that
they should ask others about. For some, this meant it was easier to ignore their debt than
ask for help:
Because the main thing is when you are in debt you feel guilt, it’s not easy to ask
you help me. It’s like almost it’s my fault. You feel that. Your feeling is that it’s my
fault, you’re really ashamed to ask for help. I think it’s even worse than ask [for]
money. (Interview 16, Male, aged 25-55, debt below £5k)
Experiences of Debt and Debt Advice Services in Islington
36
Probably embarrassed that you've kind of created these debts and somebody on
the other side of the phone is thinking that you shouldn't of maybe, although we
shouldn't really worry because them people on the other side of the phone aren't in
our situation, so... but I suppose maybe it's a parent thing or just wanting to be able
to deal with it if you can, without... pleaing [sic] to somebody to help me. (Focus
Group 5)
The ways in which emotional and psychological barriers impacted on participants in this
study, as both effects of debt and factors exacerbating debt situations, resonates with the
‘debt trap’ identified in 2010 JRF19 research into experiences of debt. In this study the debt
spiral was created where motivation and energy towards reducing debt was reversed due
to the negative emotional and psychological impacts of debt which were seen to lead to
further indebtedness. This is illustrated by the following diagram (figure 4.2).
Figure 4.2
Debt spiral resulting from negative emotional and psychological
impacts of debt
Practical resources – cost and time
There were a number of issues relating to cost and time which participants felt made it
difficult to approach and use services. As mentioned above, a preference among some
participants was to use a service that was nearby and easy to get to. This was partly
influenced by feelings of low self-esteem and anxiety about journeys, but also being put
off by the cost of making a journey, for example by public transport. Longer or complicated
journeys were also difficult for people with ill-health or mobility difficulties.
19
Dearden et al (2010) Credit and debt in low-income families. York: Joseph Rowntree Foundation
Experiences of Debt and Debt Advice Services in Islington
37
The cost of phone calls was also a barrier, as was the cost of spending time connected to
the internet. Having to spend time waiting to be connected to the right person, or enter all
their personal details onto a website, cost money which participants felt they didn’t have to
spare.
Linked to this was the amount of time and effort it was felt to take to get through to some
advice services on the phone, or to wait to be seen. Difficulty accessing advice-giving
organisations is also a finding of previous research20. Across the sample, participants
reported experiences of not being able to get an appointment, phones always being busy,
long queues, restricted opening times, and having to make appointments several weeks
into the future. Some participants had negative experiences of arriving to find their
appointment was double-booked or being told they were too late. When combined with
reluctance to approach advice services in the first place, this kind of negative experience
of trying to see or talk to an adviser, sometimes put people off from persevering, as the
following exchange from a group discussion illustrates:
F1: I phoned them and I had a meeting with them, but they never called back and
when I tried to call them I couldn't get through, so I never got to go. F2: Sounds
about right. M1: It's very difficult to get through to them….cause the phone is totally
engaged. (Focus Group 1).
Negative perceptions of services
Some participants had not used advice services, but had been put off by others or by their
own perceptions of what the service would be like. Where they had looked inside an
advice service and they felt it was too crowded or too formal (for example, one participant
felt it looked like a JobCentre), then this had put some participants off. Others were put off
approaching a service because of what they had heard from others, or their own past
negative experiences of other services. This may in part be linked to misperceptions of
low awareness of what help advice services can offer (see above).
No, I’ve never been to them because I’ve heard a lot about them and they’re just a
waste of time in there and they’re useless. [why have people said that?] Well, they
can’t get nowhere. (Focus Group 7)
Participants who were in employment appeared to be less likely to see free, independent
advice services as being available to help them.
4.2
Use and awareness of financial and credit services
As described in chapter 2, participants had a range of different types of debt across the
sample, and their awareness of types of loans and credit options tended to be fairly high.
Not everyone who took part in the research had experience of borrowing money, their
20
Turley, C and White, C (2007) Assessing the Impact of Advice for People with Debt Problems. London: Legal Services
Research Centre
Experiences of Debt and Debt Advice Services in Islington
38
debt arose instead from arrears in paying bills, rent, or Council Tax, or from owing money
to the Benefits Agency due to benefits overpayment or benefits fraud. This group of
participants appeared to have a low awareness of or strong reluctance to use credit
arrangements, despite the fact that they were struggling financially:
If you're paying double of what you're earning you're paying it back forever
because with something like that you pay, you've got to pay them back and then
you think well I haven't got the money to pay them back at their interest rates.
You'd have to try and borrow money from elsewhere to be able to pay them back,
which would be less money but then you've still got to somehow pay these people
back …it's like no, I'm not going down that road. Never in my life will I go down
that road. (Interview 5, Female, aged 25-55, debt below £5k)
Among the other participants, there was a range of experience of using different types of
credit: credit cards, bank overdrafts, bank loans, loans from loan companies (such as
Wonga, the Provident, MoneyShop), student loans, credit arrangements for large items
(such as cars), and the Credit Union. Participants had also borrowed money from family
and friends. Money had been borrowed for a number of different purposes, including to
pay off other debts or fines, to smooth a period of unexpected expenses or income loss,
for one-off expenditure on large items, or to maintain a lifestyle. The fact that credit
provided access to instant money was an important driver for borrowing, especially in
situations of severe financial need.
Views and perceptions about these credit options were mixed, and appeared to be
underpinned by the extent to which participants felt they had control over their situation.
This section will look first at the range and reasons for negative experiences, and then
compare these with other more positive experiences of dealing with creditors or borrowing
money.
4.2.1 Negative experiences of loans and creditors
Perhaps not surprisingly, a recurrent feeling among participants was one of frustration at
their debt situation, underpinned by a feeling that their choices and options were
extremely restricted. There were a range of different issues which participants felt
frustrated and anxious about, which can be categorised into four areas:
•
Perceptions of irresponsible lending by loan companies
•
Being penalised for trying to deal with debts
•
Having to borrow from family and friends, and
•
Having to deal with impersonal creditors or lenders.
Perceptions of irresponsible lending by loan companies
There were a number of different ways in which the behaviour of loan companies, banks
or other creditors was criticised by participants. These issues echo the findings in chapter
2 where they were discussed as factors that contribute to unmanageable debt situations:
Experiences of Debt and Debt Advice Services in Islington
39
•
The conditions and charges of borrowing: there was a fairly high awareness
across the sample of negative financial consequences of credit, in particular high
bank charges and very high interest rates for short-term loans. However, this
awareness tended to be a result of having a bad experience in the past.
Participants spoke about getting into situations where they were borrowing to pay
off other debts, describing this as ‘a very nasty revolving circle’. One participant
explained:
It was like I was getting from Peter to pay back Paul, where when I
couldn't manage the loans, I was taking out credit cards to actually try and
meet these monthly bills. (Focus Group 2)
Short-term loan companies, such as Money Shop or payday loan companies, were
seen as an easy and convenient way to pay off other debts or deal with unexpected
expenditure, because companies did not always do detailed credit checks21, but:
It seems the easy solution at first 'cause, like, all right, you'll pay them
ones and you've just got one. But then it ends up being more than the
ones that you were paying before. (Focus Group 1)
Despite this knowledge, participants still sometimes felt they had no choice but to
take out this type of short-term loan.
•
Lack of transparency about the ‘small print’: as mentioned, participants often
had an awareness or suspicion of credit arrangements because they had had their
fingers burnt in the past. As a result they felt strongly that they should have been
told clearly about conditions and charges beforehand, as interest rates can be
difficult to understand:
You know [sighs], it's wrong. They should first tell me this is what's going
on, this is the clause, this is what you've got to pay, blah, blah, blah, okay
this, all right that, yeah, okay fair enough. But not, not saying anything,
just sign this, sign that, no that is not in my books, that's wrong. (Interview
4, Male, aged 25-55, debt below £5k)
•
Irresponsible lending: lending to young people, people on benefits or those who
already have sizeable loans was felt to be irresponsible. This included giving
overdraft facilities even if they haven’t been requested (but then being charged),
as well as loans. There were mixed views about this, with some participants
blaming companies and banks for providing easy access to credit, and others
feeling it was the customers’ responsibility. Loan companies were felt to be
21
There were also references to loan companies (targeted at people on benefits) who refused a loan to people if they had
not paid off a previous loan according to their agreement.
Experiences of Debt and Debt Advice Services in Islington
40
irresponsible because they took advantage of people’s vulnerable and sometimes
desperate situation.
Linked to this, there was an anxiety among participants about how to assess their
ability to manage repayments: there were a number of examples of participants
who had taken on a loan thinking they would be able to manage the monthly
repayments but had not been able to in practice.
You make agreements, when the time comes to honour those agreements
you can’t and then you end up having to apologise, it doesn't work, you
know. (Interview 8, Male, aged 25-55, debt over £15k)
Being penalised for trying to deal with debts
A number of participants had taken action to improve their situation, to write off or
consolidate their debts, through bankruptcy, DROs, IVAs, or with a debt consolidation
company. They felt some resentment that a) they had to pay fees to do this, and b) as a
result of bankruptcy or DROs, they would end up being ‘blacklisted’ and unable to access
credit for a number of years. This was a disincentive for other participants to take this kind
of pro-active approach to their debts.
Having to borrow from family and friends
This tended to be seen as awkward and embarrassing, and something which participants
would not do unless they had to; it reinforced feelings of guilt and fault for their debt
situation.
I don’t put any question about our relationship because we don’t have the debt
between us [for friends where the debt has been paid]. But my sister and my friend
sometimes I ask to myself oh, erm, what about our relationship? Is that a real
relationship or it is a relationship because I’m in debt with them ….is like the debt
as a link, you know. (Interview 16, Male, aged 25-55, debt below 5k)
However, some participants felt that if they were in a ‘give and take’ situation with friends,
this made it easier to borrow from them than from friends or family who they felt did not
understand their situation. The benefits of borrowing from friends and family were also
clear: no interest rates and no deadline.
Having to deal with impersonal creditors or lenders
Situations of debt were said to be made worse by not being able to build up a personal
relationship with a creditor or bank manager. Participants spoke about regular ‘harassing’
on the phone from impersonal creditors, and having to negotiate their access to bank
accounts or loans with a computer, rather than talking to an ‘old-fashioned’ bank manager.
Experiences of Debt and Debt Advice Services in Islington
41
4.2.2 Positive experiences of loans and creditors
In contrast to the negative experiences described above, there were a number of
situations which were described in a far more positive way, and which largely appeared to
be related to participants having been able to take a greater control over their financial
situation. There were three kinds of situation that were viewed more positively:
Negotiating successfully directly with creditors
There were examples of participants who had successfully agreed a reduced and
affordable level of repayments by talking directly to their creditors. These participants had
found creditors easy to approach and that dealing directly with them was less
embarrassing and more effective than trying to do so via a debt adviser22. The advantages
of facing up to the debt, and not ‘running away from it’, as well as avoiding getting further
into debt, were highlighted. It was agreed that most people want to pay off their debts, but
only at the right level.
I say, listen this is how much I can afford to pay. If you don’t want it that’s up to
you, I’m not refusing to pay it. And then I realised that was the way forward to
make an offer what is acceptable rather than sweep it under the carpet. (Focus
Group 5).
Consolidating debt with a debt company
Again, this was a step which was seen as positive by the participants who had undertaken
it, although (as mentioned above) there was resentment at having to pay fees for the
service. The advantages of doing this were seen as making multiple debts far easier to
manage administratively, and putting an end to constant chasing from creditors. Other
participants liked the idea of doing this, but felt that they either couldn’t afford to or were
worried that they wouldn’t be able to provide the paperwork needed.
Borrowing money from a responsible lender
Perhaps not surprisingly, participants had positive experiences of borrowing as well as
negative. There were a number of components that were felt to make for a positive
borrowing experience:
•
Relatively low interest rates
•
Ability to reduce repayments if struggling
•
Dealing with individuals who understand your personal situation
•
Loans available to people with low credit ratings, and
•
Lenders who encourage a responsible approach to borrowing.
A number of participants had a very positive borrowing experience at the Credit Union. In
addition to the aspects already listed above, the Credit Union was felt to be a good place
22
This is in direct contrast with the views of others who felt that advice services were more likely to get results in dealing
with creditors.
Experiences of Debt and Debt Advice Services in Islington
42
to borrow money because a) it had a legitimate, reliable, trustworthy basis; b) it was based
on the idea of saving before borrowing (which had an additional benefit for some of
making your money hard to reach); and c) the staff were able to offer advice about
budgeting and finances generally.
A number of participants had heard of the Credit Union although they were not members,
and liked the idea of joining. However they had not done so because they felt
uncomfortable with the idea of having to save: this was either because they felt they didn’t
currently have enough money to put aside each week to save or because they didn’t like
the idea of their money being inaccessible.
Other participants had a positive borrowing experience with loan companies. Positive
elements of this type of borrowing included where they encouraged low level borrowing
initially, rather than large unmanageable loans; being prepared to agree manageable
repayment levels, and a service that was personal, friendly and understanding, with home
visits being appreciated. However, there was some cynicism around the motives of this as
a commercial service with an eye on their customer market:
They don't want to be too abrupt or too sharp or too aggressive towards you, 'cos
that would just, you know, repel you, repulse you from, you know, coming back to
them. So they're very careful about what they say. They try to, you know, try the
friendly approach. (Interview 7, Male, 18-24, debt above £15k)
4.2.3 Experiences of bankruptcy and debt relief order
As mentioned in chapter 2 several participants had gone through bankruptcy. One was
also in the process of applying for a debt relief order (DRO). Participants who had applied
for bankruptcy owed £5,000 to £40,000, for the DRO the sum owed was less than
£15,000. Going through the bankruptcy and the DRO process was suggested to
participants by advice services or support workers who then signposted participants onto
legal services. These services were described as very helpful with one solicitor even
covering the bankruptcy fee.
The impacts of going through bankruptcy varied and appeared to be underpinned by the
extent of help and support participants received. For one participant bankruptcy had led to
a complete loss of confidence in his ability to manage finances and had resulted in him
handing over all responsibility for household money management to his wife. Another
participant (described in the case illustration below) occasionally lapsed on payments for
bills but her situation did not worsen due to help with money management she received
from a support worker. A third participant, who had not accessed any further help, advice
or support following bankruptcy had fallen back into debts now worth over £15,000. It is
likely that a lack of awareness of available help and support and depression had
contributed to her situation.
Experiences of Debt and Debt Advice Services in Islington
43
Case illustration Interview 10
When Anne’s husband fell terminally ill she spent his last months in hospital
with him. During this period she fell into arrears on various bills and spent £700
accommodating her brother-in-law. She became ineligible for her husband’s life
insurance because she’d missed a payment and as her income was halved she
struggled to cover bills, living costs and repay her debts. Coping financially
was particularly difficult as her husband had always managed the finances. As
a result her debts reached about £5,000 and she was contacted daily by her
creditors. Her carer’s support service signposted her to Legal Aid on whose
advice she took bankruptcy. She now occasionally falls into arrears on bills and
has taken out small loans with Provident to stay on top of things.
The next chapter will describe participants’ views about how services could be improved
and the lessons they have learned from being in debt.
Experiences of Debt and Debt Advice Services in Islington
44
5 Suggestions for preventing debt
and improving debt services
Chapter 5 Summary
•
Participants reflected on four main areas where they felt they had learnt from their
experience of being in debt, and that they felt would be helpful advice for others:
o
o
o
o
Learning how to manage finances, in particular how to budget and manage
bills and the importance of saving rather than borrowing
Increasing awareness about ways of dealing with debts, particularly
negotiating with creditors and consolidating debt
Increasing awareness about financial products, the conditions and charges of
loans, and more affordable sources of credit such as the Credit Union, and
Seeking advice and acting as soon as possible rather than ignoring debts.
•
Advice services were felt to have an important role to play in helping to support
people in relation to these issues, particularly in building financial awareness and
capability.
•
The key elements identified for an effective advice service included: a choice of
face-to-face or telephone advice (freephone numbers to be used); ongoing support
from a case-worker; group advice sessions including practical advice from people
who have been in debt themselves; providing advice at key life stages, such as
young people leaving home or full-time education, having a child, or crisis points
such as job loss or relationship breakdown; and longer opening hours and shorter
waiting times.
•
Participants felt that advice services should promote themselves by emphasising
their difference from commercial debt companies, in providing a free, independent
and non-profit making service. Another key message to encourage people to use
advice services was the importance of communicating the practical help that can be
provided in a confidential and non-judgemental setting and letting people know that
debt is a common experience.
•
There was a call for action to be taken against pay day loan companies, for
example banning advertising of high interest loans aimed at people in financially
vulnerable situations and encouraging loan companies to behave more responsibly
in offering access to unaffordable credit and to be flexible about reducing payment
levels.
Experiences of Debt and Debt Advice Services in Islington
45
This chapter draws on material collected during the main fieldwork stage, and also from
the consultation group, which was organised at the end of the fieldwork period (see
chapter 1 for a description). Participants were asked to reflect on the lessons that they felt
they had learnt having been in debt and how they felt services should be designed and
improved in order to better address the needs of people in debt. The chapter is divided
into two main sections. The first section looks at the lessons participants feel they have
learnt, the second section presents participants’ suggestions for ways to improve services.
5.1
Lessons learnt from being in debt
Experiences of debt had clearly resulted in some participants gaining more financial
knowledge and awareness and implementing this by making more informed decisions
about financial products. When asked what they felt they had learnt, or what advice they
would give others, participants’ views were similar across the sample. For some
participants, this involved reflecting on a past situation which they felt they now
understood or which they had resolved, for others their reflections were more about a
situation they were still in and still needed help with.
The issues participants felt needed addressing or which they would advise others on
reflect some of the main findings from chapters 2 and 3 about ways to prevent or manage
debt.
•
The need for learning about how to manage finances, in particular how to
budget and manage bills, but also understanding the importance of saving versus
borrowing: a key theme here was advising others to spend within their means,
and not use credit or borrow, especially not with short term high interest loans.
Where borrowing is necessary, the benefits of borrowing from somewhere with
affordable credit like the Credit Union were emphasised.
•
The need to increase awareness about ways of dealing with debts, for
example consolidating debt, and particularly negotiating with creditors about
repayments. This was an area where awareness tended to have been low prior to
getting into debt, and where participants wished they had better knowledge earlier
on. Advice to others was that ‘it’s better to pay something than nothing’.
•
Similarly, the need to increase awareness around financial products,
understanding of interest rates, the consequences of missed payments, bank
charges and the importance of reading ‘the small print’.
I just wish that I'd had someone that could've pre-warned me about all the
charges and just everything in general, you know? Like make sure that
you can afford to pay the things that you get on credit before going out
and getting this with that and that with this, and a mobile phone contract.
(Focus Group 1)
Experiences of Debt and Debt Advice Services in Islington
46
•
Finally, the need to face up to debts and get advice as soon as you can after you
start to struggle financially; this is particularly clear-cut when there has been a life
change, for example losing a job, but less clear where problematic debt has arisen
more gradually.
Some participants found it harder to draw lessons from their situation, where for example
they felt their debt was largely the result of struggling to manage on benefits, or they felt it
had been caused by no fault of their own (an overpayment of benefits for example). In
these situations, they were more likely to feel that there was nothing they could have done
differently, and that the main way for their situation to improve was to find employment
and increase their income.
Interestingly, there was a view that it was hard to give advice to others about how to avoid
or manage debt well, because it was felt that people can only really learn from their own
experience:
But as I says, you can - you can tell someone don't - don't... not to do it, but some
people like to learn from their own experiences, that's the problem. (Focus Group
2)
5.2
How support should be designed to address people’s needs
The remaining sections of this chapter look at suggestions that participants made for how
support around debt can be improved in order to address people’s needs. The first of
these looks at how services can best meet the needs identified in 5.1, and the next
section looks at suggestions for increasing awareness and encouraging greater use of
advice services. The following section (5.2.3) looks at suggestions for customer-focused
service delivery. Finally, 5.2.4 looks at some suggestions around preventing problematic
debt at a wider or more structural level.
5.2.1 Ensuring that advice services address customers’ needs
around managing debt
Suggestions for how debt advice services could best address customers’ needs mirrored
the key issues that were highlighted in section 5.1. These were both about how to prevent
people getting into problematic debt, and how to help them manage their debts.
Advice services should:
•
Provide help and advice with money management, for example tips on low-cost
ways to buy things, how to manage bills and not worry about them, how to avoid
fuel debt through energy consumption advice (including help with choosing energy
providers), help with choosing financial products, such as insurance or bank
accounts. Part of this advice should be to.encourage saving not borrowing:
Experiences of Debt and Debt Advice Services in Islington
47
either through the Credit Union, or a savings account, with the message that it only
needs to be a small amount each week. It was felt this was especially important for
young people in order to establish a lifelong healthy approach to money.
•
Encourage people to communicate with their creditors, or help them to do so,
and not ignore their debts.
•
Increase awareness and understanding of the conditions and charges of
financial products, particularly interest rates. Going to an advice service to get a
second opinion before taking out a loan was felt to be worth doing, especially for
young people who might be more inclined to take up credit without reading/thinking
about the ‘small print’.
•
Give advice at key life stages: transition periods were considered key stages
before which young people would benefit from advice. It was suggested for
example that advice services should target young people before leaving home to
live independently, before moving to university or before leaving university. It was
considered that the most effective way of engaging and helping young people was
to hold advice circles that were advertised face to face at colleges and universities:
I think for them coming out of university or coming out of studies more
focus should be put on them. […] I guess holding special like meetings or
for, erm, certain group of like 22 year olds to 25 or something, but having
that meeting within Islington…. Advertise it and say ‘oh, we’re having a
little meeting, come down if you are having troubles, financial troubles.
Come down, speak about your finances, you know, let’s find a way to help
you.’ (Interview 18, Female, age 18-24, debt between £5k and £15k)
5.2.2 Increasing awareness of advice services and encouraging
use
As discussed in chapter 4, awareness of debt advice services was relatively low; this
includes not only awareness of the existence of a particular service, but also what is
actually offered as well as misperceptions of the ability or willingness of a service to help.
Suggestions for improving awareness around debt advice services can be grouped into
two broad areas: what kind of message should be promoted and the best ways of
promoting information about services.
Key messages to promote about advice services
The key messages that participants felt should be conveyed about a service in order to
build trust and encourage people to use it were:
•
That the service was free, independent and non-profit making (distinguishing it
from commercial companies which charge fees for helping manage debt)
Experiences of Debt and Debt Advice Services in Islington
48
•
That the service can help so that people don’t have to manage alone, setting out
the practical ways in which it can help, and
•
That people can talk directly and confidentially with someone who will not be
judgemental, that people shouldn’t feel ashamed, because debt is not unusual.
It was felt that promotional materials need to be eye-catching, informal, accessible, simple
and clear, including information in different languages for people who don’t speak English
as a first language. Targeted material, for example for different age groups or young
parents, would make it more relevant, and should use real life examples of someone in a
situation like theirs. The message should aim to be positive and not negative.
Ideas for ways of promoting information
There were a wide range of methods considered valuable for promoting awareness of
debt advice services:
•
Leaflets
•
Flyers and posters
•
Adverts in the media (local newspapers, magazines, TV, internet, radio)
•
Open days or meetings where people could come and find out more about what
kind of help was available, and
•
Word of mouth from family and friends.
Participants were however suspicious of the phone and associated this with cold calling
and commercial marketing.
Many examples of every day venues were given where information about advice services
should be placed in order to increase awareness. These included GP surgeries;
community centres/ noticeboards; charity shops; sports clubs; colleges; day centres;
opticians; Job Centres; gyms; churches; internet cafes; post offices, and on buses and
trains.
The Angel centre and colleges were thought to be a good place to advertise to young
people. It was also felt that the Council could help promote advice services by sending out
information with Council letters.
Young people felt that information needed to be provided in ‘small bites’, for example
through media such as the radio or social media like Facebook and Twitter. Approaching
young people face to face was considered preferable to leaflets, as explained by the
quote below. It was also considered that social activities or meetings were a good
opportunity to increase awareness, where young people were encouraged to attend
because there was also the chance to relax and meet people.
[…] have some people out in Islington’s streets really speaking to people
…Actually having someone talk to you might make a difference rather than
passing a leaflet. Because you get given a leaflet everywhere you go. You know,
Experiences of Debt and Debt Advice Services in Islington
49
sometimes you take it to be nice and then you walk a few steps down and you bin
it. (Interview 18, Female, age 18-24, debt between £5k and £15k)
5.2.3 Suggestions for customer-focused service delivery
As discussed in chapter 4, the approach of the adviser was seen as key in terms of
whether participants had a positive or negative experience. Identifying skills and
competencies for staff not surprisingly emerged as a significant area for suggestions for
improvements to services. Participants wanted to see advisers who were:
•
Qualified and knowledgeable to give tailored advice, and if unable to deal with a
problem, able to signpost to other services and
•
Good at communicating: who demonstrate a willingness to listen and spend time
in understanding customers’ circumstances and acting on their behalf to help their
situation, including negotiating on their behalf. A respectful and personal approach
was valued.
There were also a number of issues discussed around the preferred delivery method of
debt advice. There were mixed opinions here with some participants preferring face-toface or home visits, because of the personal and confidential approach that this enables,
while others felt that advice over the phone or the internet was also valuable (and helpful
for people who found it difficult to get out of the house). Participants suggested internet
question and answer sites. The importance of being able to help people where English
was their second language was also noted.
You can't really do this on an automated service because every individual,
everybody's problems are different. It's a really personal thing, it's supposed to be
professional but it does get personal at times and it kind of affects your experience.
(Focus Group 6)
Given the difficulties identified around accessing advice services (chapter 4), this area
was also identified as one where participants wanted to see improvements. In terms of the
cost of phoning services, it was felt to be very important to have freephone numbers
and/or the opportunity for someone to call you back. One participant said,
Also have a free phone number 'cause most of them, they have 0871s. Who,
who's got, who's got the money to be paying for 0871 numbers? And make sure
it's a free service as well so you're not paying to be getting out of debt.
(Consultation Group)
Reminding people of appointments was felt to be a small but useful service. For some
participants, perhaps particularly young people, the ability to just drop in and be seen
relatively quickly was important in helping them feel they could use a service. Longer
opening hours were also felt to be important in improving access, especially at out-ofhours times, such as evenings and weekends.
Experiences of Debt and Debt Advice Services in Islington
50
Linked to this was the suggestion of a one-stop-shop, somewhere which offered access to
a number of differently qualified advisers who would be able to address a range of queries
on the spot, rather than referring or signposting customers to other services. Being
signposted elsewhere was felt to act as a barrier to actually getting the support that was
needed.
A useful way of promoting increased financial knowledge and capacity was felt to be the
use of local group advice sessions. It was felt that these sessions should feature local
Islington residents sharing experiences of being in debt and ways they had dealt with it.
There was strong support in the consultation group for sessions to include a range of
different residents, spanning a range of age groups, to provide peer support and learning
about debt.
There was a general feeling that, while a short one-off session might answer some
people’s needs, ongoing support and follow ups were critical for people to help them
work out a practical solution to managing their debt, support was said to be needed until
someone felt comfortable with the level of repayments arranged. From a customer point of
view, seeing the same adviser was very valuable in terms of building up a relationship and
not having to repeat details of their situation each time.
It was important to participants that advice services were located somewhere convenient
and/or central so that people could get to them easily. For example, the fact that the
Credit Union was not central was seen as a problem for awareness and access. Office
buildings needed to be in buildings that were attractive and not ‘depressing’, and ideally
somewhere where parents could bring children and they could be kept occupied.
5.2.4 Suggestions for government level interventions
When discussing ways of preventing problematic debt, a number of participants’
suggestions went beyond the scope of the role of individual advice services, and touched
more on areas within the remit of central or local government.
A recurring theme here was a call for action to be taken against loan companies, to make
them behave in a more responsible way when offering credit or dealing with customers in
debt. Wider support for the regulation of loan sharks is reflected in the Islington Fairness
Commission’s recommendation for the council to use its enforcement powers to act
against illegal activity by loan sharks and for Islington Council to explore passing a by-law
to prevent payday loan companies from operating in the borough23.
One suggestion made by study participants for taking action against such companies was
to ban advertising of high interest loans, aimed at people in vulnerable financial situations.
It was felt that loan companies needed to be encouraged to behave more responsibly in a
range of ways: not offering easy access to unaffordable credit (for example for young or
23
Islington Fairness Commission (2010) Closing the Gap. London: London Borough of Islington
Experiences of Debt and Debt Advice Services in Islington
51
unemployed people); being more flexible about reducing repayment levels and allowing
people to write off their debt; intervening early and giving advice if it was clear that
someone was struggling with their payments; and liaising with support workers if people
don’t have the capacity to manage their own finances. There was a general belief that the
conditions and charges should be made easier to understand:
To me, if there wasn't so much of that small print, and maybe they sort of turned it
around and made it a big bigger, simplified it, then a lot of people probably wouldn't
get into so much problems. (Focus Group 2)
There was also felt to be an important role to be played by one-off grants to help people
deal with financial crises arising out of sudden unexpected expenditures or losses of
income. Awareness of this type of help appeared to be fairly low, although some
participants mentioned the usefulness of crisis loans, grants from charities and hardship
funds provided by employers.
There was a particular interest among the consultation group participants in ways of
helping young people to avoid getting into debt. Teaching about money management and
debt in school and college was generally felt to be worthwhile, and a good opportunity to
increase awareness and understanding before young people make the move to living
independently. Teaching young people to save was seen as important as one participant
explained:
Everybody knows and everybody gets taught how to spend their money but not a
lot of people get told how to save. So […] maybe there could be some sort of
programme or process whereby young people get taught how to save, what to look
out for. (Consultation Group)
An innovative suggestion for young people who are already in debt was to set up a Work
Incentive scheme, whereby young people take on work in the community or in a trainee
role, and instead of getting a wage, a contribution is made to repaying their debt. This was
felt to be appealing at a time when jobs for young people are scarce so that they would
also be able to build up some work experience. The following quotes provides an
explanation of this idea in participants’ words,
We came up with an idea of working apprentice schemes which is, I don't know if
you guys have heard of, like, Orange where young people used to do a bit of work.
And in place for that, they get tickets to an, an event or something that they like to
do, so we kind of spun that idea and built upon it in terms of them paying off their
whole loan. Maybe they could, you know, do a little apprenticeship and thereby it
might last one or two weeks, and this chips away at their loan. Instead of getting
money to pay, they just get maybe a proportion taken off their loan. Obviously at
the same time they get work experience. It's like killing two birds with one stone
(Consultation Group)
Experiences of Debt and Debt Advice Services in Islington
52
6 Conclusion
Personal debt has been identified as a significant issue in Islington and the Islington
Fairness Commission has warned that it could increase poverty and inequality in the
borough24. The current economic context poses significant challenges to the local
provision of debt advice and support. Personal debts and demand for debt advice are set
to rise while funding for national and local measures to tackle debt has been reduced.
Against this backdrop a key question for the Islington Debt Coalition, is how it can go
about strengthening existing provision and tackling indebtedness in the borough.
This report presents findings from a qualitative research study looking at experiences of
debt and debt advice services in Islington. The findings are drawn from interviews, focus
groups and a consultation group with individuals living in Islington who were experiencing
or had recently experienced debt.
These findings relate to the key research objectives of developing the IDC’s
understanding of the attitudes of Islington residents to debt, their related behaviours, and
their views on and experiences of debt help and advice services. This chapter discusses
the key findings from the study, their implications and suggestions for meeting the support
needs of residents.
6.1.1 Definitions of debt
‘Problem debt’ is defined by the authors as any debt that has negative impacts on the
owner. Due to the way participants were sampled (explained in the Introduction) all debt
experiences relayed in this study could be defined as problem debt. Naturally the extent to
which debts were problematic ranged in severity.
Participants experiencing problem debt can be divided into two main types: those with
manageable debt and those with unmanageable debt. The manageability of debt is
defined by:
24
•
How affordable debts were for the individual in terms of the costs of borrowing e.g.
interest rates, repayment amounts
•
The severity of sanctions available to the creditor should repayment become an
issue for the individual and
•
The financial capabilities of the individual.
Islington Fairness Commission (2010) Closing the Gap. London: London Borough of Islington
Experiences of Debt and Debt Advice Services in Islington
53
6.1.2 Underlying causes of unmanageable debt
A number of underlying problems, both individual and structural, were identified as
contributing to unmanageable debt situations. On an individual level, limited financial
capability was a key underlying cause of unmanageable debt. This was characterised by
poor money management both in terms of managing spending and managing debts and
of limited financial literacy. These qualities meant that expenditure exceeded income
resulting in arrears or borrowing. It also led to ill-informed decisions about where to
access credit and borrowing from high cost money lenders.
Poor money management also resulted in participants failing to address their debt
problems which caused debts to accumulate and become unmanageable. Negative
emotional and psychological impacts of being in debt were a further cause of debts
spiralling out of control. Depression and anxiety or feelings of shame and embarrassment
halted action to address debts and provided a barrier to seeking advice and support.
These findings highlight a clear need for increasing the financial capabilities of Islington
residents and for more holistic support for individuals in debt, in the form of:
•
Help with money management
•
Advice about which debts to prioritise
•
Help and support communicating with creditors
•
Clear and simple information about financial products and services, and
•
Signposting and referral to mental health services.
These needs are discussed in more detail later in the chapter.
On a structural level, a key issue underpinning experiences of problem debt was the
constraints of living on a low income. To some, entering work was seen as a route out of
debt because of the expectation that it would provide a larger income. However
participants described significant difficulty finding work. Further to this, experiences of
those in low-paid employment as well as temporary and insecure work indicate that work
may not be a route out of debt because it did not necessarily mean being ‘better off’. This
highlights the importance of stable, secure work that pays a London living wage to making
inroads out of unmanageable debt.
The costs associated with getting into debt were a further structural issue and cause for
debts to become unmanageable. Costs included overdraft charges, fines for missed direct
debit payments, charges for missed loan repayments, bailiff charges and the accrual of
interest. For those on low incomes these costs could be completely unaffordable and
result in further spiralling debt which was extremely difficult to get out of. Further to this,
strategies undertaken to cope with living in debt such as ‘paying as you go’, while more
manageable were more expensive and represented yet another penalty for having a low
income.
Experiences of Debt and Debt Advice Services in Islington
54
Finally, access to unaffordable credit was evidently too easy and available. For those with
limited financial capabilities, easy access to credit combined with proactive and arguably
invasive promotional strategies, such as cold calling and text messaging, facilitated
transitions into highly unmanageable debts.
6.1.3 Emerging advice and support needs
In terms of service provision in Islington, a number of areas of development were
identified that would be worth considering. These are discussed in turn below:
Promoting awareness of existing sources of advice and support
The limited awareness of existing sources of support, where to find them and what
services they offered highlights the need for promoting awareness of advice and support
in the borough, particularly to residents who have not yet come into contact with services.
A publicity campaign, although largely dependent on available resources, using diverse
and wider reaching materials and advertising spaces could be used to meet this aim.
Participants’ suggestions included leafleting residents’ homes, putting up promotional
materials such as leaflets and posters in everyday venues and advertising in local media.
As a service that was well known among study participants, a case may also be made for
information about borough-wide debt advice services to be advertised in the Upper Street
CAB office. A further option would be to distribute a directory of services to households in
Islington detailing service locations on a map. It may be helpful to present information in
such a format because participants felt it was important for services to be within easy
reach of their homes.
A key message around the design of promotional materials was that they should be easily
distinguishable from those of money lending services by stressing their independence;
impartiality and that they are free and non-profit making. In order to address the barrier to
accessing services caused by feelings of shame and embarrassment, there may be value
in promotional materials communicating that others are ‘in the same boat’ and that
services are non-judgmental.
Improving engagement with services
Limited engagement with services, even where awareness was high could be attributed to
negative perceptions of existing services and perceptions of inaccessibility i.e. due to long
queues. As discussed earlier these barriers may have been strengthened by personal and
psychological barriers to accessing services. Tackling these negative perceptions is a key
area that could benefit from further thought.
Improving the service provided to residents
There is some evidence to support the need for improvement to customer service.
Qualities that were valued and that existing services should strive for and build on include
engaging well with service users, being empathetic, knowledgeable and providing
practical help. Further work could also be done around improving the organisation of
Experiences of Debt and Debt Advice Services in Islington
55
appointments, reducing queuing times and where necessary referring or signposting
complex cases to more appropriate services.
Balancing the type of support available with resident needs
Support from advice agencies generally comes as either of the following:
•
Initial Advice from one-off meetings, or by telephone, or advertised by leaflets that
can include signposting residents to the range of support available, and
•
Detailed case work: This is more long-term and takes places over many months.
Balancing the needs of residents with the capacity and availability of these two existing
types of support together with the development of additional services is a challenge faced
by the IDC.
Helping to build residents’ financial capabilities
As mentioned earlier, there is a clear need for building residents’ financial capabilities.
Debt advice services could play an important role advising residents about the risks of
borrowing from high cost lenders and raising awareness of more affordable sources of
credit such as the Credit Union, hardship funds, grants and bursaries and social security
crisis loans.
Given the constraints of living in debt on day to day life as well as the increasing costs of
living, providing residents with Islington-specific money saving tips and advice may also
prove both worthwhile and popular. This could include guidance on where to shop for
inexpensive food, free activities and days out (particularly for families), information on
discount clothing outlets and charity shops, and energy saving tips. The provision of tools
and resources to help people manage their money could also prove useful. This could
simply take the form of a log sheet for weekly income, outgoings and savings and
examples of a weekly ‘spending plan’.
Providing more holistic support
The reported impacts of living in debt, ranging from clinical depression to increased stress
and anxiety, point to a clear need for debt advice services to provide more holistic
support. While a risk identified with signposting elsewhere was that it could create a
barrier to getting the support that was needed, increased signposting and referral to
mental health and counselling services could help service users get the more rounded
support they require.
Timing support with key life stages
Finally, to help prevent the occurrence or recurrence of debt, services could target advice
and support at points in peoples’ lives in which they may be more vulnerable to debt. For
example key life stages at which individuals could benefit from information and support
include transition periods for young people such as finishing college, going to university,
and living independently. As discussed in chapter 5, promoting services in colleges and
universities would help to engage young people about to embark on these changes.
Experiences of Debt and Debt Advice Services in Islington
56
For others having a child, losing a job, experiencing relationship breakdown, or suffering
the bereavement of a spouse or partner could be key points at which advice around debt
is offered. This could be achieved with the help of services such as health visitors,
JobCentre Plus, or local council services, with whom residents have existing links or who
they approach in response to a change in personal circumstances. The type of help that
could be offered is discussed in more detail below. However engaging residents not in
contact with services may prove more difficult.
Finally, money advice services in the form of help managing money, staying on top of bills
and ascertaining eligibility to financial products may prove useful following bankruptcy or
DRO processes. The experiences of participants of this study, who had re-entered debt or
suffered a loss of confidence in their ability to manage money, highlight how useful this
sort of support could be.
Making use of existing support roles
Islington houses a wide range of public and voluntary services that offer help and advice
around debt. While between them they may cover the range of identified support needs,
services may struggle to meet increasing demand. One strategy to overcome this issue
may be for the IDC to make use of the advice capacity of ‘support workers’ with existing
relationships with residents by seeking to widen their remits or build their capacity to offer
basic help with money and debt or signposting to relevant services.
Support workers without specialist skills in debt-advice such as social workers and charity
and housing office outreach workers have helped participants of this study to repay their
debts or keep their debts manageable by developing monthly spending plans for them and
communicating with energy companies to address fuel debt. While more complex needs
would need to be referred on to more appropriate services, help of this kind may meet the
needs of more residents and build their financial capabilities without overstretching the
capacity of existing debt advice services.
With a unique insight into the lives of their clients support workers are able to identify
when their clients enter key life stages at which people are typically at risk of problem debt
and could provide support or signpost as appropriate. Further to this, support workers may
also play an important role, simply through word of mouth, in promoting awareness and
positive messages about debt advice services.
6.1.4 Key learning about specific groups
This section draws out key learning from the experiences of young people and lone
parents in the study sample. These are groups identified in previous research as being at
risk of indebtedness or who were a key group of interest in this study. Within the remit of
this research it was not however possible to draw out findings in relation to all of the ‘at
risk’ groups such as specific BME groups.
Experiences of Debt and Debt Advice Services in Islington
57
Young people
•
Young people with unmanageable debts felt pressure to prioritise spending on
social life and appearance.
•
A key life stage at which they appeared to be most at risk of getting into problem
debt was when they left home to live independently. This was when they took
responsibility for managing their own finances for the first time.
•
Young people lacked financial literacy and were vulnerable to accessing
unaffordable credit. They also had low levels of awareness of advice services.
•
Increasing awareness and understanding of the conditions and charges of financial
products and encouraging saving were considered important in order to establish a
lifelong healthy approach to money.
•
A suggestion for promoting debt advice to young people was through the media
and social media like Facebook and Twitter or face to face in places such as the
Angel centre. Social activities or meetings were suggested as good opportunities
to increase awareness of the risks of getting into debt as they had the added
incentive of providing the chance to relax and meet people.
Parents
•
For parents, particularly those with more than one child, costs such as buying
nappies, baby food and school uniforms put considerable strain on budgets.
•
Parents were particularly vulnerable to overspending on birthdays, at Christmas
and during holidays. Raising awareness of money saving tips and offers for these
‘pinch points’ may prove beneficial e.g. free attractions in Islington during school
holidays.
•
Overspending was a particular struggle for lone parents and was made more
difficult where child support was not being paid by absent parents, causing
additional financial strain.
•
Parents distinctly prioritised their children’s needs to the sacrifice of their own
when making decisions about spending. Skipping meals so that their children
could eat was not uncommon if food was low.
•
Parents described feeling guilt and shame about putting their children through
financial hardship and denying them small luxuries as a result of their debt
problems.
•
To improve access to services it was felt that office buildings should be places
where parents could bring children and they could be kept occupied.
6.1.5 External structural influences
The findings of this report suggest a number of ways local and voluntary services could
help tackle indebtedness in Islington and this study indicates that residents are currently
benefiting from existing provision in the borough. However the context of the current
Experiences of Debt and Debt Advice Services in Islington
58
economic environment cannot be ignored. Rising unemployment, limited access to
secure, well paid work as well as the low incomes provided by benefits and wage packets,
present major challenges to the ability of individuals to live within their means. Alongside
these issues, irresponsible and unscrupulous lending and repayment arrangements as
well as other costs associated with living in debt and on a low income further trap people
into spirals of debt.
As highlighted by the Islington Fairness Commission, there is a real need for action
against illegal activity by loan sharks and for the restriction of payday loan companies
operating in the borough25. Without stricter regulation of financial services and improved
economic conditions the power of local services to help resolve local indebtedness is
limited.
25
Islington Fairness Commission (2010) Closing the Gap. London: London Borough of Islington
Experiences of Debt and Debt Advice Services in Islington
59
Appendix A Approach Letter
Dear resident, I am writing to you about a research study looking at experiences of debt among Islington residents. This study is being carried out by the National Centre for Social Research (NatCen), an independent research institute, on behalf of the Islington Debt Coalition (IDC). IDC are led by Islington Council who have commissioned and funded this research If you are currently in debt (other than a mortgage), have been in debt recently or regularly use services like pay day loans, we would like to invite you to take part in an interview. You would receive £20 as a thank you for giving up your time. Only the NatCen research team will know who has taken part in the research and everything you say will be treated as strictly confidential. NatCen will write a report summarising key findings but no‐one looking at the study findings will be able to identify you in any way. Helping with this study will not affect any benefit you receive. Taking part in an interview would involve a NatCen researcher coming to speak to you about your experiences of being in debt. The interview would take place in or near your home and would last for about 1.5 hours. The topics that will be discussed will be your views of debt, awareness of and experiences of debt advice services. This may also include the reasons you decided not to use any services to help you with your debt. If you’re interested in taking part, please: • complete the form on the back of this letter and send it back in the free post envelope or • leave a message on freephone 0808 168 1348 or • e‐mail us at [email protected]. We’ll get back to you and answer any questions you have about the research as well as check that your experiences of debt fall within the research. We can then arrange a suitable time or date for an interview. Interviews will begin in September so you should return your form to NatCen as soon as possible. We really hope you that if you’ve had experiences of debt, you will be able to take part in this important research. Yours, Nilufer Rahim, Lead Researcher Experiences of Debt and Debt Advice Services in Islington
60
Appendix B Information Leaflet
Supported by
Research Study on Debt and Debt Advice Services
in Islington
If you are in debt (or have recently been in
debt) we would like to hear about your
experiences.
The Islington Debt Coalition (IDC), led by Islington Council, is inviting
people who live in Islington to take part in a research study about
experiences of debt and debt advice services. The research is being carried
out by the National Centre for Social Research (NatCen), an independent
research organisation.
What will it involve?
•
A researcher will interview you in or near your home
•
The interview will last around 1 hour
•
Participants will receive £20 in cash as a thank you for taking part
Why take part?
•
You could help improve debt advice services in Islington
How do I get involved?
Call Free on: 0808 168 1348
Email us on: [email protected]
Turn over for more information about the study
Experiences of Debt and Debt Advice Services in Islington
61
What is the aim of this research? The aim of this research is for the IDC to get a better understanding of Islington residents’ experiences of and attitudes towards debt. The IDC also wants to hear about residents’ experiences of debt help and advice services available to people living in Islington. The findings of this research will feed into the work of IDC to assist in future strategic planning and service improvement. The IDC has asked an independent research organisation, NatCen, to carry out this research for them. Who is the IDC? What will happen to the information collected? Interviews will be digitally recorded for accuracy. NatCen will remove all names and anything that could identify participants from the transcripts and will share these with the IDC with your permission. If you do not want your transcript to be shared with IDC this will not affect your taking part. Any answers given will be treated in the strictest confidence in accordance with the Data Protection Act. NatCen will write up a report summarising key findings in November 2011. It will not be possible to identify participants in the report. The Islington Debt Coalition (IDC) led by Islington Council brings together a variety of organisations from across the statutory and voluntary sectors, to work together on the issue of indebted residents. Islington Council has commissioned and is funding this research. Who will know I have taken part? Only NatCen, the independent research organisation who is carrying out the research on IDC’s behalf, will know who has taken part. NatCen will not share the identity of participants with IDC or anyone else. Who is NatCen? NatCen is the leading independent social research institute in Britain and carries out research studies in the fields of social and public policy. www.natcen.ac.uk What is involved? •
•
•
Taking part could involve participating in either an interview or a focus group, depending on whether or not you have used debt advice services. Interviews will last up to 1.5 hours and will take place in or near your home, at a time that suits you. Interviews will include your views and experiences of debt, ways you manage your debt and facilitators and barriers to accessing debt advice services. Focus groups will last between 1.5 and 2 hours and will take place in a venue in Islington at specific times and dates. The topics covered in focus groups will include awareness of different debt services, reasons for accessing services or not, experiences of debt advice services, suggestions for improving available services and gaps in available services. •
Interviews and focus groups will take place in September and October 2011. How do I take part? Participating in the research is completely voluntary. You can register your interest in taking part by filling in the enclosed form and sending it back to NatCen in the prepaid envelop provided. You can also call this freephone number 0808 168 1348 to register your interest or to speak to someone about the research and what taking part would involve. Or you can e‐
mail us at [email protected] If you have picked up this leaflet in an advice organisation, you can ask a member of staff for an opt‐in form to post back to NatCen. What will happen next? If you register your interest in taking part NatCen will call you to: • provide more information about the study • arrange a suitable time and place for an interview or • invite you to take part in a focus group It is possible that we will not be able to carry out an interview or focus group with everyone who is interested in taking part in the research. Experiences of Debt and Debt Advice Services in Islington
62
Appendix C Opt-in form
About your debts
Have you missed any payments on bills, rent, credit cards etc?
Yes
Do you ever worry about your debts?
Yes
Have you borrowed money?
Yes
e.g. from Payday Loans companies, loan sharks, friends or family
Do you feel you will be able to repay your debt?
Yes
Have you accessed any services for advice about your debts?
e.g. Citizens Advice Bureau
Yes
□
□
□
No
No
No
□
□
No
No
□
□
□
□
□
About you
Gender
Female
Ethnicity
White
□
□
Male
Non-White
□
□
Please
specify……………………………
Parental status
Couple
Housing
Council
□
□
Housing
Household income
Below £20k
Level of debt
Below £5k
Economic activity
Employed
16-24
Are you registered disabled?
If yes, please give details
Private
□
□
Non-parent
Home owner
□
□
renter
□
□
□
Full time
Age
Lone-parent
Above £20k
£5-15k
Employed
□
□
□
part time
□
□
On out of work □
Above £15k
benefits
25-55
□
55+
□
Yes
□
No
□
..............................................................................
Experiences of Debt and Debt Advice Services in Islington
63
Appendix D Depth Interview Topic
Guide
P3121IslingtonDebtResearchStudy
InterviewTopicGuide
Researchaims:
To explore and understand: × Experiences of getting into debt, addressing debt problems and preventing debt and × Experiences and views of accessing help and debt advice Researchobjectives:
To explore: × Experiences of getting into, managing and getting out of debt, including discussion of different types of debt and factors that have led to a change in the situation over the last few years × The ways in which people have received help with debt problems, understanding what has been helpful and unhelpful and any enduring barriers × Views of available help and advice services and barriers to accessing and continuing contact with services × Potential improvements of services considering what type of help would be most effective and at what point, as well as who should provide the help and in what format 1. Participantbackground
• Household and living arrangements ×
Whether lives alone or with other people, ×
Whether owns home, rents privately or is in social housing through council (Homes for Islington or Partners or an RSL) • Employment ×
Whether employed/ studying/jobseeking ×
What they do/study and whether full or part time ×
Whether claiming any benefits, whether receiving pension (state, private or occupational) • Support networks ×
Dependents, at home or elsewhere ×
Contact with family and friends ×
Other regular contact with people Experiences of Debt and Debt Advice Services in Islington
64
2. Detailsoffinancesanddebts
• Income and outgoings (only need rough amounts if can’t remember exactly) ×
Rough level of household income ×
Sources of income ×
Levels of regular outgoings ×
Major outgoings e.g. rent/mortgage, utility bills, insurance, student loan payments, pension payments ×
How much spent on fuel ( on average per week/ month) ×
Savings • Debt situation ×
Types of debt and credit arrangements including money owed for:  Rent arrears  Council tax, hire purchase?, utility bills, child support  Credit/ store cards  Unsecured loans, overdrafts  Pay day loans  Loans from family and friends  Doorstep lenders  Loan sharks  Normal financial institutions • For each of the above: ×
How much is owed, how often making payments, how long have had this debt • Reasons for debt situation ×
How it started ×
Triggers that made them fall behind e.g. losing job, getting divorced, delay in benefit payments, losing home, mental health or drug/alcohol problems, long term sickness, change in child situation (e.g. new) or student situation ×
Approach to managing finances ×
Attitudes or circumstances that exacerbated the situation e.g. easy access to credit, not realising they were getting into unmanageable debt, not wanting to face the problem ×
Difficulties in getting out of debt now and why • Pattern of debt problem in last 3 years (think should explore in their life) ×
Whether and how debt has changed ×
Reasons for change e.g. ×
Impacts of recession, price inflation Experiences of Debt and Debt Advice Services in Islington
65
×
Changes in benefit entitlement ×
Change in personal circumstances e.g. employment, family relationships • Take up of loans ×
Who they consider to approach for loans ×
Whether they take up short term unsecured loans e.g. local door lender, payday loans, pawnbrokers, websites in response to money lending adverts ×
Costs associated with these loans e.g. interest rates, penalties • Feelings about their debt situation ×
Attitudes towards being in debt and where these stem from ×
Experience of being in debt – how being in debt makes them feel ×
Impact of debt on emotional and mental wellbeing e.g. stress, anxiety, worry ×
Feelings about financial future 3. Managingdebt
• Manageability of debt situation ×
Extent to which feel their own situation is manageable ×
What could have prevented getting into unmanageable debt ×
Whether paid off any past debts and how • Impact of debt on spending and household financial management ×
Impact of debt on household finances, whether affects spending on other things e.g. general activities, food, transport, general wellbeing, health ×
What spending they prioritise and what goes unpaid ×
Reasons for what they do and do not prioritise • Arrangements for repayment made with creditors ×
Details of arrangement  What it is  Who it is with  How they came to the arrangement ×
Whether have consolidated debt and details of this ×
Consequences of not paying ×
Satisfaction with payment arrangement and how affects ability to manage debts 4. Gettinghelpandadvice
• Whether ever sought help or advice on dealing with their debt and who from e.g. friends, family, advice agencies, financial services, doorstep lenders Experiences of Debt and Debt Advice Services in Islington
66
×
When and what triggered getting help at that point ×
Reasons for selecting chosen source of help ×
How found out about where to get help ×
How accessed source of help ×
Barriers to accessing source of help and how overcome e.g. lack of time, lack of confidence, embarrassment ×
Facilitators to seeking help • Outcome of seeking help ×
Description of advice/support ×
How often accessed it ×
If support stopped, why ×
Impact on debt situation ×
What would have made support more effective • Barriers to accessing (further) support ×
Awareness of where to go ×
Access issues (disability access, location, opening hours) ×
Negative past experiences of seeking help ×
Negative expectation of help offered e.g. do not expect advice to be impartial, fear that unmanageable repayment will be enforced, lack of belief that anyone can help 5. Suggestionsforimprovementtoservices
• Ways to better support people with debt problems ×
At what point in debt experience would help and support be most useful ×
What types of support would be most useful at different stages  Before getting in debt  Once in debt, how to manage and get out of debt  Once out of debt, how to prevent getting back into debt • Accessing services ×
How would prefer to access a service e.g. in person, have a representative come to their door, telephone, website ×
Who would prefer to speak to e.g. someone already known in community, any particular services/organisations ×
Hours and location ‐ what would be most helpful ×
How ‘formal’ should advice and help be • Awareness of services and help available ×
How and where advice and help services should be advertised Experiences of Debt and Debt Advice Services in Islington
67
×
Key messages they should get across e.g. how can help, options available to debtor, impartiality of advice, confidentiality, anonymity • Type of help needed ×
Advice on managing finances generally ×
Advice on how to manage and get out of debt ×
Legal advice ×
Advice on energy consumption ×
Help with communicating with creditors ×
Any other advice and support 6. Concludingthoughts
• What one thing could have helped them get out of debt more easily • Key lessons from their debt experience i.e. if there was one thing they know now that they wished they’d known before getting into debt what would it be Experiences of Debt and Debt Advice Services in Islington
68
Appendix E Focus Group Topic
Guide
P3121IslingtonDebtCoalitionResearch
FocusGroupsTopicGuide
Researchaims:
To explore and understand: × Experiences of getting into debt, addressing debt problems and preventing debt and Researchobjectives:
To explore: × The ways in which people have received help with debt problems, understanding what has been helpful and unhelpful and any enduring barriers × Views of available help and advice services and barriers to accessing and continuing contact with services × Potential improvements of services considering what type of help would be most effective and at what point, as well as who should provide the help and in what format 1.Background
Ask each participant to introduce themselves, including: •
Their name •
Where in Islington they live •
Whether they’ve ever received any advice about debt 2.AttitudestowardsDebt
Explain that we’d like to hear about their own personal experiences but are happy for them to talk more generally if they wish Views on most common reasons why people in general get into debt •
Easy access to credit •
Lack of sound or impartial advice from lenders •
Individual’s lack of awareness that they are getting into unmanageable debt •
Personal circumstances e.g. low pay, unemployment •
People not wanting to face the problem Views on what most makes it difficult for people in general to get out of debt Experiences of Debt and Debt Advice Services in Islington
69
•
No access to affordable credit •
Not having a job •
Having financial responsibilities e.g. children How can people prevent themselves getting into unmanageable debt Attitudes towards getting into debt •
How they feel about debt in general •
Is it ok at some levels or are some types of debt ok •
What makes it manageable/unmanageable Description of their own debt experience (if appropriate to broach in group setting) •
Types of debt •
How got into debt in the first place ‐ triggers •
How debt has changed over time e.g. amount, types, triggers for changes •
How, if at all debt situation has changed in last 3 years and why e.g. recession, price inflation, changes to benefit entitlement, irresponsible lending ‐ whether has become easier/more acceptable to get credit, change in attitudes towards debt •
Whether they are paying/have paid it back •
Factors affecting ability to repay debts i.e. things that make it difficult or help Feelings about being in debt •
How debt has affected their lives ×
Managing finances, what can/ can’t afford to do, ×
Health and well being 3.Awarenessandexperienceofsourcesofhelpandsupport
Ask participants where people who are in debt could get help. Record on flipchart paper. Prompts: •
Friends and family •
CAB •
Islington Law Centre •
Islington People’s Rights •
Cripplegate Foundation, •
Help on your doorstep (EC1) Experiences of Debt and Debt Advice Services in Islington
70
•
Housing office •
Internet and telephone services •
Banks •
Credit Unions •
Loan sharks •
Doorstep lenders Pick 3‐4 different sources of help explore them in detail. For each source of help ask: Accessing the service •
Who had heard of it and how •
Who had accessed it before •
For those who hadn’t: why not. Prompts ×
Lack of awareness of where to go ×
Issues around accessing help (disability access, location, opening hours) ×
Negative past experiences of seeking help ×
Negative expectations of help offered e.g. do not expect advice to be impartial, fear that unmanageable repayment will be enforced, lack of belief that anyone can help •
For those who had: ×
Why at that point i.e. triggers ×
Why they chose this form of help ×
What they wanted from this source of help e.g. advice to consolidate debts, how to manage finances and budgeting, repayment plans or options such as bankruptcy, how to communicate with creditors ×
How they got in touch with the source of help; how easy was this to do Experience of help received – brief overview only •
Type of help received e.g. information on how to take action, when to do it, what payments would be, when debt would be paid off, how to monitor debt levels on ongoing basis •
How often received advice e.g. once‐off or on a regular basis •
Format of advice received e.g. face to face, written letters, emails, telephone conversations Views of help received – broaden discussion out to include everyone’s views •
What was good about it Experiences of Debt and Debt Advice Services in Islington
71
•
×
Quality of information and advice ×
Whether it helped them manage their debt and how ×
How helpful the staff were e.g. understanding, knowledgeable, impartial ×
Whether format of advice was appropriate What was bad (probe on all of the above) ×
Any other concerns about way advice was given e.g. confidentiality •
Whether received advice often enough and for long enough •
Whether support continued and whether would use this form of help again 4.Suggestionsforimprovementstoservices
Ask participants to reflect back on the help and support they have received and what they have heard of available sources of help from previous discussion and reflect on Awareness •
How services could better promote themselves to make people in debt aware of them •
How and where should advice and help services be advertised •
What is key message(s) that need to get across e.g. how can help, options available to debtor, impartiality of advice, confidentiality, anonymity Accessibility •
How they would prefer to approach a service/what format e.g. in person, have a representative come to their door, telephone line, website; reasons for preference •
Who would prefer to speak to – someone already known in community, any particular services/organisations, reasons for preference •
Hours and location – what would be most helpful and why Type of help provided •
Advice on how to manage finances generally (e.g. saving); ;advice on how to manage and get out of debt •
Legal advice •
Advice on energy consumption •
Help with communicating with creditors Timing of support Experiences of Debt and Debt Advice Services in Islington
72
•
At what point in debt experience would help and support be most needed: ×
Before getting in to debt/how to prevent debt ×
Once in debt, how to manage and get out of debt ×
Once out of debt, to prevent getting back 5.Concludingthoughts
Go round group and ask each participant •
What ONE thing could help people to get out of debt more easily •
If there was one thing they wished they had known at the start, but know now what would it be. Experiences of Debt and Debt Advice Services in Islington
73
Appendix F
Consultation Group
Topic Guide
P3121IslingtonDebtResearchStudy
ConsultationGroupTopicGuide
Aims:
•
•
To highlight key emerging findings to study participants To explore solutions relating to: ×
×
×
×
debt prevention, service awareness and access, desired services and the customer experience 1. Participantintroductions(5mins)
• Ask participants to briefly say (round robin) ×
Their name ×
Whereabouts in Islington they live 2. Breakoutactivities(20mins)
• Explain that we’d like them to spend the next 20 minutes working with the participants on their table on an activity. • Each table will work on a different activity relating to a different aspect of debt advice and support. • After the 20 minutes of group work we would like them to report back to the rest of the group (they should nominate someone to do this) and then we’ll discuss the issues raised together. Groups 1 and 2 – Debt Prevention • Explain the research has highlighted that there are a number of reasons why people get into debt. • We would like them to spend the next 20 minutes looking at the causes of debt provided on the cards in the middle of the table. • They should then think about what services could realistically do to help people avoid debt and write their ideas next to the causes. Experiences of Debt and Debt Advice Services in Islington
74
Table 1 × Lack of budgeting Table 2 × Losing job ×
Money mismanagement e.g. ignoring bills ×
Getting divorced ×
Lack of awareness about ways to access affordable credit
×
Mental health or drug/alcohol problems
×
Easy access to credit ×
High energy/fuel bills Lack of awareness about the costs associated with loans e.g. interest rates, penalties ×
×
Housing change ×
Having a child • They should think about whether ways of preventing debt would be different for different people, in particular younger vs older people, why and what to do about it If the groups are finding it difficult to think about ways to prevent debt, prompt with following suggestions: • teaching financial capability (to children in schools, to 15‐16 year olds outside school and teaching parents/adults) • sessions with people with real life examples of debt • drop in for the newly unemployed or newly divorced • guidance on managing income and expenditure better • referral and signposting to other services e.g. mental health or addiction services, • campaigning/ lobbying against illegal lenders • promotional campaigns to raise awareness about accessing affordable credit Group 3 – Promotion and Awareness • Group 3 is looking at raising awareness and advertising services. • A barrier to helping more Islington residents get out of debt is that not many people know about the services that exist. • Ask Group 3 to come up with ways in which services could I.
raise awareness of services among people living in Islington and II.
encourage them to attend • Explain they should think about the following things ×
Where should they advertise their service to catch the attention of people in debt ×
What promotional materials should they use? E.g. posters/ billboards, local papers, leaflets, the internet or social media or txt messaging ×
What messages should they get across in their promotional materials ×
What should their materials look like Experiences of Debt and Debt Advice Services in Islington
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×
How can their promotional materials and campaigns be inclusive i.e. for people who don’t speak English as a first language… Group 4 – The Customer Experience • Ask participants in Group 4 to think of the advice, help and support services that exist both in Islington and nationally e.g. National Debtline and Money Advice Service. • They should spend the next 20 minutes discussing the customer service and experience they would wish for in terms of: ×
What type of service would they would prefer to access e.g. one that operates nationally, locally, one that is a charity/ independent, part of a community group or part of council ×
Ways in which people can access services (face to face/ phone/online/ drop‐
in/appointment/ home visits) ×
Hours of business i.e. do people want to do this early morning, lunchtime, early evening, weekends? ×
How long people should be able to access support and when it would be most useful ×
Customer service provided by advisers and whether they would prefer one adviser dealing with their case at any time ×
Types of advice provided e.g. on:  Managing finances generally  Legal matters, debt relief orders and bankruptcy  Accessing grants, bursaries and crisis funds  Low interest loans  Energy consumption ‐ energy bills and switching suppliers ×
Types of help provided and the extent to which the service advisers should act on customers’ behalf:  Help with communicating with creditors  Help with negotiating minimum weekly repayments  Help with consolidating debts ×
They should write their thoughts down on the paper provided. Group 5 – Engaging Young People × Participants in Group 5 will be concentrating on ideas for helping young people avoid or address debt. × They should think about the following questions and write their ideas on the flip chart paper provided. ×
What would help prevent young people from getting in debt ×
How can services help prevent young people getting in debt ×
What are the best ways to help young people manage their finances ×
When would this help be most useful to young people Experiences of Debt and Debt Advice Services in Islington
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×
What sorts of services should be provided to young people in debt ×
How could advice services attract young people to their service – what should their promotional campaigns look like × Encourage them to think creatively: to think ‘outside the box’ about channels such as E‐
Comms via websites, SMS texts, emails, social media and Community Champions. 3. Discussion(45minutes)
• Ask each table to present their work back to the group and probe on their rationale for their decisions. • Ask other groups if they agree/ disagree and what they might do differently ‐ include whether they might do things differently depending on the type of person (young/older, working, /not working, BME/migrant groups etc) who needs some support. • Explain that: ×
As they know services are currently facing funding and budget cuts ×
We would like to understand what they think are the most important aspects of service delivery – what they would want in the ‘real world’ as opposed to the ‘ideal world’ ×
Ask them to spend the next 5 minutes discussing in their groups what the most important aspects of their part of the service would be. They should number the four most important aspects which they consider to be the absolute priority ×
Ask them to feed back their views to the group • Explore reasons for these decisions and other participants’ thoughts about them. Probe on what’s more important ‐ easy to access (e.g. always being able to get straight through on the phone) or continuity + tailored assistance (e.g. you have one point of contact and do get passed between people) • Ask group as a whole to think about what they feel are the most important aspects of debt advice services overall – looking at the 4 different elements considered Experiences of Debt and Debt Advice Services in Islington
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Appendix G Sample breakdown
Depth Interviews
A total of 18 depth interviews were conducted. The sample characteristics are broken
down in the table below.
Appendix Table F.1
Characteristics of depth interview sample
Gender
• 10 female
• 8 male
Ethnicity
• 8 white
• 1 white other
• 9 BME
Income
• 18 Below 20k
Housing
• 14 council housing
• 1 home owner
• 3 private renter
Employment Status
Disabilities
• 7 on out of work benefits
• 17 not disabled
• 3 employed full time
• 1 disabled
• 4 employed part time
• 3 students (2 full time, 1 part)
• 1 retired
Parental Status
• 7 lone parents
• 11 non-parents
Debt Level
• 2 no current debt
• 9 below 5k
• 3 between 5-15k
• 4 above 15k
Age
• 5 18-24
• 10 25-55
• 3 over 55
Focus Groups
Characteristics of participants of the nine focus groups are detailed below.
Appendix Table F.2
Characteristics of consultation group sample
Gender
• 33 female
• 26 male
Ethnicity
• 29 white
• 30 BME
Housing
• 13 private renter
• 2 home owner
• 44 council housing
Income
• 51 below 20k
• 8 above 20k
Employment Status
• 38 on out of work benefits
• 11 employed full time
• 4 employed part time
• 5 pension
• 1 student
Disabilities
• 4 disabled
• 29 not disabled
Experiences of Debt and Debt Advice Services in Islington
Parental Status
• 16 couples
• 22 non parents
• 21 lone parents
Debt Level
• 30 below 5k
• 17 between 5k and 15k
• 5 above 15k
• 7 no debt (currently)
Age
• 4 18-24
• 41 25-55
• 14 over 55
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Consultation Group
Of the 33 participants who attended the group 23 had previously participated in the study
and 10 were new participants.
Appendix Table F.3
Characteristics of focus group sample
Gender
• 18 female
• 15 male
Ethnicity
• 17 white
• 16 BME
Housing
• 8 private renter
• 1 home owner
• 24 council housing
Employment Status
• 22 on out of work benefits
• 7 employed full time
• 1 employed part time
• 1 student
• 2 retired
Income
• 29 below 20k
• 4 above 20k
Disabilities
• 24 not disabled
• 9 disabled
Parental Status
• 3 couples
• 15 non parents
• 15 lone parents
Debt Level
• 18 below 5k
• 10 between 5-15k
• 5 above 15k
Age
• 3 18-24
• 21 25-55
• 9 over 55
This table provides figures for the self-defined ethnic groups of participants from BME
backgrounds across the whole sample. The ethnic origins of participants are broadly
reflective of the diversity of residents in the borough26, although the picture is a complex
one and could benefit from further research.
Appendix Table F.4
Ethnic group as defined by
participants
Black
7
Black African
12
Black British
6
Black Caribbean
2
East African
1
Indian
1
Latin American
1
Mixed
4
Pakistani
1
Turkish
4
White British
43
White Other
1
Not Stated
4
Total
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26
http://www.islington.gov.uk/DownloadableDocuments/CommunityandLiving/xls/Population_And_Demographics_ExcelVersio
n_V1.xls?extra=4#Ethnicity!A2
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