Citizens Advice “Dealing with Debt” Service funded by DETI
The Citizens Advice “Dealing with Debt” service was awarded a £1.2 million contract to provide face to face money advice across Northern Ireland. The new contract provides for 12 full time money advice workers across Northern Ireland for the period April 2008 to March 2011. This contract follows from Citizens Advice successful delivery of the same service for the period April 2006 to March 2008
Targeting those in Need: - Citizens Advice commissioned a firm of independent consultants to carry out research on the data collected from clients accessing the Dealing with Debt service.
PSC Management found that the debt advice service provided by CAB is very well targeted on those in social need. The published report found that:
• Almost half of all clients came from within the three most deprived deciles in Northern Ireland ………the overall picture is of client concentration in those areas with highest deprivation scores.
• Those on means tested benefits made up more than half of respondents.
• It should be noted that while the unemployed made up a quarter (25%) of those on the CAB database, the unemployment rate in Northern Ireland (January 2008) is less than five per cent.
PSC Management has undertaken previous research for OFMDFM on over indebtedness in Northern Ireland, and notes that “those on the margins of the labour market (unemployed, sick, retired) constituted more than half of the CAB sample, but were less than half of the over – indebted group in the OFMDFM sample.”
Profiling Debt in Northern Ireland: - Since April 2006 the project has dealt with over £28 million of new debt in Northern Ireland and helped close to 4,000 people regain. The statistics produced by the project have enabled Citizens Advice and DETI to map the structure and profile of debt in Northern Ireland.
The largest debts relate to personal credit for 2006 - 08 which accounts for 70% of all debt: See Pie Chart
Noticeable Changes between 2007 and 2008
Increase in Demand
In 2003/2004 the CAB network dealt with approximately 24,000 debt enquiries. In 2007/2008 figure rose to over 50,000 debt enquiries, an increase of approximately 108% in just 4 years. The increase in the amount of debt dealt with in just one year is almost 80%.
Mortgage & Secured Loan Arrears
The most alarming figure is that the service saw an increase of 285% in the number of mortgage cases from 2007 to 2008. The roughly translates to an increase of 137 people with mortgage arrears and 83 people with secured loan arrears. Latest figures form the Northern Ireland court service state that repossession actions are up 64% for 2008 compared with 2007. However, Qtr3 2008 increase by 93% and quarter 4 by 73% indicating an upward trend through the year.
Business Debts & Tax Arrears
The number of business debt cases has increase by 274% and tax arrears cases by 118%. These cases are small self employed contractors and sole traders, indicating a sharp increase in the number of failing businesses
Credit Union & Doorstep Lending
A 60% increase in the number of Credit Union cases and the number of doorstep lending cases has increase by a third. This could indicate that more people need to resort to forms of credit that are not main stream.
Credit Card & Personal Loan Debt
The amount of debt is up by around 50% and the number of cases up by around a third. However, the amount of debt involved (Approx £9.5 million) shows that these two areas alone account for over 50% of the debt dealt with in 2008. It is plain where the majority of problem debt lies.
Recommended Action
Debt Resolution Methods
In England and Wales the Debt Relief Order comes into force in April 2009. This is currently under consultation for Northern Ireland. However, a range of other methods, such as the Enforcement Restriction Order and the revised Administration Order has not been considered for Northern Ireland which will leave its citizens at a disadvantage. This should be addressed.
Resources from Finance Sector
Ulster Bank recently gave money for the provision of debt advice in Northern Ireland. Other lenders should follow their lead to provide funding for debt advice services
Tighter regulation of industry with direct input from stakeholder advice agencies
The Advice Sector has called for this for years. It is only as a result of the recent economic issues that it is being considered. Tighter regulation should ensue with the advice sector playing a role in feeding back what the issues are, with more sanctions available to regulators.
Social Policy Cases Studies
A County Down client who was living on sickness benefits contracted pneumonia because she was unable to afford oil to heat her home.
Another County Down Pensioner is receiving Pension Credit and he is very worried about affording oil to heat his home.
A County Antrim client was in mortgage arrears because her estranged partner was able to extend the loan without her consent. He left the property and the client has been left with unaffordable mortgage payments and arrears.
A Belfast client had a problem with gambling and had accrued a number of consumer debts as a result. He has since been attempting to pay these off but because some of his creditors have refused to freeze the interest his debt is spiralling further so that he is unable to gain control due to his low income.
A County Down client was advised by a debt collector to ask the neighbours to transport the client’s children to school due to the price of petrol. The money advisers had already been negotiating with the lender and yet the client was still being intimidated by a collector.
A County Down client lost his job due to lack of work available and was unable to maintain his mortgage payments and as a result possession proceedings have been taken against him.
A Belfast client cannot cope with the interest on her mortgage and unsecured loans. She is on a low income and had previously re-mortgaged, however now her debts are too difficult to manage and the bank will not freeze the interest. The client has attempted to take her own life as a result.