Peter Tutton is Head of Policy for StepChange Debt Charity and was speaking at last week’s Indebtedness event run by the Money Advice Service (MAS) to launch their report A Picture of Over-Indebtedness. The seminar was to establish the levels of over-indebtedness around the UK and identify indicators to help us spot those at risk before it’s too late. But it also posed three central questions: How do we prompt people to recognise their over-indebtedness? How do we trigger a decision to take action? How do we reach them in the first place?
The MAS report draws together research to pinpoint factors that can help us target those at highest risk of over-indebtedness, that is, those who consider ‘keeping up with bills and credit commitments a heavy burden’ and/or those who have ‘fallen behind or missed payments in at least three of the last six months’. Key factors include:
- Age: 25-34 year olds are four times as likely to be over-indebted than the over-65s
- Income: Households on less than £10,000 – one in four (24%), compared to 15 per cent above this income bracket
- Family: One in five parents are over-indebted, rising to one in four for parents with three or more kids; 28 per cent of single parent families are, compared to 18 per cent with two
- Renting: 25 per cent of tenants are over-indebted, more than twice that of home owners (12%); 29 per cent of social tenants, compared to 21 per cent renting privately
“We know that the five key predictors of over-indebtedness are age, income, number of children, number of parents in a household and housing tenure. If we look at the three nations we can see differences in these measures.
“Northern Ireland has a high incidence of large families with 3 or more children, (11% higher than the UK average), and also single parents. Wales has the highest level of unemployment in the UK, and low wages, with 1 in 10 adults on a household income of less than £10,000.
“Scotland has a slightly older population, and older people are less likely to be over-indebted. The incidence of large families is the lowest in the UK. The biggest variation from the UK norm is in renting. Although the incidence of social renting is typical, the number of private renters is the lowest in the UK. But we must also mention that there were far fewer over-indebted people in Scotland than you would expect given the other data. This suggests the Scots have a different attitude to their debts or to missing payments that ‘over-rides’ the demographic factors.”
MAS has clearly pinpointed who needs help and where they are but what of the central questions about what to do with this intelligence?
“We think there are simple tactical steps that could be used to encourage more people to take action,” Jane Tully, Head of Insight & Evaluation at the Money Advice Trust, tells QIPN. “We should be using stories and testimonials from people who have resolved their debt issues, using language that refers to money worries rather than debt.”
In an area as sensitive as debt, those most likely to be trusted when talking about it are those who have been through it and come out the other side. Dan Bicknell, Debt Advisor for Talking Money, agrees: “I think it is fair to say Talking Money’s reputation was largely built upon recommendations from other clients, as well as building relationships with other organisations and statutory bodies. If a client sees us who has been recommended by a friend who has been singing our praises then that goes a long way.”
It would be easy to say we should change the way British people talk about their money but there are too many competing messages for this to gain traction. Meanwhile, debt remains a taboo, where people are embarrassed and feel a failure. Speakers repeated the experience of clients feeling it is safer to do nothing, to leave the envelope unopened, and that to seek help could open a can of worms and a whole world of pain.
One way to engage people might be when they’re walking a well-trodden path towards financial hardship, before they are over-indebted. Jane Tully suggests: “We could be setting up targeted and supported referrals with creditors, or engaging people at other moments when people experience life changes or income shocks.”
According to Peter Tutton, 14 million people experienced these 'income shocks', according to research by StepChange in 2015, but their first port of call was not always debt advice, for example turning instead to GPs for help once it had impacted their health. “Debt advice is often seen as for when you’re at the end of the road. It is not seen as part of the survival strategy when juggling finances,” he reported. Four in ten of StepChange clients thought they could sort out their debt themselves and the same amount thought things would improve quicker.
Clearly, catching people at the moment of income shocks, like redundancy, or life events, like having a child or divorce, could be key to achieving MAS’ target of doubling the number of people accessing debt advice by 2020. Partnerships with specialist agencies supporting people through these critical times could be invaluable and signposting money help on web pages visited by people seeking non-financial advice around the issues could prevent spiralling debt. This would pre-empt the sinking feeling and the emotions around financial failure.
There is a wealth of theory around behavioural change starting to be applied to financial wellbeing and it does help shed light on how human nature works against our best efforts to support people out of debt. How do we manage expectations when one group of people believes everything will work itself out in the end while another group believes the world will end if they face up to their problems? How do we challenge counter-productive decision-making when we all know how tempting instant gratification can be compared to the hard slog of long-term gain? And who hasn’t been overwhelmed by something that seemed so big we couldn’t think about anything else while feeling it’s so huge there’s nothing we can do about it?
The event acknowledged these enormous challenges but it seemed there is a lot of work yet to be done to map out exactly how and where to engage over-indebted people, and what to say when we do so we help them recognise a problem and choose to act on it. Again, behavioural science has some pointers around setting trusted messengers to work, providing a clear sense of control that consumers can opt into for quick returns, in a space they feel comfortable, but the MAS event stopped short of defining what exactly these interventions might look like that could capitalise on the research so far.
“Unfortunately, while I thought over-indebtedness and the seriousness of the problem was well recognised, I did not think a way of targeting individuals to engage with free services was made clear,” concludes Dan Bicknell on reflection. “In fairness, however, it was discussed during the day that as each person’s attitude towards money, and indeed debt, is unique and very personal, it would not be realistic to come up with one solution.”