For many companies operating in the credit markets, your concern might be about a potential reduction in demand. Not so for debt charities such as StepChange.
Our risk is a different one. Debt advice is obviously a dramatically counter-cyclical sector: economic difficulty will tend to increase demand for our services. So for us, that means looking ahead to what could be a worryingly high level of demand for debt advice next year. We saw over 331,000 people contacting us in the first half of this year – the highest ever number, and that’s before next year’s particular influences cut in.
From next spring, the Financial Conduct Authority (FCA) requirements for firms to intervene on persistent credit card debt and repeat overdraft use will require providers to close down some customers’ lines of credit and put affected customers onto repayment plans. This is likely to peel back the cover on some previously hidden debt problems.
Add in strong economic headwinds, and their likely impact on employment and earnings, and next year could be busier than we can cope with without affecting our service levels. Even though we’ve invested significantly to be able to deliver against ever-increasing demand for our services, on the basis of what we already know from this year it’s going to be a stretch.
However, the important point here is that it’s not about us. While planning services is a concern for StepChange, just think what the future feels like for every single one of the households involved.
Problem debt is frightening and bad for your physical and mental health. The knock-on effects for society are awful. Yet we already know that, for a lot of households, those problems are absolutely coming and a number of them probably know it too.
For around seven in 10 people, it’s a life shock that will tip them into debt difficulty. For some households, debt won’t be something they can anticipate. However, other households will undoubtedly already be experiencing that sick feeling in the pit of their stomach knowing that, if they do lose their job, see their working hours cut, experience any delay in receiving benefits, get ill, or simply experience inflation on goods and services outpacing their own income growth, then they’ll no longer be able to balance their already precarious finances.
Anticipating that the problem might be coming doesn’t necessarily mean people can solve it.
Just to recap on what we saw in the first half of the year, as well as a record number of clients we also saw the continuation of some very particular trends. Almost a third of our clients liable for council tax were behind on it – reinforcing the fact that debt isn’t just a credit issue.
A massive 43 percent of our clients were in vulnerable circumstances, with half of these experiencing mental health difficulties. And a quarter of our clients were single parents – a huge level of over-representation against the seven percent single parent proportion of the UK population.
That already gives a pretty good steer on some of the useful places we can usefully concentrate energy on to address the problems we should all be trying to solve.
This is why we keep talking to creditors, regulators and the government not just about the existing debt advice model – which helps people to pick up the pieces once they are in problem debt – but also about how they, and we, can deliver meaningful, earlier intervention and help.
The brutal fact is that earlier advice from us will only help people if it’s backed up by a solid proposition that helps people escape the inevitability of sliding into problem debt if the thing that they’re worrying about happening does happen.
Please take a moment to think yourself into the shoes of your customer who might be paying their minimum payments to you more or less routinely and on time, who’s silently worrying and juggling all the time to do that not just with you but with a dozen other bills too. The customer who’s struggling with the ad hoc costs like school uniform they face at this time of year, which push them just that little bit further into borrowing, in a way that certainly doesn’t feel discretionary, even though they don’t want to and they’re worrying about what next year might bring.
It isn’t just the job of debt charities and the government to think about how to solve the problems that people like this are facing. Lenders and other creditors are not necessarily to blame for the fact that, for some households, this is where they find themselves – but a bit of empathy goes a long way. How would you hope you would be treated if you were in that situation? Let’s build the framework that delivers against that.