Peter Wyman’s independent review of funding of debt advice in the UK, commissioned by the Money Advice Service, was published in January earlier this year. Stakeholders were then invited to share their thoughts on the review.
The CFA was delighted to be part of the consultation, but I am afraid we saw little in the Wyman Review that we could welcome. Our Chief Executive, Jason Wassell, provides his thoughts.
Increasingly we hear more about the impact on families of debt, and just as importantly we also see that the nature of this debt has changed. There is a strong case to be made for a step-up in terms of debt advice and an improvement in the quality of that advice. The Independent Review of the Funding of Debt Advice was an ideal opportunity to address this, but the recommendation seem to miss the mark in so many areas.
One of their mistakes is to think narrowly about who should be financially supporting debt advice.
If accepted, the recommendations of the Review would leave responsibility for funding the vast majority of free debt advice with consumer credit lenders. This completely ignores the change in the make-up of household debt.
Yes, the facts show that consumer credit is a proportion of household debt but that we have also seen a rise in factors such as council tax arrears. We can see other debts, such as utilities, becoming more pressing.
However the Review introduces the strange concept of ‘unintended creditors’.
The term unintended creditor is misleading and has no place in a debate around the funding of debt advice. There is nothing unintended about a telecoms or broadcast provider conducting a credit check prior to signing an individual up to a two year contract and two years of monthly payments.
It is difficult to see how this is different to a lender providing a loan over a similar, or even shorter, period. An average short-term loan is a couple of hundred pounds, a smart phone can cost several hundred. Both need to consider the ability of the borrower to repay. At the end of the day these have the potential to be additional debts sitting within a list of financial commitments.
The only way to increase funding for debt advice, is to look at really broadening the funding base for debt advice. We agree that one of the principles should be that any organisation which benefits from a customer receiving debt advice should pay towards the cost of that debt advice – this means public sector creditors as well as those from the private sector.
Consumer credit is never going to avoid providing its financial support. There are levies, taxes and voluntary contributions that lenders pay to meet their obligations. However, we need to think wider.
Of course, this would mean introducing a new levy, or giving the FCA the power to collect a levy from firms and organisations it does not regulate. It is not an easy question, nor will it be easy to solve, but simply asking current levy payers to pay more is not the solution.
A wider levy is needed to ensure the funding of free debt advice is sustainable for the future. That is a harder road to take, but it is the right one.