Offering brief respite to those seeking free debt advice, the government is providing £27m of debt funding in the next year. It’s not enough, but will hopefully keep the commercial debt management wolves from the door.
It was originally announced that the five-year £125m funding of the Financial Inclusion Fund (FIF) would not be renewed when it runs out in March.
The move was likely to lead to up to 500 debt advisers losing their jobs, so the additional £27m is a rare piece of good news.
However, it’s only for one year and is dwarfed by the overall reduction in debt advice funding following cuts in council grants. The threatened closure of Citizens Advice branches as a result of swingeing cuts in its budget can only have a negative effect on those struggling with debts.
Cuts continue – and so does debt
And all this is happening as the number of people becoming insolvent continues to rise. In England and Wales alone, over 135,000 people went bust last year, opting either for bankruptcy, an Individual Voluntary Arrangement (IVA) or Debt Relief Order (DRO).
The last thing these people need is to fall into the hands of debt management companies, many of which have been exposed by the Office of Fair Trading as providing an over-priced and shoddy service to their clients.
And yet I can’t help but fear that budget cuts will lead some struggling consumers into these companies’ clutches, with glossy adverts failing to mention their high charges. And – in far too many cases – dodgy sales practices and poor advice. Hard-pressed families deserve better.
So what are the alternatives?
For a start, despite the doom and gloom, Citizens Advice isn’t shutting down. While some services may be cut, the organisation will continue to provide much-needed debt advice.
And let’s remember the many committed volunteers who keep local Citizens Advice bureaux going. People like Zhenya Golomuz, who is running the Virgin London Marathon to raise funds to keep the Blackpool CAB open.
The Consumer Credit Counselling Service (CCCS), National Debtline and PayPlan also offer free and impartial debt help, either by phone, online or through regional advice centres.
The debt management industry preys on the desperation of its customers. Luckily there is still an alternative – the free-to-consumer impartial advice sector. It must be supported.
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