UK Poverty Post

Poverty and debt: how the CCCS helps

Personal debt pervades UK society. At the end of October total UK personal debt stood at £1,452bn. As the UK’s leading debt counselling charity, we hear about the human cost of this stratospheric amount on a daily basis.

We’re the Consumer Credit Counselling Service, a debt help charity based in Leeds, with nine regional centres throughout the UK.

The organisation was set up in 1993 based on an American model of providing free help to restructure peoples’ debts, to make them more manageable.

Unsecured lenders share the benefit they receive from our operation with us to cover our costs. This means we can retain our independence and ensure that our advice is always in the client’s best interest.

We operate in a crowded space; alongside other free services (such as Payplan and National Debtline) there are 100s of companies who charge clients for managing their debt solutions, Some of the less reputable charge their clients around £5000 in extra costs across the life of the repayments.

Of course this high additional cost would be better used in paying off the original debt accrued rather than the service costs, especially as the vast majority of households with unmanageable debt earn less than £20,000 (if our own figures are representative of the wider population).

For those in poverty, or earning much less than the national median wage, income isn’t the only factor behind their situation, but as the Guardian said recently, “lack of income compounds it”.

Access to money costs more as credit isn’t as easily available through standard low-interest means. Low-earners have to buy via alternative methods such as hire purchase or catalogues, and borrow money through (perhaps) less salubrious methods like high-interest payday and doorstep loans.

Just servicing the interest on these methods can mean the original loan amount is paid back multiple times. This leads to further borrowing to help pay the debt, and the situation deteriorates.

And Our own research into lower-earning households also found that most of them were trapped in a budget deficit, spending, on average, over £100 more than they earned each month, before the debt costs are assessed (so in essence, they can’t pay the bills no matter what they do).

Add together the low income, the extra charges for accessing credit, the number of “budget deficits” out there and the service costs, and it’s no wonder the impact of debt on low-income families can be severe.

CCCS can help people get out of this debt spiral.

For those under severe financial pressure our remit is quite straightforward: we help people in financial difficulty by providing free, impartial and realistic advice, and managing their plans to repay the unsecured debts they’ve accrued.

We counselled over 500,000 UK citizens last year (nearly 1% of the UK population), and we service over 100,000 debt management plans, Individual Voluntary Arrangements, bankruptcies and more.

We’re well aware that there are still a lot of people who don’t know where to turn to with their debt issues, and this is why we’re speaking with websites and blogs (such as the Oxfam UK Poverty Post) to get the message out to people that help at the sharp end of UK society. We encourage everyone with a debt problem to get in touch with us, either via our online debt counselling service DebtRemedy or by phoning our helpline on 0800 138 1111 (8am-8pm Monday-Friday).

One area of hope is that levels of personal debt are falling [page 5], however the public sector cuts (and the as-yet unpredicted societal changes that’ll result), the continued rise in food prices and even the forthcoming VAT rise mean that for a lot of low-paid households debt will become even more of an issue during 2011. However, we hope we can help alleviate some of the suffering.