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review

Debt solutions in the UK: recommendations for change

Evidence type: Review i

The Study

In 2017, the Money Advice Service (MAS) and University of Bristol conducted a review of formal and informal solutions available to individuals experiencing problem debt. The study explored the extent to which solutions met the needs of customers, creditors and providers, and suggested improvements to the current system.

The study comprehensively reviewed the relevant literature and augmented this with primary qualitative research with individuals with lived experience of diverse debt solutions. The authors also engaged with the sector through expert workshops, interviews and group discussions.

The authors compiled a provisional list of 24 draft opportunities for change, which the research and sector engagement suggested could help individuals manage their problem debt more effectively. This consultation document was published by MAS in February 2017. Approximately 60 individuals and organisations responded from across the sector, including representatives from the financial services industry; the not-for-profit advice sector; the commercial debt management industry; the personal insolvency industry; and the energy industry. MAS analysed the consultation findings and identified a short-list of priority recommendations, which are set out in this study.

Key Findings

This report identified five areas where improvements to debt solutions could be made. These five areas are summarised below.

  • Better access: to debt solutions and bankruptcy advice, enabling more individuals to gain professional help at an earlier stage.
  • Better protection: to ensure individuals experiencing debt receive fair and broadly consistent treatment from FCA-regulated financial services firms and non-financial services creditors such as government, utilities and telecoms. This will help safeguard vulnerable individuals and ensure the recommended debt solutions are in their best interests. This approach increases the likelihood of debt solutions being successful, both for the individuals concerned, and their creditors.
  • Better support: assisting individuals throughout the debt-cycle, from selecting a suitable option; to managing their debt; and reintegrating back into mainstream financial services post-debt. Improving debt repayment support for example, would benefit creditors as well as individuals by stabilising payment patterns. This would also reduce the number of ‘revolving door’ cases for advisors. The review focuses on non-statutory support, particularly token payment plans. The report recommends further actions to improve support for individuals applying for bankruptcy online and enhancing recognition of debt repayment.
  • Better choices: addressing gaps in provision for individuals with negligible disposable income (who may have assets) and the increasing number of people with insecure and fluctuating incomes. Also, improving choices for individuals with non-statutory debt repayment plans to protect them from creditor action and charges.
  • Better processes: making debt advice more consistent, efficient and transparent. This would benefit individuals experiencing debt, advisers and creditors alike. The study recommends sharing good practice through a single online income-and-expenditure portal.

The review also identifies opportunities for change across these areas, building on work already in progress, and suggests new measures.

Recommendations

The study made the following priority recommendations:

  • A review of debtor-application bankruptcy fees in England, Wales and Northern Ireland.
  • Re-introducing fee remission for low-income applicants, which could be included in the remit of the review into debtor-application bankruptcy.
  • Improving online information about help with bankruptcy fees on the GOV.UK website and online bankruptcy portal.
  • Making information and tools on the online bankruptcy application portal easier to access.
  • Conducting more research into debt ‘rehabilitation’, including better recognition of debt repayment options.
  • Introducing a statutory debt management scheme for England, Wales and Northern Ireland.
  • Stimulating innovation in the equity release market for people in debt who are ‘asset rich, cash poor’.
  • Developing a single online income-and-expenditure portal.

These recommendations were subsequently incorporated into the Debt Advice Sector Strategy, which was taken forward by the Money Advice Service and supported by the Debt Advice Steering Group.

Points to consider

  • Relevance: The synthesis review was very comprehensive, triangulating evidence from a wide variety of sources and research projects. This was augmented with primary consultations with around 40 organisations, and in-depth qualitative interviews with people with lived experience of dealing with problem debt. MAS also led expert workshops consulting leading advice sector and industry representatives. Professor Sharon Collard also conducted follow-up interviews with experts to inform the draft recommendations. Group discussions with insolvency professionals operating in England, Wales and Scotland were also undertaken. The recommendations are therefore relevant to professionals and practitioners across the debt advice sector.
  • Applicability: The report recommendations are widely applicable. The authors have considered the needs of individuals on fixed, variable and flexible incomes throughout the study. It is recognised that the needs of the growing proportion of individuals on variable and flexible incomes will need to be carefully considered by agencies implementing the recommendations.

Full report

Debt solutions in the UK: recommendations for change - full report

Key info

Client group
Year of publication
2018
Country/Countries
Contact information

Professor Sharon Collard, University of Bristol Colin Kinloch, Money Advice Service Sarah Little, Money Advice Service  sharon.collard@bristol.ac.uk Colin.Kinloch@moneyadviceservice.org.uk Sarah.Little@moneyadviceservice.org.uk