Debt advice is vital, the industry and government needs to work to ensure access
The new regulations are a really important step for people facing financial difficulty, but there are still some areas where, as an industry, we need to do more.
We know there is a potential stigma associated with being in financial difficulty and in seeking advice about it, meaning many people don’t talk about debt problems. Almost half of people avoid conversations about money and around a quarter have lied to a family member about it, frequently about levels of debt. Many people are also confused about the impact support can have, with around a third wrongly believing that help from their bank would automatically have an adverse impact on credit ratings. Fundamentally, this means potentially millions of people will be missing out on the support that is available to them.
To help address these issues, our Lloyds Bank M-Word campaign has sought to encourage people to have these money related conversations and provided resources to help them do so. A similar idea could be a sustained and co-ordinated national awareness campaign, supported across the industry, on the topic of problem debt. Beyond simply marketing and awareness raising, this could seek to change behaviours and reduce the stigma around debt advice by focussing on three key areas:
- The warning signs of financial difficulty and when people should seek advice
- How important it is to start those conversations early to avoid things getting worse than they need to
- The range of support options available to help customers, depending on their specific circumstances
Secondly, the changes are likely to increase demand for advice, with debt advice organisations predicting an increased volume of calls as a result of the pandemic. The issue is clearly front of mind for the government, with an extra £37.5m provided to the sector last year. Over the longer term, as an industry we need to make sure that the funding model for independent debt advice is fair, transparent and sustainable, ensuring that everyone who needs support is able to access it. A key element of this will be expanding the scope of organisations that fund debt advice beyond financial services to all firms whose customers benefit from it (e.g. utilities and telecoms providers or gambling operators).
In the current climate, it is sadly too easy for anyone to fall into financial difficulty and for debt to become a problem. But by working together across the industry, as the new regulations show, we can encourage more people to get advice early and to help those in difficulty get back on their feet. Doing so will be vitally important in helping people build better financial resilience over the longer term and in helping the economy get back on its feet following the pandemic.