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Debt Advice and Over-indebtedness

Increasing numbers of people are getting into difficulty with their debts and finding it harder to regain control of their finances. When in financial difficulty people often need time to make plans for settling their debts without being pursued by their creditors for payment. Over-indebtedness is a rising problem, which is why the government has been working in partnership with lenders and advice agencies to ensure that people in financial difficulties are treated with consideration by their creditors.

The Government wants to ensure that:
• Creditors offer relief to people who get into difficulties with their financial commitments
• Free, independent advice is available to those who need it
• The most appropriate remedies are in place to support the over-indebted.

Debt advice for those with problem debt

The Government has invested significant funds to strengthen the delivery of debt advice, including:

• Over £130 million in England and Wales for free face to face debt advice, targeted at financially excluded people between 2006 and 2011. Since summer 2006, over 296,000 clients have been counselled by the 500 face-to-face debt advisers funded through this scheme.

• The Department has funded the Money Advice Trust to develop a new self-help debt advice toolkit. From January the toolkit will be available nationally and will empower people to negotiate with their creditors themselves and agree a repayment plan. The toolkit will help debt advice agencies to direct help in the most appropriate way, so allowing the most vulnerable and in need of debt advice to access the necessary help faster.

Using Counselling Sector Data to Understand Over-Indebtedness

As part of BIS's ongoing commitment to monitoring over-indebtedness, we are constantly looking to improve our evidence base. As part of this, we commissioned the University of Nottingham to collect and analyse individual-level client data from Consumer Credit Counselling Service (CCCS), to evaluate its usefulness as an ongoing data source.

CCCS counsel approximately 100,000 individuals per year, for whom they collect information on a number of detailed financial and non-financial characteristics.

The study found that this dataset could be an important complementary data source to the commonly-used data derived from more aggregate statistics, such as those provide by the Bank of England.

The report suggests two main potential uses for the data:

1. a monitoring system for debt distress, based on current and updateable household data;
2. an investigation at the household level of the persistence of over indebtedness across selected types of household.