#DebtActionNI. Welcome Bob Stronge Advice NI Overview of Advice NI Money & Debt Advice Services...

#DebtActionNI

Welcome Bob StrongeAdvice NI

Overview of Advice NI Money & Debt Advice Services

Sinead CampbellAdvice NI

Launch of Debt Action 2013/14 Report

Minister Arlene Foster

DETI

Project Overview & Presentation of Report

Gemma WillisAdvice NI

Projects Partners

Access Points

Headline Figures

#DebtActionNI

Reason for Debt

• The main reasons for debt are– 31% Low/reduced income – 23% Over commitment – 11% Relationship breakdown and – 11% Redundancy

43% of our clients had been experiencing financial difficulty for

over 2 years

Top 10 Debts by Amount & by Agreement

Average Debt per Council AreaCouncil Area Total Debt (£) Average debt per client

Antrim 1,883,142 25,448

Ards 1,141,398 13,120

Armagh 2,306,140 16,472

Ballymena 2,005,716 15,429

Belfast 14,696,705 15,702

Coleraine 1,673,858 13,609

Cookstown 1,120,923 12,884

Craigavon 2,724,132 13,419

Down 593,500 13,189

Dungannon 213,089 2,841

Fermanagh 3,760,538 18,434

Limavady 2,855,795 22,487

Lisburn 4,085,539 14,965

L/Derry 4,449,212 15,890

Magherafelt 1,247,201 6,174

Newry 7,981,636 27,334

Newtownabbey 1,157,306 21,836

Omagh 1,337,791 6,463

Strabane 3,055,833 17,462

Client Profile

Resolution for clients

Outcomes recorded in over 5,600 cases

Quality of Service

Excellent/Very Happy

Very Good/Fairly Happy

Fair/Unhappy Poor/Very Unhappy

Location

72

23

4

1

Waiting time

90

9

1 0

Quality of Advice

94

5

1 0

Effect on situation

92

7

1 0

Importance of

Service

97 2

1 0

Overall

Experience

95 4

1

0

Clients’ Testimonials

Audio ClipsClients’ Stories

https://soundcloud.com/adviceni/debt-action-ni-client-impact-stories

Paul LewisMoney Box

Radio 4Guest Speaker

@paullewismoney © 2014

www.paullewis.co.uk@paullewismoney


PROBLEMS OF DEBT

“Look if you have somebody in the desert, and you offer him dirty water and he’s very thirsty he will drink it. So the question is why do we do deserts and dirty water and then ask the people what do you want. If you have no choice, you take what you get and that’s the problem.”

Professor Hugo Reifner, The Price of Poverty, Radio 4, 20 April 2004


PAYDAY LENDING MARKET 2013• 10.2 million payday loans• 1.6 million people • 6 loans each

• Total borrowing £2.5 billion• Firms take £1.1 billion in interest, fees and charges

• So borrow £250 and on average pay £110 in charges.

Source: Financial Conduct Authority July 2014 Proposals for a price cap on high‑cost short‑term credit Chapter 3


Annual Percentage RateAPR

Borrow £100 over a year and pay £25.

Over a year 25% APROver three months 144.1%Over a month 1355.2%Over four weeks 1719%

Over two weeks 32,987%Over one week 109,475,544.3% APR


Annual Percentage RateAPR

Borrow £20A week later pay it back and buy friend a pint £3.10APR = 179,482.2%

If the mathematics says one thing but your brain says another, trust the maths.


FINANCIAL CONDUCT AUTHORITY

Changes from 1 July• Rollovers

• limit of two• information on getting help

and advice

• Continuous Payment Authority• limit of two

1 April 2014• Risk warnings on adverts



CAP ON COSTS

From 2 January 2015• Charges cap = 0.8% of loan per day

Wonga Borrow £200 for 28 days WAS £63.04 WILL BE £44.80 29%CUT

• Default charges no more than £15• Overall cap of 100% of loan – so £200 on

£200 loan



CAP ON COSTS

From 2 January 2015 Borrow £200 for 28 days Daily charge £1.60 = 28* £1.60 = £44.80 APR 1284.1%

Owe £244.80 Add £15 = £259.80 APR = 2898.6%

Daily interest 0.8% on that total sum After 95 days = £399 APR around 1300%


PAYDAY LENDING MARKET 2013• 10.2 million payday loans• 1.6 million people • 6 loans each

Average loan £260 over 30 daysCost £62.40Those six loans cost £374.40 in charges alone – even if paid back on time.



PAYDAY LENDING MARKET 2013

Borrowers income £18,000 vs average of £26,500• 65% have no savings• 64% have other outstanding debts• 55% said they used money for everyday spendingBefore the loan• Credit scores already getting worse• Debt had increased in previous year

overdraft breaches 23% missed payments 40%

After the loan• Debt continued to increase –

overdraft breaches 33% missed payments 60% 30% of their outstanding balances in default




CAP ON COSTS“Our model estimates complete market closure at 0.4% and we consider that at levels below 0.8%, given that our models are estimates and have some uncertainty, there is a risk that fewer than three firms would remain. This risk is greater at lower levels of cap. At an initial cost cap level of 0.8%, we can be more confident that the three largest firms will continue to offer HCSTC, particularly as we would expect all firms to respond to the cap to limit the impact on them, and reduce the risk of exit.” And it fixed it at 0.8% because

“We do not think it is desirable to leave consumers entirely without the option of using HCSTC.”


PROBLEMS OF DEBT

“Look if you have somebody in the desert, and you offer him dirty water and he’s very thirsty he will drink it. So the question is why do we do deserts and dirty water and then ask the people what do you want. If you have no choice, you take what you get and that’s the problem.”

Professor Hugo Reifner, The Price of Poverty, Radio 4, 20 April 2004


Source: The impact of life events on financial capability, Consumer research paper 79, FSA, September 2009, foreword p iii-iv

FINANCIAL CAPABILITYLife event Financial problems Financial capability

Have a baby +19% DOWN

Become unemployed +63% DOWN

* On Jobseeker’s Allowance +88% DOWN

Divorce or separate +17% DOWN especially women

Retire +31%

Enter work -27% UP

Have employed partner -15% UP

Get married DOUBLES


Unimplemented in Northern Ireland1. Universal credit, 2. PIP to replace DLA3. Bedroom tax4. Contribution based ESA limited to 12 months for those in work

related activity group5. Benefit cap £26,000 – to be cut to £23,0006. Appeal rights weakened7. Social Fund to be replaced with local discretionary support.8. Council Tax Benefit replaced by local council tax support

WELFARE REFORMS


Changes planned from 2015• £25bn to be cut in first two years of next Parliament• £13bn from departmental savings – perhaps including pay

freeze• £12bn from welfare cuts

£3.2bn of that from freezing rates of working age benefits for two years 2016/17 and 2017/18

JSA, most of ESA, Carer’s Allowance, Income Support, working tax credit, child tax credit, housing benefit, and child benefit.

• Pensioner benefits and pensions excluded from cuts

WELFARE REFORMS


www.paullewis.co.uk@paullewismoney

www.paullewismoney.blogspot.co.uk


APRs

Borrow £200 Pay back £263.04

Over a year APR is £63.04/£200 = 31.5% APR

Over 28 days the APR is 4866.1%Over two weeks the APR is 12,036.4%Over one week APR is 54,612.3%

Borrow £20One week later give me back £20 and buy me a half a pint of beer at £1.50

APR = 4197.7%

Source: DualCalc

• Paul Lewis - Money Box Radio 4

• Kevin Higgins – Advice NI

• Ursula Toner – Housing Rights Service

• Michele Loughran – Omagh Independent Advice Services

• Susanne Downey – Trussell Trust

Q&A Panel

#DebtActionNI. Welcome Bob Stronge Advice NI Overview of Advice NI Money & Debt Advice Services...

Documents

Transcript of #DebtActionNI. Welcome Bob Stronge Advice NI Overview of Advice NI Money & Debt Advice Services...