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#DebtActionNI
WelcomeBob Stronge
Advice NI
Overview of
Advice NI Money
& Debt Advice
Services
Sinead Campbell
Advice NI
Launch of Debt
Action 2013/14
Report
Minister
Arlene Foster
DETI
Project Overview
& Presentation of
Report
Gemma Willis
Advice 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
Paul Lewis
Money Box
Radio 4
Guest
Speaker
@paullewismoney © 2014
www.paullewis.co.uk@paullewismoney
@paullewismoney © 2014
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
@paullewismoney © 2014
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
@paullewismoney © 2014
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
@paullewismoney © 2014
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.
@paullewismoney © 2014
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
@paullewismoney © 2014
FINANCIAL CONDUCT AUTHORITY
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
@paullewismoney © 2014
FINANCIAL CONDUCT AUTHORITY
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%
@paullewismoney © 2014
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.
Source: Financial Conduct Authority July 2014 Proposals for a price cap on high-cost
short-term credit Chapter 3
@paullewismoney © 2014
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
Source: Financial Conduct Authority July 2014 Proposals for a price cap on high-cost
short-term credit Chapter 3
@paullewismoney © 2014
FINANCIAL CONDUCT AUTHORITY
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.”
@paullewismoney © 2014
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
@paullewismoney © 2014
Source: The impact of life events on financial capability,
Consumer research paper 79, FSA, September 2009, foreword p iii-iv
FINANCIAL CAPABILITY
Life 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
@paullewismoney © 2014
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
@paullewismoney © 2014
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
@paullewismoney © 2014
www.paullewis.co.uk@paullewismoney
www.paullewismoney.blogspot.co.uk
@paullewismoney © 2014
@paullewismoney © 2014
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
@paullewismoney © 2014
@paullewismoney © 2014
• 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
Recommended