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					  What Next for Debt Advice (cont)

                                               The Money Advice Trust estimate that            no hard independent evidence to suggest
                                               only half of the c4m people in the UK           the approach works for either debtors or
 The Money Advice Trust                        who need debt advice can actually access        their creditors.
 estimate that only half of                    it free of charge. Free debt advice is a
                                                                                               There is a view in the commercial debt
                                               scarce resource, and likely to get scarcer
the c4m people in the UK                       and readers may not be surprised to learn
                                                                                               solutions sector that these various
who need debt advice can                       that, in my view, should only be available
                                                                                               initiatives are a classic case of the free
                                                                                               sector cutting off its nose to spite its
 actually access it free of                    to those who cannot afford to pay for it.
                                                                                               face. To be more explicit, they have been
          charge.                              The recently published National Audit           adopted to meet the significant shortfall in
                                               Office (NAO) research, “Helping Over-           the free debt advice sector’s capacity to
                                               indebted Consumers”, which analysed the         meet the demand for debt advice. There
                                               BIS debt advice projects also intimated         is a view amongst many commercial
                                               that commercial providers have a role to        providers that some of these initiatives
The second issue is starker. Put simply
                                               play in making scarce free debt advice go       have been developed not because they
all the parties have realised that there
                                               further. To quote NAO: “Our analysis shows      work or because debtors want them but
will need to be huge savings in public
                                               that the private sector is an important         because of the free sector’s objections,
expenditure through cuts in services of
                                               component of the debt advice landscape          in principle, to referring clients to
all sorts and when faced with a choice
                                               and could play a valuable role in the           commercial debt solutions providers to
between cutting spending on debt
                                               ongoing ability to meet the Government’s        free up capacity for those who cannot
advice provision or for example schools
                                               strategic aim of providing sufficient high      afford to pay for advice. At the Institute of
or hospitals, it is pretty clear where the
                                               quality debt advice, particularly in the        Money Advisers Conference held in mid-
axe will have to fall. The sums spent on
                                               context of unmet demand and uncertain           May, the CAB Service announced that it
supporting the good works of not for profit
                                               funding levels.”                                intends to carry out a tender exercise to
advice centres are relatively trivial in the
                                                                                               find a preferred debt management plan
scheme of things but even so the level of                        ,
                                               Edward Leigh MP Chairman of the Public
                                                                                               supplier which can offer a free-to-client
UK national debt means that savings both       Accounts Committee which recently
                                                                                               service but at the same time provide some
large and small will be required.              examined the Government’s strategy for
                                                                                               income back to Citizens Advice. I am sure
                                               debt advice has been quoted as saying
As someone who worked for some 25                                                              that many commercial providers will be
                                               that: “In 2004, the government launched
years in the not for profit debt advice                                                        interested in bidding.
                                               a strategy aimed at improving the
sector before joining a commercial debt
                                               support to, and reducing the number of,         Obviously, the CAB will not award any
solutions provider I take no pleasure in the
                                               people who struggle with unmanageable           tender of this sort simply on the basis
prospect of seeing cuts in funding for face
                                               debt. No one is in charge of the strategy;      of what income can be derived. Clearly,
to face debt advice. Indeed, as a member
                                               groups intended to oversee it have not          with such huge reputational issues at
of the HM Treasury Financial Inclusion
                                               met, and there has been no reporting on         stake, factors such as whether the body
Taskforce I have done all I can to make
                                               its progress since 2007. The strategy has       is externally accredited should be a major
the case to Government for continued
                                               not been evaluated to assess whether the        factor. For any bidders, membership of
funding, at least at current levels, for the
                                               policy goals have been achieved and the         the Debt Managers Standards Association
Financial Inclusion Fund Face to Face
                                               department does not know how effective          (DEMSA) should be a prerequisite. DEMSA
Money Advice programme. Paymex Group
                                               the interventions making it up have             members all have to pass the stringent OFT
believes in a mixed economy of free and
                                               been.”                                          Approved Code of Conduct and are subject
fee-charging provision and indeed as part
                                                                                               to regular mystery shopping by DEMSA as
of our commitment to corporate social          I think that these comments are somewhat
                                                                                               well as having to send customer feedback
responsibility we intend to donate the         unfair; no one seriously doubts the benefits
                                                                                               surveys to clients which are returned to
funds received from the Insolvency Service     of good debt advice; benefits which
                                                                                               DEMSA by customers.
for arranging Debt Relief Orders to the not    have been well documented through
for profit debt advice sector.                 independent research. I think they are also     In conclusion, the next few years are likely
                                               unfair on civil servants, not least in BIS,     to present enormous funding challenges for
The fact is that the not for profit debt
                                               who have done a great job with limited          the free sector not to mention significant
advice sector has over the years found
                                               resources in organising the FIF project.        changes in the commercial debt solutions
more and more of its eggs together in
                                               The missing link in their strategy is clearly   sector. Demand for debt advice doesn’t
the same basket. In many ways it has
                                               how free and fee charging sectors can           look set to fall any time soon so it is
been nationalised; in simple terms, local
                                               work together going forward.                    imperative that free and commercial debt
funding for debt advice has declined,
                                                                                               solutions providers look at how they can
perhaps as a consequence of more               The free debt advice sector’s various
                                                                                               work together to ensure that all those who
reliance on centralised sources of funding     initiatives, which in essence are a
                                                                                               need debt advice can access it.
such as FIF, LSC contracts, the Lottery,       formalised self help approach, have
etc. The cuts that will be forced on local     been greeted with widespread disbelief                Nick Pearson is Director of External
authorities by central government will         in the commercial debt solutions sector.                        Affairs at Paymex Group.
hit the advice sector hard as provision of     Put simply, the experience from our
advice services are not a statutory duty for   sector is that self help is simply not what
local authorities.                             customers want added to which there is

                                                                                                QUARTERLy ACCOUNT SUMMER 2010 13

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