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Government departments, local authorities and bailiffs among the most unfair when dealing with people in problem debt

19 July 2016

Government departments, local authorities and bailiffs are among the most unfair when it comes to the treatment of people in problem debt, according to a new report from StepChange Debt Charity, Creditor and debt collector conduct: What’s making debt problems worse?

The report also highlights how some creditors are failing to take vulnerabilities such as depression and other ongoing mental health conditions into account. Other findings show how poor bailiff practices, such as intimidation and the addition of excessive fees, are still commonplace and are making people’s existing debt problems worse despite reforms implemented by the Ministry of Justice in April 2014.

The research indicates that where regulation is more robust, such as the Financial Conduct Authority’s regulation of consumer credit, there are better outcomes for clients.

Fair treatment of people in debt

The charity’s report is based on research from an in-depth survey of 1,794 of its clients in which they were asked to identify which organisations they considered to have treated them fairly or unfairly in relation to dealing with their debt. 50% said that they’d been treated unfairly by bailiffs, 42% by their local authority, and 36% by the Department for Work and Pensions.

High street banks and credit card companies performed significantly better in the treatment of people in debt, although the numbers who felt unfairly treated were still too high at around one in five.

Survey results

Rank Type of organisation "I was treated unfairly"
1 Bailiff 50%
2 Local authority 42%
3 Dept. for Work and Pensions (DWP) 36%
4 Mobile phone company 32%
5 Debt collection agency 30%
6 HM Revenue and Customs (HMRC) 28%
7 Payday or short term lender 28%
8 Utility company 27%
9 Catalogue lender 26%
10 Fee-charging debt management firm 26%
11 Store card lender 23%
12 High street bank 21%
13 Credit card company 20%

The findings highlight a particular problem with the collection of council tax debts given that 51% of bailiff visits experienced by the charity’s clients relate to council tax arrears.

Failing vulnerable customers

The research shows that many creditors are also seemingly not taking into account the wider vulnerabilities of people struggling with debt. Three in four (75%) of the charity’s clients identified themselves as vulnerable. Depression (47%) and ongoing mental health conditions (16%) are the most common forms.

83% of vulnerable clients infographic

Almost half (45%) of clients who identified themselves as vulnerable made their creditors aware of their condition. Despite being informed, firms did not take into account these vulnerabilities - 83% of those who made their creditors aware of their vulnerabilities said at least one creditor didn’t take this into account, while 35% said that none of them did.

Bailiff reforms aren’t working

The report highlights how people encountering bailiff action are often more vulnerable, that bailiff actions increase the stress experienced by people in debt, and that poor practice by bailiffs is still commonplace.

Almost 90% of those who’d been visited by bailiffs in the last two years identified as having vulnerability beyond financial difficulties, compared to 75% of all clients surveyed. Those clients visited by bailiffs overwhelmingly said that experience had increased their level of stress (86%).

Poor practice by bailiffs remains commonplace. Of those who’d had a bailiff visit, over half said that the fees added were excessive, 49% said they’d had an intimidating doorstep visit, and 48% said the bailiff refused to accept an affordable repayment offer.

The charity is calling on creditors across all sectors to ensure that people in financial difficulty can access affordable repayment plans and that they are not pressured into making payments that will deepen their existing financial problems.

Reform is needed

The charity is reiterating its call for an ‘extended breathing space’ scheme, where people who seek debt advice are given a period of six months to a year in which interest and charges are frozen and enforcement action is halted.

Other measures that the charity believes would improve the treatment of those with debt problems include:

  • Ministry of Justice to re-evaluate the bailiff reforms to improve the treatment of vulnerable people and ensure that affordable repayment plans are available to help prevent debt problems from escalating
  • Local and central government to commit to binding good practice standards that prioritise supporting households to financial recovery

Mike O’Connor, Chief Executive of StepChange Debt Charity, said:

“People fall into debt for a variety of reasons including unemployment, illness and relationship breakdown, but the way in which creditors treat people in difficulty can have a significant impact on how long it takes that person to recover. Ensuring that people in financial difficulty get the right support at the right time can make the difference between someone getting back on their feet or them being driven into deeper hardship.

“It’s important to note that there is good practice out there and 150,000 people are referred to StepChange Debt Charity by creditors every year. However, there is clearly some way to go before we have a fair and consistent approach to the treatment of people in debt and the Ministry of Justice, local and central government and creditors all have vital roles to play.”

Notes to editors

  1.  All figures taken from Creditor and debt collector conduct: What’s making debt problems worse?
  2. Poll of 1,794 StepChange Debt Charity clients who came to the charity for advice in Q3/4 2015. Fieldwork conducted 2-15 May 2016. We consider these respondents to be representative of clients who came to the charity in 2015.

StepChange Debt Charity news contact

Contact the StepChange news team on:

Tel: 0207 391 4598

Mobile: 07985 404 153

Email: press@stepchange.org

Follow our press team on Twitter: @StepChange

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