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Changes in debt advice client profiles in the year of Covid

  • Covid was the fifth most common reason for debt in 2020 
  • Pressures such as unemployment or redundancy, reduced income, lack of control over finances and health problems remained major drivers, as in previous years 
  • Emergency support and forbearance measures meant fewer people than normal went through full debt advice, but the profile of those who did shifted 
  • As temporary support unwinds, significant pent-up demand for debt advice and solutions will be released, and creative public policy will be needed to supplement what debt advice can do.

StepChange Debt Charity’s Statistics Yearbook 2020, published today, reveals some noteworthy shifts in client trends and characteristics in 2020 compared with previous recent years. However, what is equally striking is that all the debt pressures that were there before the pandemic were very much still present, concentrated among those with the least financial resources and resilience, a trend that the Covid impacts amplified. 

Perhaps the most notable shift in demographic was that the proportion of clients who were single without children rose markedly – from 36% of all clients in 2019, to 44% in 2020. Women and single parents remained over-represented, in line with previous years – 60% of clients were women, and while just 6% of the UK population are single parents, 22% of clients were this household type. Half of all clients in 2020 were in a vulnerable situation, up from 44% in 2019. 

For the first time since 2016, the average (both mean and median) unsecured debt per client fell in 2020, with mean debt of £12,644 down from £14,129 in 2019. This is likely to be a reflection of a change in the composition of clients compared with recent years, in line with 2020 seeing a greater proportion of telephone clients, who typically have both lower incomes, lower expenditure, and lower overall debt levels than clients who undertake debt advice online.

In 2020, 49% of clients sought debt advice with StepChange by phone, while 51% took their debt advice journey online. In future, this divide will become more blurred, as StepChange has invested in ensuring that clients can pick and mix the channels through which they choose to interact and more and more clients are likely to opt for a mixed approach to debt advice – perhaps speaking by phone before undertaking the main advice process online, or perhaps beginning online and then gravitating to a phone conversation if clarification or support is needed. 

What is also notable is that only around 200,000 clients went through full debt advice with StepChange in 2020, compared to over 300,000 in 2019 - a counter-intuitive decline, mirrored across the whole of the debt advice sector. 

This may seem surprising, given that the number of people in problem debt has soared since the start of the pandemic from 1.7 million to 2.4 million. It would be entirely misleading to see the fall in debt advice sessions as any reflection that debt problems have reduced. The temporary phenomenon has come about because, despite significantly increasing pent-up demand, the temporary emergency support measures through furlough, temporary benefit uplifts and creditor payment deferrals mandated by regulators have combined to create a situation where millions of households have seen their debt problems “kicked down the road”. These are set to crystallise as forbearance becomes less generous or is withdrawn. 

In this situation, it is perhaps no surprise that many households are hesitant to seek advice or commit to long-term debt management arrangements until they have greater certainty about their own situation – although we would urge anyone experiencing difficulty to take advice early rather than to wait.

Commenting on the 2020 data, StepChange Debt Charity CEO Phil Andrew said:

“We all know what an unusual year 2020 was, and client statistics reinforce that. Despite problem debt increasing, and our website running red hot as a huge influx of people sought information, we actually took fewer clients through full debt advice as many adopted a “wait and hope” approach to their latent financial difficulties, utilising emergency support. Looking ahead, the route out of Covid-induced debt for many households is not yet clear. We are seeking to work urgently with other stakeholders to chart a safe passage for as many households as possible. 

“As our other research over recent months has highlighted, we can see that debt problems are being reflected more acutely among certain groups – renters, single parents and, increasingly, single people without children. While we can certainly see the effect of Covid in our 2020 data, we shouldn’t forget that many of the other underlying drivers of debt that pre-existed the pandemic remained just as pernicious as ever. The fact that a full half of our clients were in circumstances of additional vulnerability on top of their financial difficulty reinforces how closely debt is associated with negative changes of circumstances and life events.”

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