Our response to the Financial Advice Market Review
The type of problems facing families in debt are changing rapidly, and the Government and Financial Conduct Authority (FCA) must be aware of this when making decisions about the financial advice market.
The last five years have seen a significant reduction in the number of people with very high consumer credit debts, but rapid growth in the number of families struggling with arrears on essential bills, such as Council Tax, rent or heating. It would be a mistake for the Government to assume that the commercial/regulated financial advice market is for people of certain means, and public financial guidance is for other segments of the population.
Debt advice is predominantly a non-commercial market, and yet it is a regulated activity which helps people get through life events and changes of circumstances (which we know are the main causes of problem debt). The two areas need to be considered closely alongside one another.
Free debt advice needed more than ever
The UK’s reliance on debt advice provided by the free sector is likely to increase as the commercial market retreats in response to economic and regulatory pressures. Therefore, the Government should not make changes that will reduce the amount of advice provision currently available and should seek to increase funding in the sector and promote more free debt advice.
Government policies to help tackle problem debt
Policy around guidance and advice on debt needs to be considered alongside strategies for prevention and mitigation of debt (for instance, our ideas around a new “breathing space” protection, and consistent regulatory vigilance on collection and enforcement standards).
While face-to-face advice remains vital, free sector reach and cost-effectiveness can be improved. Data from the main non-profit providers shows that telephone advice is four or five times cheaper than face-to-face provision, with online services cheaper still.
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