Debt Awareness Week 2024: Breaking down debt advice barriers part 2

By Richard Lane, Chief Client Officer, StepChange

Welcome to part two of our Debt Awareness Week blog, where we’re continuing to look at the barriers people might face when considering accessing debt advice. In part one we looked at why not having a solid understanding of what debt advice means and poor mental health can both be significant barriers to accessing debt advice. Today we’ll be picking up with barrier number three, and what it means for someone’s credit score if they contact a debt advice charity like StepChange.

Barrier 3 — Concern about credit ratings and future financial prospects

Nine in ten clients say to StepChange that they wish they had taken advice sooner, and many say they would have done if they hadn’t worried that it would negatively affect their credit score or their future borrowing prospects. Yet the act of taking advice in itself does not affect anyone’s credit record. While entering into a debt solution will be recorded, and may affect people’s borrowing capacity until this expires, StepChange only recommends debt solutions where they are a better option than not taking a debt solution. If struggling on in the hope of somehow maintaining an unblemished credit record (an unlikely outcome for someone experiencing problem debt) is the reason why some people don’t seek help, then it’s important to address this. This means building consumer awareness that addressing serious financial difficulty is an important step towards building long-term financial resilience and a positive credit record. Toward this end, we told the FCA in our response to its credit information market study, we would like the FCA to work with firms to ensure credit information relating to people entering into debt solutions reflects positive changes in repayment behaviour.

Barrier 4 — Lack of time or energy to deal with financial problems

One of the findings from the MaPS research was that people can find dealing with their problems overwhelming and exhausting, especially if they are juggling other problems at the same time as their debt. This means people may avoid dealing with problems they find stressful, and they may turn to short-term strategies and quick fixes (such as further borrowing, or short-term fixes with individual creditors that don’t address the holistic problem). Low confidence or financial literacy can exacerbate avoidance, too. StepChange has made huge changes to its services to try to make them more accessible and convenient, easier to engage with, and less daunting. For example, being able to “pick up and put down” the digital advice process at will, and ensuring that all information is in simple, plain language that avoids jargon. At a structural level, this barrier shows the importance of creditors identifying harmful coping patterns like desperation borrowing as far as possible and actively explaining the benefits and connecting people with advice.

Barrier 5 — Embarrassment

Even though it shouldn’t be, stigma is still a real issue when it comes to debt. People fear they will be judged and shamed, and many are embarrassed. Yet the vast majority of debt problems are down to life shocks that no-one can fully predict or control, and whatever the reason why people are in debt, the most important thing is to help them to get out of it.

This is where the MaPS research suggesting the need for a reframing of debt advice, a new language and a cultural shift, chimes very strongly. What if the 92% of clients who tell us that they just wish they had taken advice sooner had actually done so? Wouldn’t it be great to get people back on track and feeling more positive more quickly? To get there, as our Mixed Messages research found, we need to keep working away at the language we use, the referral mechanisms we adopt, and the clarity of the messaging that people get to demonstrate that the services on offer are positive, empowering, and completely non-judgmental. The FCA’s new Consumer Duty is a powerful tool to help deliver these positive outcomes, and we are working with many of our partners to support and promote them.

Conclusion

Breaking down barriers is why events like Debt Awareness Week are not just a gimmick, but really important in encouraging a wider and bigger national conversation. It’s vital to recognise that debt really can — and does — happen to anyone. Since 1993, we’ve helped over 7.5 million people deal with debt worries and take back control of their lives. Looking ahead, the more encouragement and support we can provide to help people overcome the hurdles they may face in getting advice, the more quickly we can help them do the same.