Our policy campaigns highlight the changes needed to reduce this harm, and how to move towards our vision of a society free from problem debt.
Here are our key policy recommendations and the research underpinning them.
1. 'Breathing space' for those experiencing a debt crisis
Our research shows that one in five people struggling financially have been unable to afford food after making unsecured debt repayments. We’re calling on the Government to consult on proposals for a comprehensive 'breathing space' scheme that would support people seeking help with their debts by:
- Providing an extended period of guaranteed breathing space protection from further interest, charges, collection and enforcement action. This would give people the time and space to stabilise their finances and start to recover from debt; or a period of interim protection where some time is needed to access a suitable insolvency option
- Giving those who need more time to repay their debts, but can do so within a reasonable period, at least the same statutory protection from further interest, charges, collection and enforcement action that the law currently gives to people who need an insolvency option
Read more about our recommendations for 'breathing space' in our Safe Harbours report (pdf).
2. Improved access to savings
We want to see an improvement in financial resilience and a reduction in the level of problem debt in Britain. That's why we believe all families should have a minimum of £1,000 saved to help them cope during a 'rainy day'. This amount would save half a million people from falling into problem debt.
We've been calling on the Government to set a target for all households to aim to have this amount available for emergencies.
The challenge is to encourage families to saving by helping them overcome the economic and behavioural barriers which are currently preventing them from saving.
Incentives such as auto-enrolment, matched funding and prize-links have been used successfully in the UK and other countries to encourage families to save. Such incentives could help to address the savings crisis. The UK already has many of the tools needed at its disposal to make this a success. It should use them.
Read more about our recommendations to improve access to savings and download our report, Becoming a Nation of Savers.
3. Access to safer and more sustainable credit
We estimate over 4 million people in Britain are likely to be using credit as a safety net as they struggle to meet both everyday living costs and emergency costs. This group is largely made up of working families on low to middle incomes, although some are households on the lowest incomes and in more insecure, ‘casual’ employment.
- The Financial Conduct Authority should review how standards of product governance are working to meet the needs of financially vulnerable borrowers and prevent detriment
- Credit providers should ensure that features of their products do not increase ‘debt risk’ and assist their customers where they're struggling to cope with their credit commitments
- By developing a credit restoration product, high street banks are very well placed to support customers who have experienced problem debt but who have since recovered control of their finances
- There should be further development of partnerships between community lenders and other sectors
- To help meet the need for affordable credit among financially excluded and financially vulnerable people, the Government should pilot a microloan scheme for Britain. This could use the Australian and Irish schemes as models of how to provide no or low interest loans to financially vulnerable households
Find out more about our recommendations for sustainable credit in our Credit Safety Net report.