Debt Advice Charities Struggling to Cope With Demand

September 2009

27% increase in people seeking debt advice could mean delays of several weeks before assistance provided

Leading debt solutions provider, EuroDebt, is warning that the growing number of people struggling to manage their finances is putting huge pressure on the debt advice charities. "Organisations like the Citizens Advice Bureau do a fantastic job under the circumstances" confirmed Kevin Still, Director, EuroDebt. "But the fact is that the scale of consumer debt is putting enormous pressure on them being able to help individuals and families in a timely way."

New figures show Citizens Advice Bureaux in England and Wales are dealing with around 9,300 cases related to debt problems every working day with the number of people contacting the charity with debt issues rising by 27% year-on-year at the end of June 2009. Chris Pond of the Financial Services Authority told the BBC that the "tidal wave" of people seeking advice on debt issues because of the credit crunch meant advice agencies are being "swamped". And, in some cases, it can be several weeks before someone can see a debt adviser according to the Citizens Advice Bureau.

"We have seen a significant rise of over 100 per cent in the number of homeowners starting Debt Management Plans and IVAs during the course of the recession" continued Kevin Still. "Many of these clients have never sought debt advice before and when they had made the decision to take action wanted to see someone within a matter of days because they have been used to paying for advice and meeting people on their terms.

"A delay in taking advice can be very costly, especially if people have been in denial for some time and have used expensive forms of credit to make ends meet.

"EuroDebt's debt solution model is based upon no further borrowing and a no obligation face-to-face meeting within two working days of contact. Maximising income can be as important as establishing a realistic monthly budget for key expenditure."

Another key factor concerning EuroDebt is that whilst CABs are able to help individuals, this is done on the basis of a self-management plan. Yet a report from the National Citizens Advice Bureau in 2008 identified that over two thirds of individuals who put themselves forward for self-management debt repayment plans had some or all of their creditors refuse their proposals. This means that those individuals continue to be chased for outstanding debts as well as continuing to incur interest and charges on late payments.

"Our approach is to conduct a thorough review of a Client's income and expenditure face to face to ensure that all debts are taken into account and a fair assessment of their living expenses is determined so that they can continue to maintain a reasonable quality of living. This approach which is, of course, a great deal more intensive than can be applied by a CAB advisor, gives people facing severe debt problems with a vital, expert, helping hand. We can also deal with all aspects of an individual's debts, including any legal actions or court judgments as well as dealing with all of an individual's unsecured creditors."

"As a result, EuroDebt is able to get creditors to freeze interest and charges on 89% of its clients' credit agreements in the early stages of the Debt Management Plan and 96% once the plans have been running over 12 months."

EuroDebt aims to help consumers take a responsible position with their creditors, especially where they have multiple credit cards and loans, by notifying the unsecured lenders that they have entered a Debt Management Plan (DMP). Generally this means there's no further unsecured borrowing and the majority of lenders agree to freeze interest & charges with the result that recovery activities stop. The debt balance will then begin to reduce at a rate based upon the negotiated reduced payments to creditors and the consumer can begin to take control of their finances again.

EuroDebt, unlike any other fee charging Debt Management Company, is the only debt management business that makes home visits a core component of its 'fact find' process, ensuring a complete picture of each individual's situation is gained. "This is crucial" concludes Kevin Still. "At this visit, the debt advisor is able to assess not only priority expenditure, like mortgage or rent, council tax and utilities, but any arrears on these payments. Repayment arrangements to clear arrears are a priority to protect a client's home and family."

There are also instances where critical insurances have been dropped, like life insurance and home insurance, which may need to be re-prioritised. And to help support its clients even further, EuroDebt provides a Prepaid Current Account and Energy Switching Services, enabling families and individuals to better manage their finances and accelerate the rate at which they become debt free.

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