Desperate North teens are saddling themselves with payday loan debt with the help of their parents, it is claimed today.
A shock report by Action For Children has unearthed “worrying levels of borrowing” in the region among young people aged from 12 to 18.
Research by the charity reveals one in eight borrowed money from companies and an alarming 41% said they had used a payday loan company.
While it is illegal for anyone aged under 18 to get credit, Newcastle’s Citizens Advice Bureau (CAB) said staff had dealt with cases where parents or guardians had sought payday loans on a youngster’s behalf.
And bureau Chief Executive Shona Alexander said the hidden debt epidemic is leading to relationship breakdown within families as teenagers – the age group most likely to be on a zero hours contract – struggle to repay relatives.
“It is a serious problem,” said Shona, who called for the credit age to be raised to 25. “We know that young people have forged the signatures of adults and that they have pressured parents or grandparents into getting a loan for them or being their guarantor.
“When they can’t pay them back, the adult’s credit rating is seriously damaged and then it is not just a debt problem but a relationship problem.
“Young people don’t know how to manage money. Something needs to be done.”
Frontline staff see young people seeking debt money to replace household goods, set up their first home or keep up with pals. High street lenders, including store cards, were used by a third (38%) of those able to get credit, the survey said.
Action For Children said the Government must fund more debt education to stop another generation of young people from a cycle of debt and bad credit.
It comes as the charity publishes its Paying The Price report ahead of Christmas amid fears the expensive festive season could be a trigger.
The report unveils how that 55% of children have not received any financial education.
And of those who had, 87% learnt from parents or carers while just 27% learnt about money at school.
The CAB added its Stockton branch had run a successful service helping to educate young people on the dangers of debt which had now disappeared because of public sector cutbacks.
Shona added aggressive marketing campaigns from payday loan companies were attractive to young people and credit firms were likely to change tack after reforms in 2015 to sell more guarantor-style short-term loans.
“Young people don’t understand interest rates and they don’t get into the regular habit of saving,” she said. “We have really got to start education at primary school age and keep that going. Too much of the debt education that we have is short-term.”
John Egan, Action for Children’s operational director of children’s services, said by becoming bogged down with debt from a young age, countless young people from the region could have their future marred by unemployment and mental health problems as a result.
He said: “High interest products and companies are now far too easy for young people to access.
“Some young people are less likely to have the financial skills they need, they may have to live on a low income or are not in education. They are also not able to learn about money at home or at school where other young people do. Add in baffling financial jargon and a lack of knowledge will dramatically create a vicious circle of debt, increasing the risk of mental health problems and unemployment.
“We cannot afford to let children pay this price because of a simple lack of financial education. They must be equipped with the necessary skills to make informed money decisions to give them a chance of a happy future.”
Source – Middlesbrough Evening Chronicle, 14 Dec 2014
A “power imbalance” between landlords and tenants has led more households to seek external help to cope in the private rented sector, a Citizens Advice Bureau claims.
In the three months to September 2014, more than 100 people received advice from the Newcastle branch of the Citizens Advice Bureau (CAB) about problems.
Issues included landlords not repairing leaking roofs, not replacing emergency lighting, the withholding of personal mail and refusals to return deposits.
Nationally, CABs helped people with 14% more repairs and maintenance problems between July and September this year than in the same period in 2013.
The organisation’s latest Advice Trends report lists difficulties getting repairs and maintenance as the most common problem reported, with the charity having helped in almost 17,000 of these issues over the past year.
The study also claims one in three private rented properties in England does not meet the Government’s decent home minimum standard, while renters have few rights and fear eviction. CABs helped with 20% more issues where people are facing eviction without arrears.
Currently, the CAB-backed Tenancies Reform Bill is going through parliament, with a House of Commons debate taking place last month and another set for January 23.
If it becomes law, the bill would prevent so-called ‘retaliatory evictions’, and has been supported by Newcastle MPs Chi Onwurah and Catherine McKinnell.
Shona Alexander, chief executive of Newcastle CAB, said:
“Many people are finding it tough dealing with their landlords in the private rented sector. We are seeing more private tenants coming to us for help.
“People are living in homes which are damp, in need of repair and in some cases dangerous. But they fear that if they ask their landlord to fix problems they may face eviction.
“The power imbalance between private landlords and tenants needs to change. It’s time for private renters’ rights to be brought up to a decent 21st century standard.”
However, the National Landlords Association (NLA), which promotes and protects landlords, argues bringing in new legislation is unnecessary.
Bruce Haagensen, NLA representative in the North East, said:
“Retaliatory eviction, if and where it does happen, is an unacceptable and completely unprofessional response. Tenants should be able to raise issues with their landlords without the fear of losing their home.
“However, the Tenancies Reform or ‘Revenge Evictions’ Bill is a response more to the fear of it happening than widespread experience and the NLA has always been concerned that there is not the weight of evidence to justify the need for additional legislation.
“Following last month’s events it would seem the majority of MPs share these reservations given that so few were present to vote for it.”
Source – Newcastle Evening Chronicle, 08 Dec 2014
A North East water supplier has stopped issuing “frightening” debt collection letters after its tactics were likened to controversial pay day loan company Wonga.
Northumbrian Water was found to be among half of UK suppliers sending correspondence which appears to be from an external debt agency, but is actually from the water company itself.
The news follows June’s ruling by the Financial Conduct Authority (FCA) that 45,000 Wonga customers must be compensated after being sent letters from nonexistent law firm threatening legal action, while similar practices were also highlighted among banks and energy firms.
Northumbrian Water, which stopped the policy earlier this year, used the name Alexander James in large print at the top of the letters, but say it was clearly linked to the company.
In total, 12 of the UK’s largest water suppliers have been found to have taken part in the practice – which water watchdog Ofwat has written to companies with concerns over – while five are still doing it.
Shona Alexander is chief executive of Newcastle Citizens Advice Bureau, which offers free debt advice.
“It is good news Northumbrian Water has stopped using this letterhead and it is disappointing to hear some companies are still using it.
“It is bad practice. By saying Alexander James at the top it looks to the client as a debt collector and that is frightening. Then at the very bottom in small print it says this is part of Northumbrian Water.
“At best it is unfair and causes distress, and at worst it is deliberately misleading.”
A Northumbrian Water spokeswoman said:
“The Alexander James brand was used to encourage customers who were not paying their bill to contact us to talk about a payment plan and to receive debt advice. It was very clear that Alexander James was part of Northumbrian Water Limited.
“We took the precautionary decision to suspend using the brand name the day after the Wonga story broke. After researching why the FCA took action against Wonga, we believe we have complied with best practise as the brand name was registered with relevant financial agencies to ensure transparency and our consumer watchdog, the Consumer Council for Water, was also fully aware we were using this brand name.
“After a review we have now decided that we will not be using the Alexander James brand in the future although our use of it was transparent and compliant.”
Source – Newcastle Evening Chronicle, 16 Oct 2014
Families are being forced into taking payday loans to cope with benefit delays, a city advice group has warned.
Newcastle Citizens Advice Bureau says the region has seen a 206% increase in the number of Job Seeker’s Allowance cases in just one year after Government rules came in which see benefits stopped as punishment for not finding a job.
While ministers say they want to force people to take job hunting seriously, the bureau says the strict new regime is having a different impact.
Shona Alexander, chief executive of Newcastle CAB, said that the longer minimum sanction period – when people are left without the financial support of their benefit – is having a counter-productive effect.
Claimants are distracted from job hunting as they focus on putting food on the table and keeping a roof over their head.
She added: “We see people here every day who have had their benefits sanctioned and who are desperate for money.
“They are often forced into the hands of payday lenders, which only make things worse.
“Sanctions often have a negative effect on our clients’ mental health. Being sanctioned can actually put someone further away from the workplace.
“They’re so busy trying to put food on the table and worrying about debts that they can’t look for a job.
“Some people don’t even know when they’ve been sanctioned, so by the time the money stops there’s no time for emergency budgeting, challenging the sanction or applying for hardship payments.
“For the first week they’ll struggle to get by, scraping up every penny.
“The second week they might borrow from family or friends, but by the third week they are desperate, and that’s when they come to us.”
In the North East, around 13% of those seeking work have had their benefits docked as a punishment for mistakes such as turning down an interview.
The extra pressure and financial burden caused by sanctions means parents struggle to put food on the table, pushing people further into debt and impacting upon their health.
The Government has previously defended the move, with employment minister Esther McVey saying: “Sanctions are used as a deterrent. The vast, vast majority of people don’t get sanctions.
“When you get Job Seeker’s Allowance – there’s a clue there in the name, job seeker’s allowance – you are paid that to make sure you are doing all you can do to get a job.”
More than £7m is thought to have been spent on appeal tribunals.
Source – Newcastle Evening Chronicle 22 April 2014