Tagged: StepChange Debt Charity

Benefit Cuts To Blame For ‘Huge Increase’ In Council Tax Arrears, Charity Warns

Government cuts to welfare benefits, rising living costs and stagnating wages are to blame for a ‘huge increase in the numbers of people with council tax arrears’, a leading charity has warned.

 

According to figures released today (13 March 2014) by the charity Stepchange, 45,561 people approached the charity for help and advice after falling into arrears with council tax payments in the last year, up 77 percent on the previous years total of 25,000. The average council tax debt was £102, the charity claims.

 

Stepchange says that the figures ‘highlights how the squeeze on household budgets is leaving more people struggling to pay essential living costs’.

 

StepChange Debt Charity chief executive Mike O’Connor said:

 

 

“More and more people are struggling to pay essential household costs. Stagnating incomes, changing work patterns, rising living costs and changes in welfare benefits are a toxic combination. Government, business and charities need to ensure that safety nets and protections are in place to ensure that short-term financial problems do not escalate into problem debt which can blight the lives of individuals, families and whole communities.”

 

The figures come almost a year after the coalition government scrapped council tax benefit as part of widespread welfare reforms and replaced it with a locally administered Council Tax Reduction support scheme.

 

Under the new system, many more low-income families – including some in receipt of state benefits – are now expected to contribute toward their council tax bill, the exact amount of which is decided by their local council authority.

 

Margaret Hodge MP (Labour), Chair of the Public Accounts Committee (PAC), has recently described the change to council tax support as “fundamentally perverse”, after it was revealed that 71 percent of councils were requiring households to make at least a small council tax contribution, regardless of whether they can afford to pay or not.

 

The PAC also found that some households, now expected to contribute toward council tax as a result of government welfare cuts, were losing as much as 93 pence out of every £1 earned, when combined with a cut in housing benefit and increased income tax and national insurance contributions.

 

Margaret Hodge said:

 

“This just goes to show, for some, work simply doesn’t pay under the new scheme. For them, work incentives have actually weakened rather than strengthened – the opposite of what the Government intended.

 

“Some of those 225,000 people stand to lose 97p for every extra £1 earned – a fundamentally perverse result.”

 

Stepchange surveyed 845 helpline clients and found that 50 percent had council tax arrears at some point over the past year, while 19 percent claimed that they had been threatened with bailiff action by their local council.

 

The Charity has also warned that changes to bailiff fees, due to be introduced in April 2014, could see an additional £310 added to a households accumulated council tax arrears every single time a bailiff pays a visit to a person’s home.

Stepchange has urged councils to do more to help people who fall into arrears on their council tax and ‘ensure that vulnerable people do not see their debts inflated through the unnecessary use of bailiffs’

Source – Welfare News Service,  13 March 2014

http://welfarenewsservice.com/benefit-cuts-blame-huge-increase-council-tax-arrears-charity-warns/

South Tyneside Waging war on payday lenders

Council leaders in South Tyneside are being asked to launch a crusade against high-interest rate lenders.

The move comes as the Citizens Advice Bureau in South Shields says the number of people approaching it with debts resulting from payday loans has doubled in the last two years and the average amount owed is £1,610.

A motion, to go before a full meeting of South Tyneside Council council later this week, calls for a series of measures to clampdown on lenders like Wonga, The Money Shop, Quickquid and Payday UK.

The recommendations are:

* Blocking access to loan company websites from council-owned computers.

* Issuing public warnings about the dangers of payday lenders.

* Work with partners to stop lenders locating in South Tyneside and prevent them promoting their businesses in the borough.

* Try to get licensing powers extended to limit the expansion of lenders in the borough.

* Provide debt advice to people affected by lenders.

* Promote the Bridge Community Bank in South Shields as an alternative lender.

> If it’s any incentive, I’ve got an account with The Bridge !

http://www.bridgescommunitybank.org.uk

The Money Shop, which has an outlet in Fowler Street, South Shields, offers an annual interest rate of 390.94 per cent and an annual percentage rate – the rate for a payment period, multiplied by the number of payment periods in a year – of 2,962 per cent.

Anyone taking out a £200 loan would face repaying – in a single payment, within 28 days – £259.98.

Coun Allan West, the council’s lead member for adult social care and support services, is a signatary to the motion, and says he is concerned that the most vulnerable people in the borough are falling foul of the lenders.

He said: “It is easy to understand the financial pressures that lead people to rely on payday lenders, but their excessive interest rates mean there is a real risk of a short-term financial issue turning into a long-term spiral of increasing debt and interest payments. A national cap on the cost of lending would go a long way towards protecting some of our most vulnerable citizens from the dangers of payday lending.”

He added: “In the meantime there is a lot we can do locally, by letting people know about options like The Bridges Community Bank, which offers much lower rates, as well as keeping money in the local economy.

“I would encourage anyone who has financial problems or concerns about the Government’s changes to the welfare system to contact the council’s welfare rights service on 424 6040.”

The full council meets at South Shields Town Hall at 6pm on Thursday.

Payday  lending firms have become a major political issue in recent years.

Many councils already block access to lenders’ websites from libraries and other public buildings and South Shields MP Emma Lewell-Buck, last year, signed a national charter – supported by some of Britain’s biggest debt, consumer and anti-poverty organisations, including Which?, Citizens Advice, StepChange Debt Charity and Church Action on Poverty – calling for tougher regulation of payday lenders.

In October 2012, Newcastle United sparked a storm when the club announced a four-year sponsorship deal with Wonga.com.

The payday loan company now has its name on the club’s shirts.

Wansbeck MP Ian Lavery labelled the company “morally bankrupt” on social networking site Twitter.

Before the start of this season, the club’s star striker, Papiss Cisse, said he would not wear the club shirt bearing a Wonga logo on religious grounds, but the row was resolved in time for the club’s warm-up match against St Mirren.

Source – Shields Gazette,  11 March 2014

Beware of the loan sharks

Payday loan sharks have trapped an increasing number of Brits into unmanageable debts and new research has revealed that this problem is increasingly getting worse.

In fact, a new report from the charity StepChange showed that the number of people seeking relief from payday lenders has shot up by 82 per cent.

Worryingly most of those vulnerable people seeking help had racked up thousands of pounds worth of debt after taking out more than one loan.

According to StepChange, people seeking advice in 2013 held an average of three payday loans, but at least 13,800 had five or more. The average debt was £1,647, significantly more than the average person’s monthly income of £1,381.

Many people make the mistake of taking out a payday loan believing that it is “easy money”.

However, payday loan companies are little more than legalised loan sharks that prey on vulnerable and low-income people and trap them into a cycle of debt that they cannot get rid of.

Many firms such as Wonga charge annual percentage rates (APR) of 4214%. To put it in layman’s terms and get an idea of just how quickly debt can balloon out of control, if you took out a loan of £3000 at 20 per cent APR (way below the average) and made the minimum repayment of two per cent or £5 per month, it would take you a whopping 90 years to pay it all back.

That is just at 20 per cent APR. Not at 4214% which was correct at the time this story went to print.

Now it is worth noting that the Financial Conduct Authority (FCA) assumes responsibility for the regulation of consumer credit in April.

Mike O’Connor, Chief Executive of StepChange Debt Charity, said that he hopes the FCA will address some of these issues.

He added: “The widespread harm and misery caused by payday loans continue unabated. The industry has failed to address the problems causing untold misery and damage to financially vulnerable consumers across the UK”.
“We hope the FCA’s proposals will address some of the areas of consumer detriment, but on issues such as affordability checking, rollover and repeat borrowing, there is an urgent need for even more radical reform”.

Unfortunately that seems unlikely, when you consider the corporate interests in maintaining high debt levels.

In fact, the StepChange charity highlighted the case of one man whose original £200 debt grew to £1,851 in just three months, thanks to inflated interest rates.

And this highlights an important problem. Most people simply do not realise just how rapidly their debts can run into the thousands before they take out a loan.

Fewer people realise that payday loan firms such as Wonga have previously advised the government on how to deal with consumer debt in the UK.

This essentially means that the government is working alongside those very companies who help to trap people into debt in the first place.

Further research conducted by YouGov for StepChange Debt Charity found that at least 26.3 million people had been offered high-interest credit such as payday loans via unsolicited marketing calls or texts.

These are often taken up by vulnerable, or desperate people who are uneducated about the high costs of loans.

And in most schools across the UK, financial management is not part of the curriculum.

Therefore, if you are struggling with money problems, avoid payday loan companies at all costs. It is better to speak to an independent charity or financial advisor who will offer help and advice for free and advise you on ways that you can make your budget go further.

> Or credit unions.

Source –  Akashic Times,  28 Feb 2014

http://akashictimes.co.uk/beware-of-the-loan-sharks-charity-highlights-predatory-behaviour-of-payday-lenders/