Tagged: StepChange

Struggling Sunderland families owe £9million in unpaid bills and loans

Thousands of Sunderland children are living in families trapped by debt, a new report says.

The figures, released by The Children’s Society and debt charity StepChange, show a third of households in Wearside are forced to borrow money to pay for essential bills.

More than 5,200 families in the city – 15 per cent of the total – are failing to keep up with household bills and loan repayments.

It means an estimated 7,471 Sunderland children are living in families with problem debt, with each struggling family behind on payments by an average of £1,669.

Across the city, families owe a total of £8,716,944 in bills and loans.

In Durham City and Easington, the problem affects 2,957 families, with 4,970 children, and a total of £4,934,526 is owed in debts.

The charities’ report, The Debt Trap: Exposing the impact of problem debt on children, claims family debt causes youngsters to suffer from worry and anxiety, experience bullying and miss out on essentials.

The Children’s Society chief executive, Matthew Reed, said: “This research exposes the shocking reality of parents lying awake at night worrying and unhappy children going without.

“Many families are feeling the squeeze, and parents struggling on low wages are battling just to pay the bills.”

In Sunderland, Pallion Action Group has seen a surge in requests for debt advice since the welfare reform capped benefits at £26,000, and now helps between 100 and 175 people each month.

Money and debt advisor David Brass said the majority of those he deals with owe money to utility companies or have rent and council tax arrears.

He said: “We don’t see so many with credit cards, store cards and loans anymore. What we are seeing is people who cannot pay their gas or electricity bills.”

Most advice he gives involves identifying priority debts, like rent and council tax, over general credit debts, then working out a budget and sticking to it.

Luxuries go out the window,” he said. “That means losing your Sky TV and non-essentials like home insurance. They have to try and maximise their income and minimise expenditure.

“As long as they keep a roof over their head and food on the table, that’s our job done. We give food parcels out as well. A loaf of bread can make a big difference to someone who is desperate.”

The centre gives out about 25 food parcels a week through its partnership with Sainsbury’s, Mr Brass said.

He said he would encourage parents to tell children, especially teenagers, about money problems, as muns and dads are often under pressure to buy expensive gadgets or designer clothing.

Many parents get into debt because they do not want to see their children go without, so it is important that they understand the pressures,” he added.

Most parents always make sure children are clothed and have school uniforms. There are one or two who really struggle who can’t afford the uniforms.”

The Children’s Society and StepChange are calling on the Government to consider a “breathing space” scheme to give struggling families an extended period of protection from additional charges, further interest and enforcement action.

Also, review whether the protection for children against the harm caused by debt collection is working; provide earlier and wider access to debt support and advice, and impose tighter restrictions on advertising loans to youngsters.

Source – Sunderland Echo,  12 Aug 2014

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/

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/