The prevailing economic wisdom says spend, but today I’m going to advocate caution
Against limited contraction in personal debt there is a brief dip in demand for advice / resolution, which coincides with economic stimuli, but that tide is now turning and we still have no concept of the scale of unmanageable debt in the UK
is the sheer scale of unmanageable debt when we only measure outcomes: bankruptcies, IVAs and DMPs & new advice cases: 15 m = NCC, Yahoo Money 2005 & then National Statistics / FSA 2008 19m = R3 running out of money 10 days before payday23m = HSBC 20% adults have £0 & 30% <£249 re redundancy
is that there’s been a huge growth in debt deferral over the past couple of years: payday loans up 400% in 4 years, pawn broking invading vacant high streets, and a plethora of prepaid cards and managed accounts posing as basic banking alternatives
“Confused” has nothing on consumer finance as sub prime goes prime time...
And the sector persists in maintaining that these products are necessary for those on low incomes with low educational attainment, on the back of scant consumer research and limited regard for multiple intelligence and learning theories
Research into Payday lending by Consumer Focus (a qualitative sample of 20) found stigma to be a common factor in the decision making process -> Abbott & Costello Clip
By law, we label food but not finance, thus we are exploiting insecurity in what is essentially a commodity market for basic household goods and services: NB > 400 terms in the MMC jargon buster!
If we fail to address the very real and urgent need to quantify and segment the UK debt market, then we are at irrevocable risk of becoming a victim of it ourselves
The UK Debt Market
The UK Debt Market
or the market for UK debtors?
what we don’t know
what we do know
the basic banking bonanza
There are more than 100
prepaid cards available on
the UK market which has an
estimated value of some
Many sell themselves as
basic banking, when they
charge fees for services
which accounts listed in
Money Made Clear guidance
capable or condescending?
• Functional illiteracy and innumeracy amongst
13-19 year olds has remained at one in five
over the last twenty years.
Source: Prof. Greg Brookes, The Sheffield Report
• Adults with numeracy and literacy needs
tend to be better than average at keeping
track of their finances.
Source: NRDC, Financial capability of LLN learners
security of shame
The borrowers appreciate
the anonymity of the
process, particularly online
borrowing. For a variety of
reasons, many are ashamed
or embarrassed about taking
out a loan. This may be due
to being short of money or
the purpose of the loan.
Consequently, they like the
‘no questions asked’
approach of the lenders.
pizza v payday
• OFT : high cost credit £7.5bn in 2008
... to the extent that problems in
these markets arise from more
deep-seated issues, such as
weaknesses in the financial
capability of consumers...
• Money Made Clear: think about
Make sure you understand what
you’re buying. Quite often
special words or phrases will be
used, so if you’re not sure, find
out what they mean.