The UK Debt Market
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or the market for UK debtors... seminar presentation to DRF conference, 02.11.10
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The UK Debt Market
- 1. The UK Debt Market or the market for UK debtors?
- 3. debt trends -10 0 10 20 30 40 50 60 70 2005 2006 2007 2008 2009 debt insolvency CAB cases
- 4. what we don’t know 15 million 19 million 23 million
- 5. what we do know D. around 1/3 seek help 2/3 avoid ignore or pretend
- 6. the basic banking bonanza There are more than 100 prepaid cards available on the UK market which has an estimated value of some £4.5 billion. Many sell themselves as basic banking, when they charge fees for services which accounts listed in Money Made Clear guidance do not.
- 7. 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
- 8. 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.
- 9. 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.
Editor's Notes
- are we at risk of “seizing the wrong assets”?
- 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 payday 23m = 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