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With a little help from my friends

4 November 2008
With a little help form my friends

How advisers, creditors and debt collectors can work together to help people in debt negotiate repayments themselves.

With a little help from my friends [ 160 kb]


Demand for debt advice is growing.  However, not everyone in debt wants or needs an advice agency to deal directly with their creditors.  Instead many advice agencies provide information, advice and support for people who can and want to negotiate with their creditors themselves.  This self-help approach enables people in debt to regain control of their finances and allows advice agencies to offer greater support to those who cannot deal with matters themselves.

However, the evidence set out in this report shows that self-help debt advice services are presently not working as effectively as they could.  Nearly half of all the people who completed our survey wanted to take control of their own debt problems, yet only 20 per cent reached agreement with all their creditors and almost 90 per cent had a bad experience with at least one company.  Consequently, people in debt are left feeling disempowered.

Our research with people in debt, advisers and creditors showed that inconsistent practice by creditors and advisers may be adding to the problem.  It appears some creditors expect advisers to make offers of repayment on behalf of everyone seeking debt advice.  Creditors trust that offers of repayment made by advice agencies are realistic and sustainable, but this may not be the case for offers made by borrowers themselves.  Some advice agencies do not adequately assess whether people in debt can cope with negotiating with their creditors themselves and the range of selfhelp information and support materials is growing.

As the cost of living increases, and the ‘credit crunch’ affects the wider economy, it is important that these problems are resolved, so that more people can regain control of their finances.  The advice sector could also be overwhelmed if the number of debt problems rose steeply and the credit industry insisted that all negotiations were carried out by advice agencies.

Although our research has highlighted a number of problems, our research found many examples of good practice.  Some creditors are not treating people who negotiate with them directly any differently from those represented by an advice agency.  Indeed more than half of the people who completed our survey reported having a good experience with at least one creditor.

We have used these examples of current good practice from creditors and advisers to propose a new model for self-help debt advice services.  We propose that a working party with representatives of the credit and advice sectors is established to make the model a reality.  The advice and credit sectors have previously worked together to improve how people in debt with mental health problems are treated and how offers of repayment are assessed.  If the credit and advice sectors work together to improve self-help debt advice services, people in debt will be able to negotiate affordable, fair and sustainable repayments successfully with all their creditors.


Unmanageable personal debt is a growing problem in the UK.  It now accounts for one in every three problems dealt with by the CAB service in England and Wales.  In 2007 alone, nearly one million people sought free, impartial and holistic advice about debt from either an independent advice centre which is a member of the umbrella group AdviceUK, National Debtline or a Citizens Advice Bureau.  The service provided by these agencies aims to help people with multiple debt problems, using a consistent, holistic and practical approach, which:

  • protects clients’ homes, liberty and essential goods and services
  • ensures that clients understand their rights and responsibilities
  • helps clients make informed decisions about how to deal with their debt problems
  • improves the health and well being of the client and their family
  • wherever possible, gives clients the skills, knowledge and confidence to manage their financial situation themselves.

In response to growing demand for debt advice, the Government set aside 45 million from the Financial Inclusion Fund for 2006-2008 to expand the capacity of the advice sector to deliver face-to-face debt advice to financially excluded people; those from poorer backgrounds with limited access to financial services and advice.  In the first two years alone this fund allowed advice agencies to recruit an additional 515 debt advisers, who have helped nearly 120,000 people.

This funding has now been extended to 2011 and will help a further 270,000 people at the cost of 84 million.  The credit industry has also provided

funding via the Money Advice Trust (MAT), which runs National Debtline, Great Britain’s leading provider of free impartial and confidential telephone debt advice services.  Since 2005 the credit industry has increased funding to the MAT from ?3.9 to ?4.7 million.  This has enabled the MAT to employ 88 advisers at National Debtline who deal with nearly 150,000 calls per year, produce 130,000 information packs each year and fund a range of money advice support services for the whole free debt advice sector.

This increased funding has resulted in more people being able to get help with their debt problems.  However, advice agencies still find it difficult to cope with demand.  Debt casework can be extremely time-consuming for a number of reasons: the number of creditors clients have, the range and complexity of issues which require advice and advocacy, or the client’s state of health or mind.  For example, research for the Advice Services Alliance showed that the average time required to advise on a debt case under a Legal Services Commission contract was five hours and 12 minutes, compared to four hours and 38 minutes for a welfare benefits case and three hours and 52 minutes for a housing case.

Consequently, the free advice sector has to provide advice and assistance about what can be complex, time consuming and labour intensive debt problems to a range of people, some who want to deal with their own debt problems, some who could deal with their own debt problems with a little help and others who simply cannot deal with their own debt problems.

To do this, a self-help approach to debt advice has been developed.  This approach gives people who are willing and able to deal with their own debt problems the information, advice and support they need to do so and allows the agency to provide a more intensive service for those who are unable to deal with matters themselves.  These self-help services involve providing clients with advice on their financial situation, helping them budget and draw up a financial statement, which shows a breakdown of their income, expenditure, debts and offers of repayment.  It also includes sample letters which can be sent to creditors and further information is then supplied in comprehensive packs or fact sheets covering specific subjects like bankruptcy.  These services can be provided both face-to-face or by telephone.  This approach to advice delivery is not new. National Debtline, for example, has been providing self-help debt advice since 1987 and their telephone advice service is focused on referrals and self-help rather than taking on cases and negotiating on behalf of people in debt.

However, these self-help services do not seem to be working as effectively as they could.  Advice agencies are now reporting that people negotiating with their creditors themselves are being treated less sympathetically than those whose negotiations are carried out by an advice agency.  As a result, advice agencies are forced to take over negotiations when creditors reject offers made by the client themselves or demand a letter from the advice agency on headed paper confirming the client’s offer.

This situation presents a strange conundrum.  On the one hand the credit industry provides a substantial amount of funding to the main provider of self-help debt advice services, National Debtline, and sponsors the production of self-help packs and other materials, yet on the other hand, they often treat people who use the self-help materials less favourably than those who have an advice agency negotiate on their behalf.  This means people in debt are finding it harder to sort out their financial situation and make sustainable offers of repayment to all their creditors.

As the current ‘credit crunch’ and rising food and fuel costs are likely to result in more people needing help managing their finances, it is important that problems in accepting the value and validity of self-help services are identified and addressed promptly.  This report will cover:

  • the main problems experienced by people who negotiate with their creditors themselves
  • the knock-on effect on advice agencies
  • the possible reason why these problems exist.

We then set out a model of best practice to ensure that people who negotiate on their own behalf can do so successfully, and we make recommendations as to how the model could be put into practice.

With a little help from my friends [ 160 kb]