Comment: We must save our debt advice services
This is an important debate given the uncertainty and confusion over the continuation of the £25 million Financial Inclusion Fund (FIF) face-to-face debt advice project coupled with the proposed removal of funding for debt advice in the current legal aid consultation paper.
By Yvonne Fovargue MP
The FIF project is due to end in March 2010 and a written answer on January 25th stated that the fund would close. However, a letter to Kate Green MP on February 2nd stated that no decision had been made.
Over 500 money advice workers in local Citizens Advice Bureau (CAB) and advice agencies are under notice of redundancy and have stopped taking on new clients due to this uncertainty.
This just does not make sense when unemployment is rising, the economy continues to falter and there is an increasing demand for debt advice. Specialist advisers are trained to deal with complex cases and represent clients to their lenders.
People like John, who went to my local CAB in Wigan, will be left without help. John was receiving numerous letters from creditors and his debts were getting on top of him. He had mentioned suicide to his community psychiatric nurse and she arranged for an urgent home visit from a CAB specialist. They helped him to reinstate his entitlement to disability benefits, discussed his options and John decided that bankruptcy was his best cause of action. John no longer fears losing his home or goods and needs less input from his case co-ordinator.
He said: “Thanks to this wonderful help, I am no longer afraid to answer my telephone, or open my door or mail.”
The government is suggesting a free financial advice service to increase levels of financial literacy and empowering consumers to take charge of their finances.
Whilst this is laudable, it will not help those in debt now or those who fall into debt in the future due to unforeseen events, loss of job, illness or disability. If the FIF project ceases and the legal aid reforms proceed, people will be forced into the hands of fee-paying debt management companies – the subject of a damning report by the Office of Fair Trading who found that frontline debt advisers, working for these companies, lacked competence and gave poor advice.
Last year 580,000 clients with £2.4 million of debt used the CAB service. Citizens Advice Bureau deal with 70% of debt relief orders. Changes in rules in April mean more people will be eligible for this solution.
With the withdrawal of the FIF funding, coupled with the other local funding cuts to advice agencies, access to specialist help will be severely restricted. It is imperative that the government review urgently all the funding for free independent debt advice and ensure that face-to-face access is available in trusted and competent advice agencies.
Yvonne Fovargue is the Labour MP for Makerfield
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