The UK’s largest provider of debt management advice, StepChange, has rebranded with a “debt happens – lets deal with it” tag line, despite StepChanges’ funding loss and its backtrack and reversal on giving advice on, then setting up DROs, more commonly known as debt relief orders for its clients.
The largest provider of DROs in 2022 was StepChange but after the Money and Pensions Service took the decision not to fund them in early 2023, Stepchange decided it could no longer afford to retain its large team of DRO experts and chose to refer clients on to other providers instead.
StepChange has come in for some criticism in recent years.
It got a share of £7.5m in extra Fair Share funding off the Money and Pensions Service during Covid to support the increase in those needing debt services, yet itself was reported in making up to 170 staff redundant, despite the Covid Furlough scheme still being in action which StepChance could have used first, before making those redundancies.
StepChange themselves said on the 9th June 2020 that “It’s worth remembering that nearly 10 million households faced financial stress even before the pandemic, and our new research suggests that 4.6 million people are already facing financial problems as a direct result of it.”, indicating that the debt charity clearly anticipated an increase in the need for and use of its debt counselling services.
The same June 9th press release from StepChange said “Welcoming the Government announcement of an additional £38 million funding through the Money and Pensions Service for the debt advice sector to increase its capacity to help 1 million people through full debt advice and 2 million people through guidance over the next 12-18 months in the wake of coronavirus”
Yet less than a year later, in the face of rising debt and worsening outcomes for those in debt, the charity made the redundancies.
Significant Loss of StepChange Funding
According to StepChange’s documents filed with the Charity Commission, it received £12.45m in government grants in 2022, £12.1m in 2021, £10.5m in 2020 and around £3.7m in 2019 and 2018 but in Feb 2023 all government grants ceased.
Additionally, StepChange received Fair Share funding off the Money and Pensions Service but this funding was stopped in 2023 also.
Whilst there is no suggestion that StepChange taking additional funding to help more people during Covid, but then reversing course and reducing its capability less than a year later factored into the decisions of the government and the Money and Pensions Service to both pull their funding in 2023, most would be surprised if there wasnt a connection.
Move to Online Services
In 2017 StepChange had a headcount of some 1600 people but in Jan 2023 outgoing CEO of StepChange Phil Andrew indicated that by the end of 2023 the headcount would fall to some 1000 people.
Commenting on the loss of funding, he said: “We have just got to be significantly more efficient.” Andrew left StepChange to lead housing group Orbit in July 2023.
With the reduction in funding and the increase in the need for debt advise services StepChange boosting its online services via an automated debt tool may prove useful in reaching more people in need under challenging conditions but we will have to wait until the 2023 statement comes out from the debt advice charity to assess the outcome and whether more, or less people were helped in 2023.
With millions of people needing help with debt in the UK and a limited number of debt advisers, any process that can help give good quality debt advice and reduce the human input may enable more people to get the advice they need so the move to increase digital (and a rebrand to promote it) StepChange may have made the right choice at the right time, despite the criticism is has faced.
Another advantage is that the online advice tool can be accessed 24/7 and therefore it is available at any time that is convenient to the client. The client can also save their progress and take several sessions to enter all the information if they dont have it all during the first session.
We spoke to Tony Higham who is a bad credit mortgage advisor and who set up a fully online service for bad credit mortgages, called Adverse.Online, which offers an online tool to take users information and progress them through a 5-10minute process were they can be told of their eligibility for and resultant interest rates of mortgages that are suitable for their circumstances.
Higham said, “It is well documented that there is an underserved stigma and resultant embarrassment in regards to bad debt that prevents people getting the advice they need earlier than they currently do. There is a hesitation which can often make matters worse and as a result of that underserved stigma and resultant embarrassment I created a fully online bad credit mortgages tool. The tool enables people to see if they are eligible for a bad credit mortgage without any initial credit search.
Underserved Stigma and Resultant Embarrassment of Bad Debt
The feedback Higham got was tremendous. “..we have had so many people comment to us that they didnt want to drag up the past and the shame surrounding their bad debt experience and that our tool gave them hope” Higham added.
Although the reasons for bad debt tend to be unforeseeable for the majority of cases and often involve significant negative life events such as the breakdown of a marriage or long-term relationship, loss of income through redundancy or the death of the household primary income provider there is still a stigma to getting into bad debt. Higham commented, “I chose to be a bad credit mortgage specialist as I get a huge amount fo job satisfaction from helping people into a home of their own, [a signifiant life goal for most of the working population] after a bad credit/debt event such as divorce, job losses and a close family death.”
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