Category: News

Creditfix ends debt packager referrals fees but calls for greater safeguarding measures for debt advice

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Creditfix will no longer accept referrals from third party debt packager firms from 1 May 2023 in a move to protect customers and ensure best advice.

As the UK’s largest IVA provider, Creditfix recognises its influence across the sector and hopes that the move will encourage other Insolvency Practitioners to follow suit in the interest of protecting customers – especially as the cost-of-living crisis continues to drive soaring prices and record numbers turn to credit cards for essentials.

To date, Creditfix has implemented robust safeguarding procedures to identify customers that may have been wrongly referred, but agrees with the FCA, Insolvency Service and the not-for-profit sector that, to ensure the best outcome for the customer, the next crucial step is that referral fees should be banned.

Paul Mason, Chief Executive Officer at Creditfix, said: “Creditfix has consistently been a champion of reliable debt support but the same can’t be said for some of our colleagues in the debt sector.

“We welcome the FCA’s announcement to ban referral fees and believe that it’ll go a long way in protecting the most vulnerable seeking support. Whilst we’ve always had stringent safeguarding procedures in place, there’s an added peace of mind that the announcement will play a part in helping to reduce mis-selling – especially during the cost-of-living crisis.

“However, reform can’t just end here. As the cost-of-living crisis continues to grip the nation’s purse strings and an increased number of people are looking for debt support, we need to be realistic about resources.

“The not-for-profit sector is an invaluable asset to those struggling but it’s underfunded and under-resourced. The reality of the cost-of-living crisis means people need to be able to get advice on a multichannel basis to suit their lifestyle. That’s where Creditfix can step into the gap and continue to offer support.

“We’re seeing an influx of enquiries – up 28% on last year – and speak to 3500 people on average every week. The demographic of people struggling with debt is dramatically changing, with previously comfortable families’ finances now on a knife-edge. That’s why we’re committed to being on the front line, providing real-time support and investing in technology and staff to meet consumer demand.

“Now is the time for the free and commercial sectors to join forces to help guide people through this crisis and we’d welcome any collaboration with organisations who share our vision to provide reliable, timely and most importantly life changing advice to those in need.”

Cost of living: New report reveals rising problem of debt for parents

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A new report from Creditfix has revealed the worrying levels of debt parents across the UK are currently facing.
The research, conducted as part of the personal insolvency provider’s report ‘Families on the edge’ revealed that parents of children under the age of 18 across the UK have an average debt level of £17,402.This is significantly higher than the national average debt level of £15,998, as rising costs for energy, food and clothing compound the already precarious financial situations many families already find themselves in.

On average of those who have approached Creditfix for support with their personal finances, parents of children under the age of five was £16,570.

Explaining the findings, Layla Johnson, regional manager at Creditfix, said: “Almost half (47%) of our customers are parents and our data shows clearly that the additional costs of parenthood are increasing the levels of debt being taken on. The rising cost of living means that we are expecting to see this additional strain continue to take its toll on households.

“The figures across the UK paint a worrying picture – we know that mortgage and rent costs are increasing for many, alongside other essentials like energy and food bills. In this climate, parents are confused and desperate – and forced to make difficult decisions about what to cut out in order to make budgets stretch as far as possible.”

 

“Money worries put a lot of pressure on family life”

Jo Middleton, founder of the lifestyle and family blog Slummy Single Mummy, who has two children and a grandchild and contributed to the report, added:

“Money is one of those issues that can seep into so many areas of our lives – and it’s something we often don’t like to talk about, even with partners or other family members. When we don’t talk openly about money though, it can become something even scarier and can cause resentment and anxiety.

“On a practical level, money worries put a lot of pressure on family life in terms of what you’re able and not able to do. Not having money for any kind of treats or activities can actually be isolating and often cause a lot of loneliness, especially for single parent families over the winter when it’s harder to get out and enjoy free activities outdoors.”

 

“Life is really difficult for families at the moment”

Childcare is another significant cost for parents, Creditfix research revealed average full time nursery costs per child are £276 per week, with parents in Harrow, in Greater London, having the highest day rate for nurseries across the UK. Parents in the borough are paying an average of £85.17 per day.

Layla added: “Unfortunately, childcare costs have continued to rise in recent years, especially for those working full-time jobs. A lot of parents aren’t in a position to pay these rising fees and this can put a real strain on family life.

“Our research also shows that there are huge differences in total childcare costs according to the month your child is born. The data shows that for children born on 1 September, parents could pay an average of £13,909 for childcare, in contrast to £876.22 if their child was born just a month earlier in August.”

 

Children just need a warm home and love

Danielle is a 32-year-old mum from Essex. She described how her debts spiralled after having her second child. She said:

“As a new parent, you have so many extra costs. Essentials like nappies and baby wipes are expensive, and you can spend a fortune on baby chairs and cribs, which they grow out of quickly. Although it’s easy to pick them up second-hand, there’s still a cost.

“My debts spiralled when my daughter, now two, was born. I already had a three-year-old son, and I thought they needed the best of everything – including the latest fashion clothing and gadgets. What I now know is that all they need is a warm home and love.

“I bought a lot of things from catalogues that my daughter didn’t really need, and eventually reached the point where I owed £9,500. I know from my own experience that it’s really hard to ask for help. You feel embarrassed that you’ve managed to get yourself into so much debt but there’s so much support out there. Even speaking to someone at Creditfix helped to take some of the stress and pressure away. Now I’m paying off my debts in manageable amounts through an IVA, instead of worrying that they’ll increase even more.

“Life is really difficult for families at the moment, and I’m concerned about the cost of gas and electricity and whether I’ll be able to keep my children warm this winter. But at least I’ve got my spending and debts under control.”

Scottish bankruptcies on the rise

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The number of Scots falling into bankruptcy has risen by five per cent, new industry figures have revealed.

Provisional figures from the Accountant in Bankruptcy (AiB) for the financial year 2018-19 highlighted the increase, showing there were 4,862 awards of bankruptcy compared to 4,644 during the year 2017-18.

However, statistics from the insolvency service also revealed that protected trust deed (PTD) numbers have continued to rise across Scotland, including bankruptcies and PTDs, by 20.5 per cent. The last year saw 7,917 PTD cases compared to 5,958 in 2017-18.

Debt Arrangement Schemes (DAS) also saw an increase in numbers, with an increase of 9.5 per cent approved DAS repayment programmes with 2,544 awarded in 2918-19 compared to 2,318 last year. Meanwhile the number of DAS schemes completed in 2018-19 was similar to that of the year before at 1,687. Figures show that a total of £37.1 million was repaid through the scheme last year down slightly on the £37.6 million paid back in 2017-18.

Year-on-year stats also show that corporate insolvencies rose from 884 to 966.

Speaking of the rise in insolvencies, Finbora Group chairman Pearse Flynn said: “The rise in insolvencies across Scotland highlight the economic pressures faced in these uncertain economic times.

“Never has it been more important to offer a diverse range of debt relief solutions to support those struggling across the country.

“Carrington Dean has long been heralded as Scotland’s debt specialist and that’s a reputation we’re proud to uphold. Making it from one pay day to the next is easier said than done for most people and that’s something it’s important we understand.

“There’s no one size fits all profile when it comes to those living with debt so it’s important that the debt relief solutions available are open to people from all walks of life. There are more options available that bankruptcy and that’s something we need to make more people aware of.

“Everyone should have access to affordable debt help – that’s something that we always have and always will champion.”

Commenting on the latest figures, Minister for Business, Fair Work and Skills Jamie Hepburn said: “These figures highlight the challenging economic times we are facing with more Scots experiencing increased financial pressures.

“The ongoing uncertainty around EU exit, alongside the challenges of the roll out of Universal Credit, bear much of the blame.

“In this climate it is more important than ever that people encountering financial difficulty seek early advice and the appropriate solution. It is welcome to see an increase in the number of Scots accessing the Scottish Debt Arrangement Scheme which helps them to pay back their debts. Recent reforms to the scheme will also allow more individuals in Scotland to benefit from this initiative going forward.

“The Scottish Government urges those in financial distress to obtain money advice at the earliest possibility in order to take control of their finances and ensure the right debt solution is found to suit their circumstances.”