Does consumer credit threaten family ties? Niall Cooper National Coordinator Church Action on Poverty UK Household debt • UK household debt now exceeds £1 trillion (€1.5 trillion) • 6.1 million families reported some difficulties meeting their debt repayments • Citizens Advice Bureaux advisers across the UK now see over 1 million new consumer debt cases per year – up by 47% in 5 years. Debt and poverty • More than ½ households in serious debt have incomes of less than £7,500 a year • 1/3 regard their debt as a burden and 10% as a “heavy” burden, with many of those among lower income families. • Low-income households are 3x more likely than the general population to be in arrears with rent, council tax, utility bills or mortgage payments. The need for credit • Obtaining credit is an essential part of everyday life for people on low incomes. • 90% of people need to borrow money not only to buy essential items, but also to make ends meet. • People regularly borrow to pay bills, to buy clothes and school uniforms, and for birthdays, holidays and Christmas. The need for credit “I have a fifteen year old daughter and she needs clothes so I have to get a Provi loan or vouchers. It’s hard. At the end of my benefit I’ve nothing left to pay back the loan and vouchers. I can’t spend money on shopping and bills.” CAP national policy forum participant – 9 July 2001 Debt traps • Mary, a lone mother on Income Support (£101.50 a week), took out a £200 doorstep loan over 30 weeks. Total cost £300 (330% apr). • One month later, Mary ran into difficulties and was encouraged to take out another £500 loan with £310 further interest over 54 weeks (170% apr) • Again Mary ran into difficulties and was offered a £1,000 loan to pay off the balance. Interest on this was a further £620 over 54 weeks, at 170% apr. • In six months, Mary’s loan of £200 had turned into a debt of £2,227. Sucking money out of communities • 87% of households in Meadow Well, North Shields, have loans with doorstep lenders. • Average repayments are 33% of total weekly income (averaging £200 per family) • Around £5 million pa is paid out by households in debt servicing and repayments. • Interest payments alone are £1.6 million. Impacts • Social relationships • Women • Health and mental health • Crime • Work disincentives 1: Social relationships • Feelings of shame, failure and other negative internalised identities are common • People do not participate in social activities because they feel stigmatised by the shame associated with being in debt. • The biggest cause of rows within a relationship is not infidelity but money, according to Relate – the UK’s main relationship counselling agency. 2: Women and debt • Men generally control and allocate financial resources and women undertake the financial management of them. • 81% of local agents for doorstep lenders are self employed women usually living in the area in which they work. 3: Debt and Health • Debt has a detrimental affect on people’smental and physical well-being due to stress, stigma and fewer associated life opportunities. • ¼ of those in debt also receive treatment for stress, depression and anxiety from their family doctor. • A link has also been found in one study between debt and maternal depression. Health responses Some doctors surgeries now provide access to debt advice services • Bradford South and West Primary Health Care Trust supports 3 debt advice services to which around 300 patients were referred in 2003. • Wolverhampton Health Action Zone funded advice sessions in 18 local doctors surgeries, attended by over 700 people. 4: Crime… • “At the moment I’m on income support and child benefit. I’ve used the Provvy and Shopacheck and I’ve been unable to keep paying them so I don’t do that no more. Now I have to buy from shoplifters so I have money to look after myself.” CAP national policy forum participant – 9 July 2001 5: Work disincentives • There were cases where lone parents found themselves in debt, struggling, worse off than they had been on benefits – or not sufficiently better off to feel they were adequately compensated for the new demands on them. • “I think this does stop me looking for work…it’s always on my mind, even with all these court things, if I got a job, then they’re gonna take it out of my wages and things like that, and I can’t really afford for that to happen if I’ve got pay housing and council tax, and look after my son, it’s quite scary” Conclusion • Families - especially on low incomes – do need access to credit… • … but debts can also damage families, health and wider social relationships • Irresponsible and extortionate lending practices will worsen impact on families. ID: 37322 Author(s): iff Publication date: 25/04/06     Debt and families (198085 Bytes)

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