The report ‘With a Little Help from My Friends' is calling for an overhaul of the ‘self-help' debt system.
Self-help debt advice involves giving debt clients who are willing and able to take on negotiations themselves the initial advice, information and support they need to draw up a realistic budget. It also supplies them with the letter they need to make offers of repayment.
This approach is welcomed by advice agencies as a way of empowering more people to take ownership of their finances as well as ensuring that the agencies can provide a more intensive service for those in greater need of support.
The process for those who negotiate debts themselves is exactly the same as that which a Citizens Advice Bureau or another agency would follow if they were acting on the clients behalf. Nearly half (45 per cent) of all the people surveyed for the report wanted to take control of their debt problems themselves and one in five people were able to get all their creditors to accept their offers. However, nearly 60 per cent of people surveyed for the report said their offers had been rejected.
The report is based on research from the credit industry and advice agencies who will continue to work together to make the system as effective as it can be.
The report highlights that the current problems with self-help debt advice services are down to a number of factors including:
* the large number of self-help debt advice services currently on offer, and
* a somewhat inconsistent approach to self-help by the advice sector
Citizens Advice Chief Executive David Harker said: "Personal debt in the UK is growing and it now accounts for one in every three problems dealt with by the CAB services in England and Wales. As the current credit crunch and rising food and fuel costs are likely to result in more people needing help managing their finances it's important that those who want to and are able to can negotiate with creditors directly without the risk of being treated unfavourably.
"We are recommending that a working party consisting of representatives from the credit, debt collection and advice sector should work together to agree a set of proposals for a model of practice for ‘self-help' and implement these by 2010".
The report specifically recommends that:
* the advice sector develops a consistent way of delivering self-help debt advice
* the credit industry changes the way it processes accounts that fall into arrears and assesses offers made by customers who use self-help debt advice services, and
* the credit and debt collection industries work with the advice sector make these changes a reality
Eric Leenders, Executive Director of Retail for the British Bankers' Association said: "An effective self help model could be a good way of supporting consumers in sorting out their debt problems and taking control of their financial affairs. We support the idea of the banks working with advisers and consumer groups to devise a model that will meet the needs of all".
Joanna Elson, Chief Executive of the Money Advice Trust said: "There has been a lot of progress made over the years between the money advice sector and lenders, one example being agreeing on a Common Financial Statement. This report is an opportunity to improve the self-help options for money advice clients and we look forward to working with lenders and money advisers to make them work in practice".
