StepChange urges DWP to improve historic Tax Credit overpayment deductions practices that leave 98% struggling

Deductions from Universal Credit used by the Department for Work and Pensions to collect historic tax credit overpayments are leaving households unable to pay for rent, food and groceries, according to a new report from StepChange Debt Charity. Survey data reveals 98% of StepChange clients experiencing such deductions struggle to cope, and 59% borrow to cover the shortfall.

With over £3bn of tax credit overpayment debt having transferred from HMRC to the DWP since 2017 and over £2bn still to pass across, these practices urgently need addressing. Many people are finding up to 25% of their allowance taken without a check to see if this is affordable, for previous overpayments they were often unaware they had received. A typical StepChange client with tax credit debt faces a £46 monthly shortfall even after a lower rate deduction of 15%.

The report, The True Cost of Tax Credit Overpayments, examines the issues and suggests several practical steps that could be taken now that would improve DWP practices and reduce the harm being caused.

A recurring issue for the clients StepChange surveyed was the lack of clear communication. An overwhelming majority of those surveyed said the information they received was unclear; two thirds of respondents did not know collections were going to start before money was taken from their Universal Credit claim, and 70% of respondents did not know how much money was going to be taken. While it is possible to renegotiate the rate of repayment, the report found a third of respondents were unaware of this option.

Client Testimony: “I think that before taking such a big deduction from benefits they should at least send some communication informing you and find out if it’s affordable. When you have problems with anxiety or depression it’s much easier to respond to a communication to make an arrangement in advance than it is get in touch off your own back because you didn’t know that they planned to take it.”

The DWP’s processes to proactively identify vulnerability appear to be woefully lacking, while even those clients who make efforts to disclose their situation are frequently not treated appropriately. Two in five vulnerable clients surveyed in the report hadn’t made the DWP aware of their issue, while only 11% of those who had felt they were treated fairly. This lags behind standards in other regulated sectors, with the Financial Conduct Authority, Ofgem and Ofwat all having launched comprehensive vulnerability strategies in recent years, which set out clear expectations for identifying and responding to vulnerabilities such as mental health conditions and physical disabilities.

StepChange is urging the DWP to improve practices and reduce the hardship caused by the collection of tax credit debt. The report identifies several practical measures that could be implemented without legislation:

  • The DWP should assess affordability before determining the rate of repayment, reducing the maximum deduction for tax credit overpayments from 25% to 5%, and introducing a new minimum deduction of a £1 token payment for those who can’t afford any more
  • Tax credit debts over six years old should be written off, and debts that will take over ten years to repay should be reduced to affordable levels
  • The DWP needs to use and share data effectively to improve the identification of vulnerability and targeting of communications and support about tax credit overpayment deductions.

Peter Tutton, Head of Policy at StepChange said: “The lack of focus on the consequences of benefit deductions, which the Department for Work and Pensions uses to collect tax credit overpayments, is causing real harm. Almost every respondent to our survey told us that deductions from their benefit payments had been unaffordable, which should act as a wake-up call.

“An essential first step is that the DWP needs to ensure no one is pushed into hardship by unaffordable repayments. The maximum deduction should be reduced to 5% with flexibility for lower affordable payments and debt reduction so that no one is pushed into hardship of left making repayments for decades. A limitation period should be applied as it is in regulated financial services writing off historic tax credit as HMRC has done in the past.

“These legacy debts often come as a shock to people who are unclear as to how they have ended up owing the government money. Communication must be improved so that people are properly informed, with better identification of vulnerabilities, and better tailoring of support.

“The DWP needs to act urgently to stop benefit deductions from causing avoidable harm. More broadly, we also need to see a wholesale review of the way Government collects debt, starting with the Cabinet Office’s upcoming response to the call for evidence on Government debt collection practices.”

JLM Mortgage Services integrates OMS

One Mortgage System (OMS), the seamless single-input enquiry to completion processing platform for brokers, has been integrated across it proposition by leading mortgage and protection network, JLM Mortgage Services.

JLM Mortgage Services has opted for OMS after an extensive review period and the integration will allow all JLM’s Appointed Representative (AR) firms access to OMS’ all-encompassing CRM system and full workflow solution.

JLM Mortgage Services Ltd is a mortgage, protection network established in 2002. It is privately owned, completely independent and currently has over 100 advisers and 50 support staff with offices stretching the length of the UK.

OMS was the first system to develop a full two-way DIP integration with a number of specialist lenders. It offers AVMs, customisable workflows, drag and drop document facility, and gives its users access to documentation and application forms for a majority of lenders without the need to rekey any additional data.

Neal Jannels, Managing Director of One Mortgage System (OMS), commented: “We’ve all realised the impact of technology on our personal and business lives over the course of the last couple of years, and this has led to even more conversations with a variety of firms across the mortgage and protection markets on how to better utilise its potential and maximise efficiencies.

“JLM Mortgage Services is one of the fastest growing and most forward-thinking networks operating within the UK mortgage market. They realise the value of integrating the type of technology which helps advisers to improve their engagement process with existing and potential clients and generate additional business across a variety of sectors. These shared values will be integral in the success of our partnership moving forward, and we are excited to be able to support them in their continued upward trajectory.”

Sebastian Murphy, Director of JLM Mortgage Services added: “From our initial review of OMS, we realised this was a system which could add a significant number of benefits to both our own advisers and those operating across our wide network of AR firms. Today’s mortgage advice market is all about securing the efficiencies that technology can offer whilst freeing up the time to work with more clients. Being able to make a number of areas bespoke to our business and with ability to add numerous third-party integrations, we see this as system that will future proof our consultants and allow them to take advantage of technology as it develops.”

COVID sees number of “side-hustlers” double

One in four (24%) UK adults now work a second or third job, or run a “side hustle” to boost their earnings.

Research from Credit Karma reveals that the number of people with multiple streams of income has doubled since Covid hit. Most ‘side-hustlers’ (61%) say that their financial stability is dependent upon this additional income and nearly half (42%) report taking on extra work as a direct response to the pandemic.

Entrepreneurial Britons have taken to buying and selling items online, trading cryptocurrencies or joining focus groups to raise extra cash since the pandemic began. Roles that can be performed from home have become increasingly popular, as side hustlers swap cleaning and painting/decorating for social media influencing and virtual private tutoring to raise funds.

Men are more likely to take on these additional jobs, and see greater financial reward for doing so. Earnings from second incomes dwarf those of their female counterparts, with the men taking home nearly £840 a month from their side hustles, where women earn just £670 on average – a difference of more than £2,000 a year.

While financial stability is key, including one in five (19%) using the income to pay down debt, side-hustles are also viewed as a great way to save extra money (32%) or be able to afford items that would otherwise be out of reach (22%).

But the study also shows that incentives for taking on extra work often goes beyond the financial, with the ability to explore passions and the enjoyment of taking on different work being key – as the average side hustler now has three jobs.

But tax penalties for second incomes outweigh the potential benefits for nearly half of workers (49%) as the majority of second income holders (59%) believe emergency tax is unfair. Current workers are also feeling the pain from emergency tax, with 40% believing it will eventually stifle their side-hustle.

Ziad El Baba, General Manager at Credit Karma UK commented: “As a nation, we’ve shown extreme flexibility and ingenuity in the face of a crisis, and really demonstrated just how entrepreneurial we are. But with more and more people working additional jobs or finding new income streams, it feels like emergency tax is an outdated millstone around the neck of those simply seeking financial stability.”

Recognise Bank enter personal savings market

Recognise Bank, one of the UK’s newest banks, has announced that it is entering the personal savings market with the launch of a range of fixed rate and notice accounts.

Recognise Bank launched at the end of last year, initially providing commercial loans and mortgages to the under-served SME business sector. The bank has now unveiled its first personal savings accounts, to be followed by business savings accounts later in the year. This follows the lifting of deposit restrictions by the PRA (Prudential Regulation Authority) earlier this month.

All of Recognise Bank’s personal savings accounts are covered by the FSCS (Financial Services Compensation Scheme), meaning that savers’ money is protected up to the scheme’s limit of £85,000 per person and £170,000 for joint accounts.

The initial line-up includes:

  • 95 Day Notice Account – 1.00% AER/1.00% gross P.A./1.00% gross P.M. Variable Rate
  • Five Year Fixed Rate Account – 2.00% AER/2.00% gross P.A./1.98% P.M. Fixed Rate

Announcing the launch, Jason Oakley, CEO of Recognise Bank, said: “Recognise’s presence in the personal savings market is an important part of our mission to support the UK’s growing small and medium sized businesses. Our founding ethos, and the reason for the bank’s name, is to focus on the SME community, which has been so overlooked and neglected by mainstream banking.

“By saving with Recognise Bank, customers will not only have a safe home for their money, they will also know that their FSCS-protected savings are helping ambitious SMEs, so they are directly supporting the UK economy as well.”

Damian Trussler, Head of Savings and Payments, Recognise Bank, continued: “We call it saving with a purpose. People want a compelling rate for their savings and to know that their money is safe and secure, but they also want to be sure that their hard-earned savings are being put to good use. By saving with Recognise Bank, people are helping ambitious businesses grow.

“With Recognise, when people save for their own future, they are also directly supporting the plans of hardworking business owners. Small and medium sized firms are the engine room of the UK economy, and as we recover from the impact of the pandemic, those businesses need our backing more than ever before.”

Following the launch of personal savings accounts, Recognise Bank plans to introduce business savings accounts later in the autumn. Further personal savings products will follow later in the year.

Specialist Mortgage Group celebrates 20th Anniversary

Specialist Mortgage Group (SMG), the group of packaging firms committed to specialist finance, is this month celebrating the 20th Anniversary of the business.

Established in September 2001 as Y3S before becoming SMG in 2017, the Cardiff-based Group has grown significantly over the past two decades and now includes packager businesses Y3S Loans, Y3S Private Clients, B2B Financial, and Chaseblue Loans.

The Group covers a range of specialist product areas including complex first and second-charge mortgages, buy-to-let, bridging, commercial and development finance. SMG acts as a master broker and packager for introducing advisers, offering advice services to clients on behalf of those firms.

Y3S started out with just three people in 2001 and has increased to 75 members of staff through a strategy of organic growth and acquisitions. It is now comprised of a number of separate brands and is focused on benefiting from a technology-focused investment and growth strategy designed to help the growing number of borrowers who need specialist finance solutions.

Barney Drake, CEO of Specialist Mortgage Group, commented: “It has often been a roller-coaster ride over the last 20 years, but we are absolutely thrilled for the Group to be hitting this milestone and to be looking forward to a future where we anticipate going from strength to strength. We feel a long way forward from the excitement of initial launch all those years ago, but our focus remains on delivering for all our adviser partners and customers to ensure they get the right finance for their needs.

“20 years of activity in this space gives us an incredible amount of experience and know-how, plus we are very fortunate to have a team of people who believe in what we’re doing and work hard to ensure we remain committed to our core values and delivering excellence to all that use us. I’d like to thank everyone who has worked with SMG over the years, who has shown faith in us, and who has contributed to us being the kind of firm we are today. We couldn’t have done it without you, and we raise a toast today to all our stakeholders.”

Administrators appointed at Barrow & District Credit Union Limited

James Sleight and Peter Hart of PKF GM have been appointed as Joint Administrators of Barrow & District Credit Union Limited.

The Financial Services Compensation Scheme (FSCS) has also declared the credit union in default, which means that savers are entitled to receive their deposits back.

James Sleight, the Joint Administrator said: “Barrow & District Credit Union members do not need to worry as all of their money is safe – all of their deposits will be returned to them by the FSCS.”

“If you have savings at the Credit Union, you don’t need to do anything to get your money back. Anyone with a deposit with Barrow & District Credit Union should look out for a cheque in the post from the FSCS in the next few days.”

“We’ll also be in touch with anyone who has a loan from Barrow & District Credit Union to explain what happens next.”

“We’ll be available by email or phone to assist members with any queries that they may have on issues such as loan repayments or setting up new accounts for benefits payments.”

£360million Covid rent debt crisis will escalate unless Universal Credit cut is reversed, StepChange warns

A £360 million wall of rent debt built up during the pandemic combined with cuts to Universal Credit threatens to leave hundreds of thousands of tenants facing long-term housing insecurity and problem debt, according to StepChange analysis of new YouGov polling.

Since March 2020, StepChange’s research has revealed a tale of two pandemics, with renters one of the groups most likely to have faced a prolonged loss of income or experienced a negative financial impact [see notes to eds 3]. Around half a million private tenants are now battling to stay on top of £360 million rent arrears.

The polling shows how the Government’s planned £20 per week cut to Universal Credit threatens to escalate entrenched difficulties caused by the crisis and exacerbate a two-speed recovery.

The charity’s research shows 558,000 Universal Credit claimants in Covid rent arrears – including private and social renters – say the planned cut means they will struggle to pay existing rent debts over the next 12 months.

Despite the reopening of the economy, StepChange’s polling shows how rent debt levels have not budged over the past nine months and threaten to escalate as Covid support is withdrawn. 225,000 private renters now expect to lose their homes due to not being able to keep up with rents and many see no way out of entrenched pandemic-related difficulties.

StepChange is warning that unless the Government changes tack on Universal Credit and delivers an urgent package of targeted support, many private renters face long-term housing insecurity, and prolonged debt harm. This includes the threat of court action, long-term housing insecurity, homelessness and eviction.

Sue, 61, from Essex has rent arrears of £2,000: “I have recently managed to get some help from the council regarding my rent and am just about managing to pay it in full, but I’m still not really able to pay anything towards the arrears. Luckily the landlord seems fine with this at the moment, but obviously that could change at any time.

“My Universal Credit goes down by £86 per month from October – I don’t know what I’m going to do then. I am trying my hardest to get a job. I just hope that I can stay in my home in the meantime.”

The charity’s research points to both the deepening and widening of difficulties from the £20 per week cut. StepChange found 4.3 million people expect to carry on with a claim over the next twelve months, 1.3 million more than were on the benefit in March 2020, with reduced support.

The research shows that while some renters are optimistic about recovery, with a quarter (24%) expecting to find more work in the next 12 months, for many in entrenched debts, work will not necessarily avert financial difficulties.

One in ten in-work renters in arrears expect to be evicted from their homes as a result of these arrears in the next twelve months, showing that targeted support remains essential to stop the looming shadow of serious debt harm.

Nadia, 52, works for a travel company and has £2,000 of rent arrears: “I’ve been furloughed twice so far during the pandemic because of the travel restrictions. My husband works in car manufacturing, he was made redundant 3 times last year. We rent from a private landlord who has repeatedly threatened to ask us to leave despite the lockdown restrictions.

“My husband is suffering with long covid and although he is at work, the stress of not hitting his targets is really affecting his mental health. He is just about earning enough to pay the rent, but not enough to be able to contribute towards the arrears. I’m back at work, but still on furlough pay till end of September and I’m not sure what’s going on after that.”

StepChange has been leading calls during the pandemic for the Government to provide an emergency financial support package to help renters worst affected. Such a scheme, as in Wales and Scotland [see notes to eds 8] would help renters to safely wind down Covid-related rent arrears and ensure help for renters to keep their homes.

The charity is also urging the Government not to cut £20 a week from Universal Credit and ensure renters and other low-income households get the financial support they need to sustain tenancies and keep up with essential costs. This would help to reduce the long-term cost to public services like housing, health and mental health that would otherwise be inevitable – and help to offset some of the annual £8.3bn cost of problem debt to the economy.

Phil Andrew, Chief Executive of StepChange Debt Charity, said: “For 18 months, renters have been at the sharp end of the pandemic. Sadly these figures show a huge number of people worried about how they will keep up with their rent. While the end of restrictions will allow some get back to their feet, thousands are still facing a mountain of rent debt they are unable to address alone.

“The Government’s own research shows that private renters have been hardest hit by the pandemic, and that numbers in rent arrears have more than doubled since March 2020. Covid support schemes, while a lifeline for many, haven’t been able to help renters address their arrears and with cuts to Universal Credit and the end of furlough imminent, there is a real danger of thousands losing their homes.

“That’s why StepChange is calling for a dedicated financial support to help ensure renters can safely wind down Covid rent debts and keep their homes. By establishing a dedicated rent debt fund, and by scrapping the planned Universal Credit cut, the Government can avert the threat of a rise in evictions, problem debt and homelessness that will compound financial and social problems and hamper economic recovery.”

SDL Surveying launch Degree Apprenticeship scheme with Nottingham Trent University

National residential surveying and valuations firm, SDL Surveying, has today announced details of its new apprenticeship scheme which is being run in conjunction with Nottingham Trent University.

The Level 6 Chartered Surveyor (Real Estate) Degree Apprenticeship is designed for both school leavers and existing employees within companies who do not currently have a relevant degree, and SDL Surveying will work with the University to take students through both the vocational and theoretical content of the course.

Students are placed within SDL Surveying for a duration of five years. In years one to three, they will be rotated around various departments within the business, providing them with rounded business knowledge and experience.

In years four and five, they will work with SDL’s audit and technical teams to gain more specific surveying knowledge – each student will have a mentor from the business, and they will shadow experienced surveyors on site.

At the end of the five years, they will have achieved a degree-level qualification and MRICS accreditation.

SDL currently has three Apprentice Surveyors working through the course out of its Nottingham offices, Tom Walford, Caitlin True and James Morris, and the business is committed to developing opportunities for many more students to move through the course in the years ahead.

Simon Jackson, Managing Director of SDL Surveying, commented: “This is a brand-new initiative for SDL Surveying and we’re working closely with Nottingham Trent University to run an excellent course and to ensure our apprentices get the type of learning and experience they need in order to start their careers as surveyors. We’re pleased to have Tom, Caitlin and James currently working out of our Nottingham office as our first students and they’ll be learning everything there is to know about what we do and what is required as a surveyor. There is always a gap for excellent surveyors, and we believe with this course we’ll be delivering a growing number of next-generation professionals who will set the highest of standards in the work they go on to carry out. These three are just the first of many who will benefit from this new scheme.”

Curve Launches Flex

Curve is very proud to announce Curve Flex, a unique rival to Buy Now Pay Later (BNPL). After receiving FCA approval on September 1st, Curve has quietly launched Curve Flex to simplify and unify credit. It offers customers the power to pay later for almost any purchase made at any merchant, from any card, up to a year ago.

Curve Flex builds on Curve’s patented and trademarked Go Back in Time technology to let customers convert almost any purchase made on any card linked to the Curve platform in the past 12-months into an instalment plan; all the customer has to do is swipe to pay later. Curve Flex is better than any existing BNPL solution on the market, as it is not restricted to specific merchants, accounts, cards, or products. It brings control back to the customer and is another step in Curve’s mission to become the super app for money.

Whether a customer wants to split a retail purchase, online order, household bill, or simply has an unexpected need for cash, they only need to swipe a transaction and select the number of instalments. The transaction is then refunded in full almost immediately, giving customers convenience and control over their money. Curve Flex is here to provide seamless and affordable cashflow support.

Curve Flex customers will be able to take advantage of a dedicated team of customer service agents who will be on-call solely to answer questions, amend plans, and help customers navigate their loans.

Curve Flex has been in testing since September 2020 and our 1,600 beta users have already “Flexed” around 7,000 transactions into affordable instalment loans worth over £1m.

Curve’s founder and CEO, Shachar Bialick said: “Why settle for a rigid copy when you can have the real thing? Curve Flex is almost certainly the most flexible credit solution in the market. With no limitations on merchants and the ability to accommodate all Mastercard, Visa, and Discover cards, Curve Flex will provide customers with access to easy and affordable credit.”

Head of Curve Credit Paul Harrald said: “Curve is giving customers the unprecedented ability to convert transactions made up to a year ago into free or low-interest instalment loans. Being able to Go Back in Time and Pay Later is going to forever change how UK customers think about managing their personal finances and cashflow.”

Evolution Money appoint new Chief Digital Officer

Evolution Money, the second-charge lending specialist, has today announced the appointment of a new Chief Digital Officer (CDO).

Matt Meecham joins the business as CDO and is charged with driving its digital transformation and supporting its extensive plans for growth.

He has an extensive knowledge of IT systems and digital acquisition, and will implement a digital strategy for Evolution helping revamp its online digital journey to make it easier for partner integrations and consumers to secure a second-charge mortgage.

Matt joins Evolution with 15 years’ experience in personal loan and mortgage broking having founded his own firm in 2012. After securing investment he helped grow his award-winning business to a combined group turnover of £10m.

Evolution Money is also currently undertaking a further recruitment drive to support its growth. The Manchester-based lender is seeking staff in a number of areas including: mortgage advisers, case and team managers, developers, compliance staff, digital content designers, trainers and a performance coach.

Steve Brilus, CEO of Evolution Money, commented: “We are very pleased to be able to bring Matt on board who has a significant amount of experience working in both the digital and second-charge spaces. Matt will lead our digital development, helping ensure we have a state-of-the-art system to be able to onboard both new partners and consumers, transforming the lending journey for all. We believe Matt will be a huge asset to Evolution’s future as we seek to achieve our ambitious growth plans and develop new products and routes to market.”