It’s right that Financial Services firms should be a significant contributor to debt advice funding, but they should not be bearing the brunt alone. The concept that ‘all who benefit should pay’ is similarly questionable; many creditors benefit beyond those that appear on a debt management plan.
These are the views of the Credit Services Association (CSA), the voice of the UK debt collection and debt purchase sectors in response to the ongoing debate around future funding of the debt advice sector which will see some £172million of funding provided to providers in 2019.
Of this £172million, £56.3million will be raised in the debt advice levy collected by the FCA and a further £55.7million in FairShare contributions. CSA members alone contributed £25.5million in the last year to FairShare providers.
While few in the financial services sector would deny the need for debt advice, the argument has been more around how such advice should be funded, and by whom, says Peter Wallwork, Chief Executive of the CSA: “The debate has not been helped by a clear lack of data and understanding regarding the current funding channels and sources, and even the Money & Pensions Service’s predecessor found difficult to unravel the ‘money merry-go-round’ of debt advice.
“We are keen to work with all parties in finding a workable solution, and one where future funding contributions are fair, equitable and the benefits measurable and transparent. Any future thinking must understand that it is not only financial services businesses that ‘benefit’ from debt advice and informal debt repayment plans.”
Mr Wallwork says there are creditors that benefit from debt advice, but who currently contribute nothing towards it. They may contribute in other ways, but without data, the conversation can quickly fall on deaf ears: “Without transparency on who contributes currently, the industry ends up blaming one another and pointing fingers, often in the wrong direction.”
The CSA also want transparency on where and how current funding is being spent: “We need to be sure that any money spent is spent well in delivering real help to the consumer and not being lost in inefficiency and unnecessary overhead. There may also be other ways of contributing to help debt advice agencies more directly, to help drive efficiencies to enable the funding to go further.”
Lack of meaningful data is contributing to the challenge: “We have no clear idea how the FairShare percentages are calculated, how those percentages could be reduced (i.e by widening the pool of contributors) or how many debt management plans are in existence. Similarly, we do not know the cost of creating a debt management plan, or what services need to be funded (e.g initial consultation, negotiating with creditors, annual reviews etc) in order to have one agreed.
“What we do know is that it is wholly wrong for the funding of debt advice to continue to fall primarily into the lap of the financial services sector. Especially so when there are so many unanswered questions about how that money is spent and how effectively consumers are helped. Thankfully there is general consensus that ‘something must be done’ and it is pleasing to report that following many conversations, debates, and discussion alike, actionable steps are now being put in place.”