In a report published today, the charity also notes that some creditors are failing to take into account depression and other ongoing mental health conditions. And despite Ministry of Justice reforms implemented in April 2014, poor bailiff practices such as intimidation and the addition of excessive fees are still common and are making people’s debt problems worse.
The report, Creditor and debt collector conduct: what’s making debt collections worse? noted that where regulators, such as the Financial Conduct Authority, have more authority and influence, as in the case of consumer credit, there tends to be better outcomes for people in debt.
The report is based on a survey of 1,794 of StepChange’s clients. They were asked to identify the organisations they considered to have treated them in an unfair manner in regards to their debt.
Fifty per cent said they had been treated unfairly by bailiffs, 42% by their local authority, and 36% by the Department for Work and Pensions. This is significantly more than the 28% who reported that payday loan companies or short-term lenders treated them unfairly.
High street banks (21%) and credit card companies (20%) performed better, although the number of people who claimed unfair treatment by the latter was still one in five.
The results point to a persistent problem relating to the collection of council tax debts, since half of all reported bailiff visits were due to council tax arrears. Earlier this month, Citizens Advice published a report that concluded heavy-handed collection practices operated by councils were pushing people further into debt, and delaying repayment.
Mike O’Connor, chief executive of StepChange, said: “People fall into debt for a variety of reasons including unemployment, illness and relationship breakdown, but the way in which creditors treat people in difficulty can have a significant impact in how long it takes that person to recover.
“Ensuring that people in financial difficulty get the right support at the right time can make the difference between someone getting back on their feet or them being driven into deeper hardship.”
The research highlights that creditors are failing to take into account the circumstances and vulnerabilities of those struggling with debt. Three-quarters (75%) of the charity’s clients identified themselves as vulnerable, with depression (47%) and ongoing mental health problems (16%) being the most common.
Almost half of clients who said they were vulnerable made their creditors aware of the situation, and despite being informed, firms did not take this into account; 83% of those who made their creditors aware of their status said at least one creditor didn’t take this into account, and 35% said that none of them did.
According to the report, the people who encounter bailiff action are often more vulnerable, with 90% of those who had been visited by bailiffs identified as having a vulnerability beyond financial challenges, compared to 75% of all respondents.
Those people who had experienced bailiff actions reported overwhelmingly that it increased their levels of stress. Also, poor practice, in the form of intimidating doorstep visits, the addition of excessive fees and the refusal to accept an affordable repayment offer, was still commonplace.
The charity is calling for an extended ‘breathing space’ programme, whereby those who solicit advice on debt repayment are given between six months and a year in which interest and charges are frozen, and action to recoup the debt is paused.
