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ISSUE 7

WINTER 2013

A Newsletter for Debt Advisors

Sharing our knowledge. Supporting our industry.

UK Asset Resolution Limited (UKAR) is the holding company of Northern Rock (Asset Management) plc (NRAM) and Bradford & Bingley plc (B&B) which includes Mortgage Express. Visit www.ukar.co.uk

LEAD

S

TOR

Y

TAKING THE

LONG VIEW.

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ISSUE 7

WINTER 2013

This material is directed at Debt Advisors in the UK who support mortgage customers of NRAM, Bradford & Bingley and Mortgage Express. This should not be shown directly to customers. Calls may be monitored or recorded. 0844 & 0845 numbers may be charged at a higher rate than local and national calls and will vary between different providers. Check with your provider.

UK Asset Resolution Limited. Registered Office: Croft Road, Crossflatts, Bingley, West Yorkshire, BD16 2UA. Registered in England & Wales (Company No. 7301961). Please note that UK Asset Resolution Limited is not authorised or regulated by the Financial Conduct Authority. Northern Rock (Asset Management) plc, Bradford & Bingley plc and Mortgage Express are part of the UK Asset Resolution Limited group.

4

MAKING S

TRONG PROGRES

S

THREE YEARS ON.

CEO Richar

d Banks r

eflects on

the thir

d anniv

ersary of UK

AR.

10

TAKING THE L

ONG VIEW

.

A ne

w appr

oach t

o funding debt advic

e.

W

ith Chris Ma

y fr

om the Mone

y A

dvic

e Servic

e.

16

LOOKING AHEAD

.

Nick W

ood fr

om CML looks a

t w

orking

together t

o pr

ovide the bes

t support.

CHOO

SE Y

OUR CHANNELS.

A ne

w gener

ation of Debt A

dvic

e.

W

ith My Mone

y S

teps’ R

osie T

hompson.

12 6

A NEW

APPRO

ACH

.

W

ha

t the F

CA can do f

or y

ou and y

our

clients. W

ith the F

CA

’s Cr

aig Simmons.

PUTTING DEB

T AD

VICE

CENTRE S

TA

GE.

Yv

onne MacDermid, CEO of Mone

y A

dvic

e

Sc

otland, intr

oduc

es Sc

otland’

s ne

w

bankrupt

cy and Debt A

dvic

e Bill.

14

THE RULES OF

ENGA

GEMENT

.

W

hy early int

erv

ention ma

tters mor

e

than

ev

er

, with

UK

AR's

Debt

Advic

e

Str

at

egy Manager

, L

ee Usher

.

19

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MAKING STRONG PROGRESS THREE YEARS ON.

UKAR’s CEO Richard Banks reflects on the third anniversary of UKAR.

4

“The New Year is always a time to reflect on past successes and consider future plans, and here at UKAR we have plenty of reason to do both. In October 2013 we celebrated the third anniversary of bringing our heritage businesses together under UKAR.

Since our formation in October 2010 we have been working hard, serving the needs of taxpayers and mortgage customers and forging closer relationships with the debt advice industry.

We inherited the mortgage books of Bradford & Bingley, Mortgage Express and Northern Rock supported by government loans totalling £48.7 billion.

We expect to repay the majority of these loans within the next ten years and we have already repaid more than £9 billion, a real achievement for us all.

Helping borrowers in financial difficulty access the best debt advice has been a vital part of our strategy – and an

approach which is paying dividends. In the first issue of

UKAR ARena, published in Summer 2012, I reported key statistics relating to the number of mortgage holders on UKAR’s books and the extent of their collective borrowing and arrears. Now, as we enter 2014, those figures have changed significantly as we help customers manage their finances, whilst we continue to deliver value for the taxpayer.

At our formation in October 2010 we had 850,000 mortgage holders, with £86 billion of loans. Now we have just 491,000 with £64 billion of loans.

Working in close partnership with the debt advice industry, has helped us reduce the number of accounts in arrears of over three months too – falling from 39,532 in October 2010 to 18,993 at end of September 2013. We will not be publishing our accounts until after March 2014, but at the end of December the numbers in arrears had continued to fall. More customers are clearing their arrears in full and thankfully there are fewer repossessions.

Research from YouGov and the Money Advice Service shows that individuals who seek advice are twice as likely to make debts manageable within 12 months compared to those who do not.

With that in mind, we have adopted a proactive approach to debt management; engaging customers who may be in financial difficulty, or those showing signs that they are struggling to balance budgets.

We can then signpost them to independent and impartial debt advice providers to get the support they need to ensure that they can continue as homeowners. The number

of customers referred to debt advice providers in 2013 was 4,251 compared to 6,073 in 2012, reflecting a reduction in those entering into arrears. In addition, during the first nine months of 2013, 43,000 account arrangements were successfully completed and approximately 1,600 account modifications, such as temporary switches to interest only or term extensions, were made to assist customers with the repayment of their mortgage.

As part of our proactive approach we have written to 20,000 interest only customers with a mortgage term of 10 years or less. Half of them have already responded and shared their repayment plans with us.

We are also currently preparing to implement changes under the Mortgage Market Review (MMR) in line with revised FCA guidelines which come into effect on 26 April 2014.The review focuses on responsible lending and the affordability of borrowers, through tightening criteria and eligibility which could impact interest only customers and those who are in arrears. This includes ensuring that colleagues who are giving advice to customers are professionally qualified.

In 2014 we intend to extend our programme of proactive support to customers, particularly those customers with interest only mortgages and whose mortgage term ends when they retire.”

“ Working in close

partnership with the

debt advice industry,

has helped us reduce

the number of

accounts in arrears.”

Richard Banks, UKAR.

850 ,000 3, 18 9 4 91, 000 15,888 39 ,53 2 18,99 3

£9 billion

We have repaid more than £9 billion to the taxpayer since the formation of UKAR (Oct 2010).

Oct 2010 Sept 2013 Oct 2010 Sept 2013 No. of customers Down from 850,000 to 491,000. With £86 billion of loans decreasing to £64 billion. Debt advice referrals Up from 3,189 to 15,888. Oct 2010 Sept 2013 3 months + arrears (inc possessions) We have reduced the number of accounts in arrears from 39,532 to 18,993. Payback progress

since the formation of UKAR (Oct 2010).

Repaid Total owed

20%

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A NEW APPROACH.

What the FCA can do for you and your clients.

6

UKAR ARENA WINTER 2013

6

Consumer protection is the benchmark of any fair financial services system. And the recently established Financial Conduct Authority (FCA), with its new range of powers, is dedicated to delivering effective regulation and ensuring an appropriate level of support for all users.

Established last year to replace the Financial Services Authority (FSA), from April 2014 the government-established body will also assume control of Consumer Credit Regulation, taking over from the OFT. Here Craig Simmons, part of the FCA’s Consumer and Markets Intelligence Team, outlines their plans and explains how he hopes debt advisors can contribute to their success.

He says: “We were set up to regulate the financial services industry in the UK and ensuring firms ‘treat customers fairly’ is one of our key aims. We are more consumer-focussed than the FSA, so we look at how firms work with clients and how consumers are protected.

“We’re funded by a levy on the 26,000 financial services firms we regulate across the UK and, from April 2014, when we take over Consumer Credit regulation, this will increase by another 35,000 firms.

“Taking a proactive approach is something else that marks us out as different. We want to spot risks and intervene before situations become more serious. And it’s in this area in particular we want to work more closely with you, the debt advice industry, so if you do see a concerning trend, please tell us about it. We are also keen to raise awareness – among debt advisors – around the work we do to create lasting dialogue.”

So what is the FCA’s approach?

Craig says: “We are looking to promote better standards across the industry, ensure effective regulation and, where necessary, enforce our rules, in several key ways:

Authorisation

“All firms will have to be authorised, providing a ‘gateway’ to financial services for companies and individuals holding positions of ‘significant influence’ within them. To be authorised, firms are assessed against the standards we expect; known as the threshold conditions. Supervision

“Once a firm enters the industry, we will ensure they comply with the standards through periodical reviews. Firms deemed ‘higher risk’ will be monitored more closely. We also have the resources to be reactive.

Thematic Review

“We can look at whole sectors or product types. At the moment we’re reviewing how mortgage lenders are treating customers in arrears and we welcome suggestions about other areas to examine.

Enforcement

“We have fairly wide-ranging powers of enforcement – stretching from fines to criminal action – and we know these measures act as a deterrent. Ultimately, we can take away a company’s or individual’s authorisation to work in the industry.

“ All firms will have

to be authorised,

providing a ‘gateway’

to financial services.”

Craig Simmons, FCA.FCA.

“ We were set up to

regulate the financial

services industry in the

UK and ensuring firms

‘treat customers fairly’

is one of our key aims.”

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Consumer Credit Regulation (CCR)

“We’ve taken over Consumer Credit Regulation from the OFT and this will become effective from April 2014. Our approach will be different in several key areas:

• We have more flexibility and greater rule-making powers, including the ability to ban products • We are better-resourced than the OFT in terms of

people. We have retained a number of OFT staff and their expertise and recruited extra personnel

• Potential for earlier intervention. We hope this will make a real difference to the way firms are regulated, particularly being better informed about the industry through reporting requirements, thematic reviews and our proactive supervision

• Improved access to redress. We can require firms to reimburse consumers

Payday Loans

“This is a key area for us. We’re proposing:

• Affordability checks for every agreement with criteria laid down in our rulebook. Our aim is that firms only lend to borrowers who can afford to repay

• That the ‘rollover’ of loans is limited to two. This should deter firms from lending to applicants who can’t repay • Unsuccessful attempts to take repayments by

continuous payment authorities will be limited to two and part payments will be banned

• Advertising must be clear, fair and not misleading • Stricter reporting requirements so we can be

better informed about the industry

• A tougher supervisory approach for high-risk firms

Debt Management Companies

“These firms will be subject to prudential standards around the way they hold money on behalf of consumers, as well as being subject to specific conduct standards. Our focus will be on ensuring client money is protected and that a failed firm can be run down without adversely affecting consumers. “Not-for-profits firms will have to meet client money rules and

a number will also be subject to the prudential standards. Debt management firms will also have to spread initial set-up fees so creditors are being repaid from the start of a plan.

Not-For-Profit Organisations

“We don’t want to place any additional burden on these organisations so we’re proposing they go through the authorisation process for free.

A New Landscape

“We want to be a proactive regulator so we are keen to hear from debt advisors about new and emerging problems with firms’ behaviour or products. It’s important to note that we are interested in trends - individual complaints should still go to the firm in question. The thinking behind all these measures is clear – empowering consumers and helping when things go wrong. “Finally, I’d stress that for those who are already compliant with

the OFT guidance, there is little to worry about. For others, the new regulation brings an opportunity to make positive change.”

Consumer Helpline:

0800 111 6768

Email:

consumer.queries@fca.org.uk

Firm Helpline:

0845 606 9966

Email:

fcc@fca.org.uk

Debt Advisors & Clients:

consumeraffairs@fca.org.uk

Read more at:

fca.org.uk/news/cp13-10-consumer-credit-detailed-proposals

“ The thinking behind all these

measures is clear – empowering

consumers and helping when

things go wrong.”

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UKAR ARENA WINTER 2013

10

Useful links: moneyadviceservice.org.

uk/en/categories/our-debt-work

WINTER 2013 UKAR ARENA

11

TAKING THE LONG VIEW.

A new approach to funding debt advice, with Chris May, Debt Advice Manager at the Money Advice Service.

10

“With this in mind we have devised a set of key objectives, against which we can measure future progress and success. These include:

Appropriate Geographical Coverage

“We’re asking providers to outline how they will deliver services to those in most need, especially key vulnerable groups, including, those with disabilities, victims of domestic abuse, those in prison/on probation, the elderly, under-25s, substance abusers and those living in remote areas. Targeted Help

“We want providers to consider how and where people want to access help – whether face to face, over the telephone or online.

An Evaluation Framework

“For the last 12 months, we have been working with providers to develop an evaluation framework that will allow outcomes to be measured.

Wider Money Advice

“We are asking for providers to consider ways of integrating wider money advice into their delivery – helping clients improve their long-term financial health. This could involve referral to other agencies once a client’s debt crisis has been averted. We want providers to have strong referral partnerships in place to meet client need for holistic support. It is one of the most pressing issues facing

any provider of debt advisory services - and for most agencies securing long-term, future funding is an on-going concern. So the introduction of a new three-year funding arrangement beginning in Autumn this year has been warmly welcomed. Announced by the Money Advice Service at the end of 2013, the long-term model will give their six major partners (who manage 225 debt advice agencies across England and Wales) the opportunity to seek guaranteed income over 36 – instead of the usual 12 – months.

At the same time the partners involved - Citizens Advice, Capitalise, Community Finance Solutions, Greater

Merseyside Money Advice Partnership, Bristol Debt Advice Centre and East Midlands Money Advice – will be asked to demonstrate how they will deliver services, in a bid to maintain standards and promote efficiency.

Launching in October 2014, the new agreements will run until the end of September 2017 and could become a model for future working. Chris May, Debt Advice Manager at the Money Advice Service, explains how the scheme will work in practice and highlights potential benefits for the wider debt advisory industry.

He says: “Three-year funding represents a change for all of our partners and one which we hope will bring immediate

benefits to customers, debt advisors and the industry as a whole. We predict that moving from an annual to a three-year plan will give partners greater security and stability. We also hope that the new arrangement will ensure customers receive the tailored support they expect and enable debt advisors to invest in longer-term planning and training, contributing to a more cost-effective approach overall.

“In the past, partners have struggled with the short-term nature of funding. It makes it difficult to ensure continuity and there have even been instances where staff members have been issued with redundancy notices while they waited for new funding to be approved, something any organisation would seek to avoid.”

He adds: “For us the move is significant. The Service took over management of funding from the government in April 2012 and in the first year our partners helped 58 per cent more people to get their finances back on track. They’re on target to match that by the end of this financial year so things are progressing well but the new arrangement also offers a chance to review and improve all of our working.

“For the rest of this year we’re inviting our lead partners to demonstrate how they can deliver efficient services, in line with our wider objectives, as part of their bid for funding. We have already visited 120 out of the 225 Debt Advice Centres so we have seen for ourselves the best practice that exists and we want to help agencies build on that.

Tracking Referrals

“We want them to be able to track referrals, including those made from creditors, to measure productivity. Accredited Quality Standards

“We would like partners to meet one of our quality standards. Levels of Funding

“We want to ensure our partners receive the funding they need to carry on delivering quality support. Predicting demand over three years isn’t easy so initially we are asking providers to provide detailed forecasts for the first 18 months of the agreement. After that we will work with providers to assess changes in demand.

Feedback

“Feedback underpins all our working. The new funding arrangement is built on close collaboration with our partners. Since we announced the changes in September 2013 we have been speaking to them on a regular basis, to check progress and review our own working. We will continue to do so as we move towards October 2014.”

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CHOOSE YOUR CHANNELS.

A new generation of debt advice, with Rosie Thompson,

Online Services Manager at My Money Steps.

12

Advice and support is further separated into different categories including:

• Protecting Your Income • Boosting Your Income

(including maximising benefits) • Budgeting Advice

• Debt Options (from making affordable payment offers through to bankruptcy)

• How to Deal with Debts with Extra Rules

Matching the right people with the right services is an essential part of delivering valuable debt advice. And as demand for trusted support has grown, providers have been exploring new channels to meet the needs of their growing customer audience.

For many agencies, providing an online service to

complement and work alongside more traditional phone or face-to-face support has become a vital piece of the debt advice jigsaw. Here Rosie Thompson, Online Services Manager at My Money Steps (MMS), a web-based system managed by National Debtline, explains the benefits it brings to advisors and clients.

She says: “The debt advice landscape is constantly evolving and online services are a key part of delivering

support in the modern world. Our web-based service, My

Money Steps, is part of the overall package that National Debtline can offer. It ensures we have another way of reaching those in need – and of relieving the pressure on other channels used to deliver advice.

“We want to create more awareness – among consumers and the debt advice industry – about how it works and the benefits it can bring both groups. The original service launched in 2010 and became available to users in August 2011. Even before 2010 we had started to identify that there was a growing segment of end users who were looking to access advice online.

“It was always designed to run alongside our other services; to provide a new or additional way of engaging with customers who felt that online was the right approach for

them. Since then we’ve built up 43,000 registered users – users who have formally signed up and entered their details into the programme – and that figure is growing year on year.

“One of its strengths is that it is a complete advice tool and

has been designed to offer an easy-to-follow service. Just as

an advisor would ask clients to talk through their financial status and history; including debts, income, budget, arrears and repayment plans, the online system allows users to input all of that too. The programme can then provide tailored suggestions to support them going forward.

“Customers can access the diary and email reminder functions to help manage their situation. My Money Steps can also be used as a long-term tool that tracks and updates as finances change. So if a user’s situation changes, it can review their status and make new suggestions.

“Often this may be the first time they have started to research dealing with debt, it may be quite an emotional process and being able to find independent, trusted support straight away is important. This versatile, modern service meets those needs; offering advice where and when people are able to access it.

“Some people who make that first step towards a more traditional appointment may be put off by having to wait say, two weeks, and lose that momentum or the impetus to deal with their debts. For some people the way they feel about their financial problems – particularly if they feel sadness or shame around their debts – can stop them

seeking face-to-face help. The less personal nature of an

online service can be more appealing to some of those people who might be nervous talking about their situation.

“Another advantage of an online service is its agility. We have a designated information team at National Debtline who produce all of our self-help materials and ensure that My Money Steps is kept up to date. It means we can respond to new legislation or developments in the debt advice area quickly, ensuring customers are always offered accurate, valuable advice. Ultimately that is our main aim – providing the best advice, delivered in ways customers feel most comfortable with.”

“As household finances continue to come under strain and the demand for frontline debt advice services grows, this type of online working is becoming increasingly popular. In

the same way that we once saw a move from face-to-face

to telephone support, there is now a move being made from telephone to online support.

“Some people use a combination of the two, mixing on and offline and we’re seeing a new generation of digital customers who have grown up using online tools. For them it’s the way they prefer to access advice and services.

“It works alongside the existing National Debtline services

to make sure people can access help in a way that suits

them. It’s all about offering information via the most

relevant channels. Of course for some people, the traditional approach will always be the most appropriate and different kinds of customers – especially those who

may be vulnerable – will value face-to-face meetings.

“But as we all know, this type of meeting is time and resource-intensive. So it’s an approach than can bring benefits for debt advisors too – offering a more efficient way of working for some clients and relieving the growing pressure on front-line services.

“For debt advisors, matching users with an online service can be a way of protecting and prioritising limited resources. Barclaycard funded the initial service and are

now sponsors, with experts from National Debtline

managing content. The instant availability of the online resource is another benefit for both users and advisors.

For more information,

go to

mymoneysteps.org

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PUTTING DEBT ADVICE CENTRE STAGE.

Scotland’s new bankruptcy and debt advice bill.

14

UKAR ARENA WINTER 2013

14

“We want to see consistency between different debt remedies and debt management tools and the way to achieve that is by making advice mandatory across all areas. There will also be one common financial tool to assess a debtor’s ability to pay - something we welcome. Having one tool provides consistency and hopefully more equality of approach when determining levels of contributions.

“With regard to the length of payments in sequestration we believe four years is too long and for some of the debtors the payments would be unsustainable, which could have a detrimental impact on people longer term.”

New Ways of Working

“The Bill brings a new emphasis on more efficient working, streamlining the processes for creditors and debtors. So applications will be made to the Accountant in Bankruptcy (AIB) and are likely to be online.

“The AIB has also been awarded the power to review

decisions before appeal to the Sheriff Court and can transfer debtors across to different debt solutions.”

Profile

Money Advice Scotland (MAS) is a national umbrella organisation promoting the development of free, independent and confidential debt advice and financial inclusion. Established in 1989, the organisation is a registered charity, with clear charitable objectives. It serves 200 members organisations and individuals drawn from local authorities, CAB, and other voluntary projects, all of whom provide money advice. Other members who are supportive of our objectives include insolvency practitioners, creditor and debt collection organisations.

Go to

moneyadvicescotland.org.uk

Serving Everyone Better

“ The Bill has three main objectives designed to strike a balance between the interests of debtors and creditors. It aims to:

• Ensure there is a fair and reasonable process for people experiencing debt problems enabling them to gain access to debt advice and solutions.

• Make sure people who can pay their debts do so. There are new procedures and controls in this area.

• Ensure creditors get the best return on what they are owed.

Easier, Earlier Access to Debt Advice

“It also introduces compulsory financial education for those who are deemed to require it, including those people who have been made bankrupt more than once or had a Bankruptcy Restriction Order against them.

“There is also provision for debtors to elect to have financial education. As an organisation we have been directly involved in developing this area of the Bill and are creating an e-module for debtors’ use. In the longer term this could be used by others seeking to organise their finances better. Value is placed on independent advice as a way of ensuring that those in debt are offered the best support.

“As a general principle, clients should also be encouraged to seek advice early in order to ensure agreements are reached with their creditors before problems get worse. Bankruptcy can be a complete life changer and the new Bill says that before going into bankruptcy, advice must be sought. This procedure already exists within the DAS Regulations in respect of setting up a Debt Payment Programme, and bankruptcy will be no different.

Yvonne MacDermid, MAS. Yvonne MacDermid,MAS.

“ Clear, early debt

advice, which will

be compulsory,

takes a central role

in all of the changes.”

UKAR are committed to helping customers improve their financial awareness. Signposting people towards sound debt advice is a key part of that process.

A new Scottish Bankruptcy Debt and Advice Bill aims to place this kind of support and education at its centre; committed to bringing ‘a balance of fairness’ into the provision and management of financial solutions for consumers and businesses. With the first stage completed last month, 2014 sees the formal introduction of the completed legislation.

Here Yvonne MacDermid, Chief Executive of Money Advice Scotland, explains in more detail what it means for debtors and creditors and outlines the significance of debt advice provision to its success. She says: “The Bill has been introduced by the Scottish Parliament and will transform the way bankruptcy is managed in Scotland.

“Clear and early debt advice, which will be compulsory, takes a central role in all of the changes, bringing benefits for both those in debt and their creditors. We believe that with mandatory money advice at the heart of the Bill, it will provide for improved consumer protection in 2014 and beyond.”

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LOOKING AHEAD.

Working together to provide the best support, with Nick Wood, Senior Policy Advisor at CML.

16

For more information, go to

cml.org.uk/cml/statistics

closer working with the debt advice industry is very important;

engaging with borrowers as they plan ahead to anticipate problems and addressing overall indebtedness.

“But one of the biggest challenges is demonstrating in tangible terms the added value delivered by debt advice.

With two-way information flows, there is the potential for

lenders and debt advice providers to better monitor effectiveness and evolve their approaches accordingly.

“If the lender feels they have control over the referral of a customer to a debt advice serve, outcomes can be monitored thereby making the system more effective. So Payplan, for example, has a secured lender referral process allowing lenders to monitor the outcomes of agreed solutions. The new year also brings new challenges for lenders and advisors in terms of the safety net for mortgage customers in financial difficulty.

“The Mortgage Rescue Scheme in England will close to applications at the end of March 2014. Although the scheme was costly for government to deliver, it did directly prevent more than 5,000 possessions with thousands more

customers compelled to seek free, independent debt advice. With no replacement scheme in the offing, some lenders may consider their own alternatives to possession, including supported sales.

“Looking to the longer term, Support for Mortgage Interest (SMI) is currently available to borrowers in receipt of certain benefits and is subject to a 13-week qualifying period. From April 2015, that period is scheduled to revert to 39 weeks. This does beg the question whether lenders will be able to accounts in arrears are behind by more than 10 per cent of

the outstanding balance, compared to around one in eight at the beginning of 2009. Lenders have worked hard to support those customers in financial difficulty, by offering forbearance and referring to independent debt advice, and of course low interest rates have helped suppress payment problems for a lot of people.

“Although it has set greater expectations on what will trigger

consideration of a rise in base rate, the Monetary Policy Committee (MPC) has recently foreshortened its estimates of when this might happen. In November, the MPC gave

this a two-in-three chance of occurring by the end of 2016,

compared to its even money prediction back in August.

“Naturally there will be question marks over how even a marginal increase in interest rates will impact customers conditioned to a historically low and prolonged interest rate environment. But more immediate pressures, such as cost of living squeezes and the finite nature of forbearance, may come to bear on those customers in deepest arrears.

“And it is that need to be forward looking that led the FCA

to undertake a pre-emptive thematic review into lenders’

arrears and forbearance management approaches earlier this year. The findings will not be known until early this year, but I hope the outcome will assist lenders as their approaches evolve.

“One of the ways our members can help to manage down future risks is by engaging with customers as early as possible and promoting the virtues of debt advice. Partnership and

forbear for nine months if there is no change in the customer’s circumstances. We will be looking to join forces with advice agencies in pushing for an extension to the more favourable waiting period.

“And, as part of wider welfare reform, the move towards Universal Credit will pose challenges as claimants migrate across from legacy benefits. Thankfully, SMI will remain largely unchanged, with payments continuing to be made to the lender. However, the impacts of the new ‘zero earnings rule’, which will see those Universal Credit claimants working sparingly lose SMI payments, are untested.

“Responding to all of these challenges is something in which we all have a vested interest – and it is something

where lenders’ engagement with borrowers and

partnership with debt advisors are the keys to success.”

When the latest figures from the Council of Mortgage Lenders (CML) were unveiled in November, they were hailed as a step in the right direction for struggling homeowners - and a sign that targeted debt advice is working. But beyond the headlines, what does the CML report really mean for borrowers?

The figures show a fall in the overall number of first charge arrears and repossessions. A total of 149,400 mortgages, representing 1.33 per cent of the entire stock of mortgages, had arrears equivalent to more than 2.5 per cent of their mortgage balance at the end of the third quarter. This was down from 154,900 in the second quarter, and 159,100 in the third quarter of 2012.

Repossessions came in at their lowest level since the CML began collecting quarterly figures. There were 7,200 possessions in the third quarter down from 7,600 in the second quarter and 8,200 in the third quarter of last year.

Here Nick Wood, Senior Policy Advisor at CML, looks behind the headlines to explore what the figures mean

to his members and their debt advice partners.

He looks forward to examine new challenges facing stretched borrowers in 2014 and beyond – and suggests how lenders and debt advisors can work in partnership to support them. Nick says: “To understand the wider importance of the figures it’s crucial to put them in to some kind of context. “Although the overall arrears and repossessions numbers are

down, the proportion of accounts in the deepest arrears has risen steadily over the last four years. Around one in five

Profile

The Council of Mortgage Lenders represents banks, building societies and other lenders who provide around 95 per cent of all UK residential mortgages. There are 11.2 million mortgages in the UK, with loans worth over £1.2 trillion.

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WINTER 2013 UKAR ARENA

THE RULES OF ENGAGEMENT.

Why early intervention matters more than ever.

19

It’s a piece of research that demonstrates the scale of the UK’s debt problem – and suggests new ways of supporting and engaging with customers may be required.

Despite national figures showing an overall decline in mortgage arrears (our article on pages 16 and 17 examines these numbers in more detail and provides valuable context) a recent Money Advice Service report shows that more Britons than ever are experiencing financial hardship.

According to the 'Indebted Lives' study, almost nine million UK adults are now living with serious debt but only 1.5 million of those are seeking professional advice. A significant proportion of these people have been finding it hard to pay their bills for at least a year, and a further 48 per cent say they are in so much debt they are struggling to buy ‘the basics’.

It is crucial that creditors do not lose sight of the impact debt can have on people’s lives and more important than ever we ensure effective Debt Advice referral strategies exist. Here at UKAR, we encourage early engagement with debt advice services, intervening before problems become serious and taking a holistic look at finances.

We know other creditors are also working hard to support customers in financial difficulty although a more co-ordinated

approach could further improve the customer experience. For instance, completing affordability assessments to ensure arrangements are affordable and sustainable should be the norm within any organisation. But this is not always straightforward and capturing accurate information takes time.

For customers with multiple creditors, they may be asked to repeat the process which can lead to them disengaging with creditors. I'm keen to understand what we can do to simplify the customer journey here - to provide the best possible opportunity for those customers to return to a manageable debt position. This will hopefully be something we can cover in more detail in future editions of UKAR ARena.

We know that early engagement with debt advice can help provide that holistic approach to managing multiple debt situations and I'm really proud of the work we’ve done at UKAR to promote the awareness of sources of support to our customers. The referral process starts even before a customer enters into arrears, offering advice when they start to show signs of being unable to cope.

Of course there is always more that can be done and we are continuing to work with you, our colleagues across the debt advice community, to ensure the customer journey continues to improve.

On another note, November saw Debt Advice Policy Analyst and editor of UKAR ARena Kevin Shaw join the Money Advice Service on a six-month secondment, giving him a great opportunity to share knowledge and skills across two sectors.

Naturally, we’re sorry to see him depart for now but I'm delighted to welcome Stuart Laidler to the team. He’ll be taking over Kevin’s role and I’d like to take this opportunity to wish them both the best of luck in their new ventures.

19

“ According to the

'Indebted Lives' study,

almost nine million

UK adults are now

living with serious debt.”

Lee Usher, UKAR Debt Advice Strategy Manager.

“ It is crucial that

creditors do not

lose sight of the

impact debt

can have on

people’s lives.”

(11)

Our key debt advice partners:

ISSUE 7

WINTER 2013

Let us know your

thoughts and views about

UKAR ARena, email us at

debtadviceteam@ukar.co.uk

Sign up to the email distribution

list for future e-zine copies

of UKAR ARena please email

debtadviceteam@ukar.co.uk

References

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