With millions of low-income families dealing with the burden of escalating personal debts and the future of local, face-to-face debt advice services uncertain, it is now more important than ever to understand the challenges that customers face and initiate the right support at the right time, says Naomi Williams, Investment and Commissioning Manager for Orbit, who are successfully using a new debt management tool to support customers.
“With nearly four million low-income households in the UK behind on rent, bills or debt payments according to the Joseph Rowntree Foundation, and this figure only predicted to increase when the price cap lifts in April, it’s become more important than ever to make sure that we understand the difficulties faced by our customers and ensure that we support them in the most effective way possible.
“Working in partnership with PayPlan is helping Orbit to do just that by gathering clear data on our customers and the situations that they’re challenged by.
“Unemployment rates in the UK have just dropped to their lowest level this year (4.3% according to the Office of National Statistics) and this is reflected in our latest data about our customers, which shows that 79% are in employment. But whilst this may be seen as a positive outcome, the stark reality is that many of our customers are struggling financially and only 15% of the debts are from overspending.
“The majority of customers who are facing debt are struggling because of life circumstances, and though they are working, their average budget situation is a £105 deficit every month. With the end of furlough and debt payment holidays, and the rising cost of energy and food bills, many people will find the next few months even more challenging.
“That’s why as part of our vision to build thriving communities and to improve the social, economic and environmental prospects of people and communities, we invest around £5m a year into our communities through our Better Days programme. A key part to this investment is funding projects which help customers build life skills in key areas and one such project is our partnership with PayPlan, which provides independent debt management support and helps customers gain the skills and confidence to manage their own finances.
“The impact of this approach is evident: within the space of a year, £2.1m of customers’ debt is now being managed in an affordable way, giving households the space to regain control of their often-changing circumstances.
“The monetary impact on the household is clear but supporting people to develop their financial capability has a profound effect on their overall wellbeing too. In the first year of operation, 93% of customers who accessed this service said they felt more reassured and calmer about their financial situation, and 79% felt more confident about managing their money. With our support, customers gain skills and knowledge such as financial numeracy, confidence with money and a sense of control over short and long-term money management, empowering them to be resilient to both expected and unexpected life events and changes in circumstances.
“As for the business impact, we have been able to look at the relationships between customer impact and the impact on the business. Using a randomised control trial (RCT), we were able to analyse the impact of the programme on our rent arrears. This RCT has proven that in the six months following PayPlan engagement, participating customers have significantly improved their account balance.
“Although none of this may come as a surprise to anyone working in debt management or housing providers - otherwise the sector wouldn’t have been delivering and providing debt advice to the scale it has for so many years - it does serve as an important reminder as to why we do it.
“With the latest government budget announcement leaving free, local, face-to-face debt advice services with an uncertain future, it is essential that we step up and ensure that we offer our customers the right support at the right time.
“By gathering customer feedback and data, we can make the right decisions and provide the right support which is responsive to customers’ needs and deliver life-improving impact.”