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6 October 2023updated 17 Oct 2023 11:06am

How to help foster a financially resilient UK

John Pears, chief executive of Lowell UK, on how government and the private sector can work together to improve the UK’s financial health.

Inflationary pressures and the cost-of-living crisis have thrown the UK’s poor financial resilience into sharp relief. As people increasingly feel the pinch, there are ways the financial services industry, government, and debt agencies can help mitigate the worst effects of financial ill health. John Pears, head of the debt management company Lowell UK, shares some of his expertise below.

Why do you think the UK is facing issues with its financial health?

The challenges facing the UK’s financial health are complex, extending beyond the immediate impact of the rising cost of living. Whilst these cost escalations are undoubtedly leading to families and individuals feeling the squeeze, we believe there are longer-term issues linked to rising vulnerability.

Navigating personal finances can pose considerable challenges, especially for individuals dealing with problem debt, and the UK’s education system lacks a definitive focus on financial education. A staggering 24 million individuals say they have a lack of confidence in managing their day-to-day finances. It’s imperative that we establish a clear agenda around financial education, not only for school children but also for adults. 

Access to affordable credit is also a real issue, and we’re seeing a concerning pattern amongst those that are caught in problem debt and have very little help in finding a way out. The existing system clearly penalises individuals who have found themselves in difficulty, due to changes in their circumstances, and the departure of several high-cost lenders from the market has left a significant void. Creating wider access to more affordable credit can be a lifeline for people who are excluded from mainstream providers. But there needs to be more done to bridge the divide and prevent individuals from resorting to loan sharks.

There are huge inconsistencies from companies and organisations offering debt advice. Some of the advice on offer is sound, and can be highly beneficial to users. But some can be exploitative. Whilst valuable advice can relieve stress and anxiety for individuals in debt, the existing patchwork is inadequate for the scale and complexity of current demand. This problem can lead to disengagement and further disrupt the individual’s financial circumstances. Many organisations are underfunded, their capacity constrained and some are even unregulated, resulting in debt solutions which just aren’t fit for purpose.

In addressing these long-standing concerns, the UK has an opportunity to recalibrate its financial health, equipping individuals with the tools, knowledge and access they need to navigate this ever-challenging landscape. 

These aren’t new issues so what can actually be done to tackle these problems?

In the short term a triage approach is needed, and identifying ways to assist individuals grappling with financial challenges must become a priority for the government. Money management skills are vital to everyone’s daily lives. A greater emphasis on financial education is needed as individuals step into adulthood and embark on their credit journey.

We must apply financial education at the point of need. People no longer learn the way they used to, so education needs to focus on in-the-moment training, tackling financial issues which are most prevalent at each stage of a person’s life. Excellent examples of this include the government’s Help to Save scheme and Barclays’ LifeSkills programme, but I believe there’s a need for a financial education one stop shop, from budgeting to reading payslips and understanding terms such as APR (annual percentage rate) and AER (annual equivalent rate). There are many companies who are doing great things in this space, but we need a more concerted effort led by a government-funded education forum. 

Additionally, we need to develop better affordable credit options for non-prime consumers, serviced through new ventures to help make the invisible consumers visible again. By combining the values and reach of the community lending sector with the insights and capabilities of fintech businesses, a better personal lending market is possible. There has been traction here, but the government needs to lead the conversation to progress it further. We need the government and regulators to actively support firms looking to bridge this void. 

Last but by no means least, we need to continue to innovate and develop tailored debt advice at the point of need. The variety of advice is currently too fragmented, with people being directed in several directions. New legislation is welcomed to tighten large fees and the targeting of consumers in financial difficulty. Why should debt advice be limited to financial services organisations, why not create clear signposting help at points of illness or job loss, i.e: in pharmacists or job centres?

Where does a company like Lowell fit in?

We are passionate about how we improve people’s financial health because we see problem debt every day. How we treat our eight million customers is important. We have led the way on improving debt collection standards in the UK, pioneering a long-term approach to repayment, breathing space and flexible repayments. Small changes to our practices have a real impact on customers and how they manage their finances and we are constantly challenging ourselves to do more.

Beyond that we have sought to take our insight and expertise to a wider audience and pushed for policy change that can massively impact the way debt is considered in the UK. Working with our partners at places like the Centre for Social Justice think tank and MyBnk financial education organisation, we are pushing for higher public sector debt collection standards, campaigning to tackle debt stigma, working towards improved financial education, calling for a clamp-down on illegal money lending, and the regulation of bailiffs. 

We’re proud of the changes we’ve been involved in and we recognise that there’s lots more that needs to be done to tackle the stigma of debt and ensure that individuals feel confident engaging with their creditor. We see the challenges that our customers face every day and as a nation believe we can do better. Firms like Lowell have an obligation to tackle these issues and we welcome further conversations around problem debt and what we can do as a society to fix it.

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