There are more than 8m people in the UK struggling with some degree of problem debt. Yet most will not call a debt helpline until their finances are at breaking point.

Problem debt is usually a private battle. Callers are likely to have spent two years sinking deeper into debt and juggling multiple creditors until all their options are exhausted.

When they finally do pick up the phone, they will come through to a trained adviser in a call centre like the one visited recently by FT Money.

“Good morning, welcome to PayPlan. You’re speaking to Julia. How can I help?”

One of the UK’s largest providers of free debt advice, PayPlan operates its helpline from a brutalist 1960s office building in Grantham, Lincolnshire, birthplace of Margaret Thatcher.

“Live within your means; put by a nest egg for a rainy day; pay your bills on time.” The line, often quoted from the Iron Lady’s speeches, is something that more than 100,000 people who have called PayPlan’s helpline in the past year have found they were unable to do.

The first thing staff do is take a contact number in case they are cut off.

“I’m calling from my son’s phone,” says a woman in her 50s with debts approaching £20,000. “I don’t have my own mobile — I can’t afford it.” Julia Round, the PayPlan adviser on the call, asks if she can take her son’s number. “No, I don’t want my son to know about this.”

Another caller is a man in his late 20s, who speaks with the calm resignation of having nothing left to lose. He says he is sitting in front of a pile of letters that he is too scared to open. Most are overdue bills; some of these have morphed into demands from debt collectors or county court summonses for unpaid debts.

On the other end of the phone in Grantham, adviser Shannon Nothdurft calmly catalogues the debts the caller admits he has been hiding from his partner — a situation PayPlan says is common to one-third of callers. Every creditor she logs on the system appears in red type.

“Who is the letter from?”

“And how much is that one for?”

“Is there a reference number?”

She patiently repeats this exercise again and again, slowly unravelling a list of multiple creditors. Before long, the whole screen is red. The total he owes exceeds £10,000.

The caller says he hasn’t been in work for months. His wife has been paying the rent and, as we later learn, the repayments on a previous plan he entered into in an attempt to become debt free.

Around us, the same exercise is being repeated. Debt advisers have to obtain a full picture of everything a person owes to find the best solution. They also have to ask detailed questions about a person’s income and outgoings to assess what they can afford to repay and whether it will be possible for PayPlan to broker a debt management plan with their creditors or use insolvency to see some of the debts written off.

Though problem debt is primarily an issue for low earners and those with few assets to their name, it also affects those on larger incomes — and its ramifications can be felt by a much wider group, affecting family relationships and putting a strain on friendships. Ahead of a government consultation response on plans to help people tackle problem debt, FT Money has spoken to those on the front line of debt management to explore its effects on individuals and communities.

Evolution of problem debt

The nature of problem debt has shifted over the past decade. Debts arise less often from impulsive spending as from day-to-day expenditure, advisers say.

“Before the financial crisis, it was not uncommon to find a nurse with £100,000 of unsecured debt,” says John Fairhurst, PayPlan’s executive director.

“At that time, clients typically had large credit card debts, maybe had remortgaged their house, and were caught in a cycle of general overspending,” recalls Rachel Duffey, PayPlan’s chief executive.

Today, Mr Fairhurst says: “The people we’re helping have lower debt levels and lower income levels. All too often, their debts have occurred just through spending on everyday things.”

The typical caller to PayPlan’s helpline has debts of £15,000 and a household income of less than £2,000 per month. Most are living in rented accommodation and often have young children.

“If the background level of debt is sufficient, something relatively modest can happen — an illness, a car repair — and that’s what tips everything over,” Mr Fairhurst says.

Problem debts are also more likely to be owed to government organisations. The proportion of people reporting debt problems relating to public sector organisations doubled from 21 to 40 per cent in the five years to 2017-18, according to research by Citizens Advice. During the same period, those reporting problems with consumer credit debts fell from 52 to 33 per cent.

The helpline conversations are difficult to listen to but follow a similar pattern. Most people have been struggling on for months, if not years. Most have kept their debt problems a secret, and the stress is taking a toll on their mental health. Sadly, it is common for callers to say they feel suicidal.

Nearly a quarter of people who attempted suicide last year were in problem debt, according to a study by the Money and Mental Health Policy Institute (MMHPI).

Many callers report issues with benefit payments, notably universal credit. Problems arising from benefit overpayments are also common. These debts are clawed back via reduced levels of future benefit, and helpline staff say individuals often get into more debt as a result. Others have given utility companies permission to take payments directly from their benefits to avoid being cut off.

The cost of servicing greater levels of debt steadily rises. Payments are missed. Charges increase. More money is borrowed to cover the gaps — and for those with a chequered borrowing history, this credit comes at a high cost.

During the FT’s visit on a Monday morning in March, nearly all the callers reported owing money to specialist credit cards lenders such as Capital One Classic (“a credit card for people with poor credit”), Vanquis and Aqua. These all carry an APR of between 35 and 40 per cent — double the rate of a standard credit card.

Yet this is dwarfed by the rates charged by some short-term lenders. Some names that come up are almost comical — Drafty Loans, Peachy, Mr Lender and Uncle Buck (slogan: “Ask Uncle”) — yet their rates of interest are no laughing matter. Uncle Buck’s website shows “representative APR of 1,249 per cent”.

Alternatively, the indebted might be able to persuade a family member or friend to take out a guarantor loan. One of the biggest UK providers of these is Amigo. Its website promises: “Borrow up to £10,000 over four years with a guarantor, no credit scores”. The representative APR is 49.9 per cent.

One caller to the PayPlan helpline was a woman who had guaranteed a loan like this for her brother, only to imperil her own finances when he missed the repayments.

In the later stages of problem debt, it becomes impossible to juggle the repayments or obtain any fresh lines of credit. Defaults mount. Bad debts are sold on to third-party debt collection agencies for so many pence in the pound.

Although these debts might have originally been owed to household names such as high street banks, the firms chasing the payments are not so familiar. Helpline staff type out the same names time and time again: Lantern Debt Recovery, Frontline Collections, Carter Forbes Collections, BW Legal (which, according to its website, is “an award winning debt recovery law firm”).

Often, it is a bailiff’s knock that triggers the first call to PayPlan’s helpline.

The knock at the door

Numerous studies have criticised local councils for rapidly resorting to bailiff enforcement for relatively small debts, often through an automated process.

“Council tax collection is so aggressive it pitches people into a crisis,” says Alistair Chisholm, head of policy and partnerships at PayPlan. “If you miss just one payment, and the reminder, you automatically lose the right to pay in monthly instalments. You then get a bill for the whole lot, plus the court costs, which can add another £60 to £120 to the debt. If councils send a bailiff — and they overwhelmingly do — then even more costs will be added.”

PayPlan’s own research found that more than 62 people in England and Wales were imprisoned for non-payment of council tax in 2016-17. Court action for committal to prison was taken against almost 5,000 others. On average, the council tax arrears were just over £2,000 per person — below the level for which bankruptcy can even be considered.

Councils can also be extremely aggressive in their pursuit of parking charges.

Helen Undy, chief executive of MMHPI, points to the tragic case of 19-year old courier Jerome Rogers, relayed in the BBC docudrama Killed By My Debt. After failing to pay two £65 traffic fines, Jerome’s debt increased to more than £1,000 and bailiffs clamped his motorbike. Unable to see a way out, he took his own life.

“As his mother says in the programme, it wasn’t the debt that left him feeling there was no way out of his situation. It was the way he was made to feel about that debt,” says Ms Undy.

Members of the cross-party House of Commons justice committee called this month for independent regulation of the bailiff sector. Citizens Advice has recorded a 16 per cent rise in complaints about problem bailiffs in the past year.

The Financial Conduct Authority has taken big steps to protect people in problem debt — including its crackdown on the payday lending sector — and lenders must demonstrate that they are treating their customers fairly.

However, the FCA’s remit does not currently extend to public sector debt collection — a problem the debt advice sector is constantly butting up against.

“The situation is definitely becoming more polarised,” says Ms Duffey. “Yes, the FCA-regulated lenders will contact you if you fall behind, and that can be stressful, but compare their approach to councils chasing rent arrears, council tax, parking fines or government departments chasing benefit overpayments, and the public sector is relatively aggressive,” she says.

In a report last year, the National Audit Office concluded that the public sector “lags behind the retail lending sector in following good debt management practice”.

The government consultation on breathing space — a proposal to give people in problem debt a 60-day period of legal protection from creditors and debt collectors so they can work out a repayment solution — ended in January, and a response is expected shortly.

It proposed that breathing space would offer protection “on as many of an individual’s personal debts as possible”.

People working within the debt advice sector are emphatic that government departments and utility companies should be treated equally alongside other creditors, and contribute fairly to the cost of funding debt advice needed to set up repayment solutions.

In England and Wales, while the private sector funds debt advice through FCA levies and voluntary contributions, there is no such obligation on the public sector.

“Government debt makes up a growing proportion of problem debt. Everything has to be included, otherwise it’s just not going to work,” Ms Duffey says.

“If deductions from universal credit are not counted in statutory debt repayment plans, people’s finances will still have the features that pushed them into vulnerability,” adds Joe Lane, head of policy at Citizens Advice. “In our view, the way these debts are being collected is making people’s debt problems get worse.”

In response, HM Treasury said the breathing space scheme would “give people in problem debt the time to get their lives back on track”.

“We increased funding for the Money Advice Service to over £56m last year, which has helped over 530,000 people get the debt advice they need,” the Treasury said. “We have given the Financial Conduct Authority strong powers to protect consumers who borrow money, including cracking down on payday lenders, capping the cost of rent-to-own, and taking action on overdraft fees.”

The solutions gap

The eventual introduction of breathing space is expected to swell the numbers calling debt helplines. PayPlan, the debt charity StepChange and Citizens Advice have raised concerns about how this extra capacity will be funded. Citizens Advice estimates there are already 600,000 people a year who need debt advice, but are unable to access it.

PayPlan says a “solutions gap” has emerged for clients who are running “deficit budgets” and cannot afford to contribute to a formal repayment plan.

“Where everything falls down is those clients who haven’t got enough to pay their rent, utility bills and council tax,” Mr Fairhurst says. “The underlying problem is, we can’t fix poverty.”

Back in the call centre, Julia is speaking to a woman who is threatened with eviction. She has rent arrears of several thousand pounds, owes thousands more in overpaid tax credits, is being chased by bailiffs for her council tax debts and admits she “cannot afford the electric every week”.

Her only income is universal credit, which has been reduced to recover the benefit overpayments, and she has borrowed thousands of pounds from short-term lenders to make ends meet.

Her lack of income means PayPlan cannot broker a repayment solution. Nevertheless, she will be sent leaflets with advice about her rights, dealing with bailiffs, the bankruptcy process and further sources of help.

Upstairs, Emma Gibbons, the manager of the vulnerable clients team, has a stash of sweets labelled “The Happy Jar” for staff who experience distressing calls. It is next to a box of tissues.

Working in a debt helpline is a challenging job and is not right for everyone, she says. “People tend to stay for a very long time, or leave very quickly.”

Helpline staff at PayPlan are given suicide awareness training. In extreme cases, they may have to call out the emergency services to the client’s address.

“The reality is that quite a few staff will go off with anxiety or depression,” Ms Gibbons says. “We have a strong HR team, and everyone has access to counselling.” Colleagues are encouraged to ask each other: “Has anything happened today that you need to talk about?”

The staff are a close-knit bunch, and go to great lengths to keep each other’s spirits up. Desks are covered in novelty mugs, fluffy pens and animal stationery — often given as birthday presents from colleagues. The supervisor walking the floor carries a box of Celebrations. When clients are put on hold, the piped music they hear is M People’s Search for the Hero Inside Yourself.

“We get so many thank you letters,” Ms Gibbons says. “Many of them say ‘I was considering suicide until I called you’.” During my visit, she receives a huge card and box of chocolates from an ex-forces client with post-traumatic stress disorder who, with her help, is finally debt free.

“Everyone else had given up on me, but you refused to,” he wrote. “I call you my angel because you kept me alive.”

‘I survived problem debt . . . then I wanted to help others

Julia Round has worked on PayPlan’s debt helpline for more than seven years — but she was once the person on the other end of the line.

“I came to PayPlan many years previously as I’d been in debt myself,” she says. “People think having debt is the worst thing in the world. They’re ashamed. Sometimes callers say: ‘You have no idea what it feels like’. In actual fact, I do. In seven years, I’ve only had to say it four times. But I also know how it feels to be debt free.”

Asked to describe the most rewarding aspect of her job, Julia says: “You feel like you’ve given someone a light at the end of the tunnel. Often they say: ‘I wish I’d spoken to you years ago’.”

Calls to the helpline can be promoted by a demand from a bailiff. “People don’t understand what rights they’ve got — they believe what the bailiff is telling them,” she says.

Once, Julia took a call from a woman who couldn’t get to work as a bailiff had illegally clamped her car. “They had no right, as the car belonged to the hire purchase company,” Julia says. “The bailiff would have known that, but he clamped it anyway to inconvenience her, hoping that she would get the money.”

Bailiffs collecting council tax debts have been known to shout through the letter box: “You’ll go to prison if you don’t pay up!”

She says it is not uncommon to get calls from people who take home £4,000 or more a month and are in trouble. The bigger the salary, the bigger the debts.

“Often, they’re living to the max, overspending on their lifestyle or have children in private school,” she says.

Julia was due to retire this year, but has opted to keep working. “I’d also love to pilot a programme in schools, teaching young people about money and debts. There are so many people who don’t know how to budget. It never ceases to amaze me.”

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