AM urges clampdown on debt management “sharks”

332 homeless applications in Pembrokeshire in six months
433 people in urgent housing need in Carmarthenshire
Joyce Watson AM is calling for a clamp down on rogue debt advice firms that mis sell services, charge hidden fees and cold call vulnerable households.
In the first Assembly questions session of the new term, Mrs Watson claimed free debt advisors can provide better and more suitable advice than companies that charge customers a fee.
The Mid and West Wales AM argued that banks and financial institutions should be made to fund free debt advisors at the Consumer Credit Counselling Service, National Debtline and Citizens Advice after April, when UK government funding for the scheme comes to an end.
“Given that casino-banking triggered the financial crisis, it is only right that the banks help get us out of it. That mean paying their fair share of tax, meeting their targets for lending to small businesses and paying for free debt advice services,” Mrs Watson said.
The Labour AM, who sits on the Assembly’s Enterprise and Business Committee, referred to a recent study that found more people are turning to payday loans to cover mortgage and rent costs. She said free debt advisors offer vital support to people struggling with debt – helping them avoid falling into arrears and risk losing their home.
Mrs Watson asked the First Minister: “What can your government do to pressure the UK Government to force the banks to carry on funding free debt services after April, and what can the Welsh Government do to crackdown on rogue debt advice firms that charge hidden fees and cold call vulnerable people?”
The First Minister responded, saying third sector advice services were under pressure because of changes to Legal Aid and Welfare Reform. However, he pledged to work with financial charities to lessen the impact of any funding cuts.
The housing charity Shelter claims that almost a million people in the UK have turned to a high-cost payday loan to cover their mortgage or rent in the past year.
Between April and September last year, Pembrokeshire Council received 332 homeless applications and 433 people in Carmarthenshire were registered as being in urgent housing need in November, according to figures obtained by Mrs Watson.
Free debt advice services are funded by the Financial Inclusion Fund (FIF), which is aimed at increasing the provision of free face-to-face debt advice in England and Wales. In February 2011, the UK Government announced that it would stop funding the scheme from April 2012. FIF has provided funding of about £27m a year through 16 debt advice providers since 2006.
From April, the Money Advice Service will take on the role of coordinating debt advice across the UK. The Money Advice Service have requested funding from the Financial Services Authority (FSA) for the continuation of the free face-to-face debt advice projects from April 2012. The FSA raise money by charging fees to all authorised financial firms that carry out activities they regulate, as well as other bodies such as recognised investment exchanges.