Money Advice Service - Free and paid-for UK debt advice

1. Description of the programme
2. The study
3. Key findings
4. Points to consider

Description of the programme

The effectiveness of both free and paid-for debt advice services was evaluated in this study. This included advice delivered face-to-face, via telephone, email, website, post, printed material and instant messaging.

The evaluation objectives were to explore:

• the effectiveness of taking advice over not taking advice;
• the relative effectiveness of different advice channels; and
• the effectiveness of free versus fee-charging organisations.

The study

• The evaluation was undertaken in March 2012 and was based on a survey of 4,020 respondents who had previously reported themselves as being 'in debt' since 2006. The sample were asked at which points their debt had been ‘manageable’ or ‘unmanageable’ between 2006 and survey completion (a self-defined measure), whether they had sought debt advice and their experiences of being in debt. The sample was divided into two groups: those who had and those who had not sought debt advice over the study period, and the outcomes for the two groups over a 12 month period were compared.
• A sub-group was identified who had maintained ‘manageable debt’ throughout the period and had also sought debt advice. A follow up survey was conducted among 1,247 of the original respondents in this sub-group to establish their experiences, motivating factors to seek advice and the outcomes they achieved.
• Statistical analysis was employed to establish the effectiveness of debt advice, measured by the length of time it took to move from unmanageable to manageable debt levels.

Key findings

The evaluation (which involved a survey of participants who had sought debt advice and a comparison group of those with debt problems who had not) found positive change in relation to the following outcomes:

Financial wellbeing:

• Debt advice was found to be effective in delivering positive outcomes for both those with unmanageable debt and manageable levels of debt.
• Those who had unmanageable debt and sought debt advice were 93% more likely to be out of unmanageable debt within a 12 month time period compared to those who did not seek out debt advice.
• Paid for and free debt advice were found to be equally effective in helping people to move out of unmanageable debt, as were each of the channels assessed.

Financial behaviour:

• Seeking debt advice was found to be positively associated with survey participants’ ability to maintain manageable debt (once no longer in unmanageable debt).
• Those with unmanageable debt who had sought advice were significantly more likely to claim to have reduced their debt levels by a little or a lot than those who have not sought debt advice (60% sought debt advice versus 74% who sought advice).

Financial ability (mindset):

• Receiving debt advice was found to lead to greater levels of confidence in financial abilities.

Other:

• Receiving debt advice was also found to lead to greater levels of physical wellbeing.

Points to consider

• Scale of debt was found to be a positive predictor of moving from unmanageable to manageable levels of indebtedness over a 12 month period with the higher the debt, the greater the likelihood of it becoming manageable.
• Type of debt was also found to impact on likelihood of moving into manageable debt over 12 months, however having a credit card, student loan or loan from friends and family (i.e. non-priority debts) significantly reducing the likelihood of a person moving out of unmanageable debt within this time period.
• Unlike the rest of the UK, debt advice is not a significant predictor of achieving manageability in Scotland. This requires exploration, but might be explained by an increased awareness of debt solutions in Scotland than in other parts of the UK and substantive differences in legislation.

Full report

Full research report