The case for Fair Share
Amidst escalating consumer credit levels, inflation above target and record levels of priority debt, advice has never been more paramount.
This year Christians Against Poverty (CAP) has seen a rise in the number of calls to the New Enquiries team, indicative of the increased demand for debt advice. As demand increases, resources are stretched, which is why the funding of debt advice is currently undergoing an independent review, the conclusions of which will be released next year.
Here at CAP, we have taken this Review as an opportunity to set the case for a funding mechanism that we feel has immense value: Fair Share. In December CAP released a briefing paper on The case for Fair Share, outlining the benefits of this funding source and identifying further areas of funding need.
Fair Share is a voluntary agreement to pay back a fixed percentage of the amount received by the creditor in debt repayments distributed by a free-to-client Debt Management Company (DMC). Fair Share helps fund the cost of providing debt management services, recognising the beneficial impact it has on both the creditor and customer. The Money Advice Service (MAS) estimates that £50 million a year is contributed to debt advice through Fair Share.
The benefits of Fair Share far outweigh the drawbacks. Its mechanism, by design, is proportionate, simple to administrate, cost effective and responsive to need. We have broken down the benefits of Fair Share into six elements.
Fair Share is proportional and linked to results, which allows creditors to see clear evidence of success through repayments received. Those in Debt Management Plans (DMPs) can also see that a proportion of funding is provided by creditors for debt management.
Fair Share provides a predictable and consistent income stream, meaning that not-for-profits can plan and strategise, based on the knowledge this funding stream will not stop at the year end. Funding lasts the duration of a DMP.
- Shared ownership
Because Fair Share is voluntary, it creates the opportunity to build relationships between creditors and DMCs. This partnership shares ownership for resolving and preventing problem debt and increases incentives to promote debt advice and increase take-up and collection rates.
- Better client outcomes
The relationship between creditors and DMCs provides opportunity to influence best practice across debt collection. It also provides more efficient services and tries to achieve good customer outcomes.
A variety of funding sources brings further sustainability and helps to accommodate a variety of client types. A lack of restriction allows freedom to provide services that address complex needs.
- Provides accountability
Fair Share builds stronger links between creditors and the advice sector. Operational links hold both creditor and DMCs accountable for fair treatment of those in financial difficulty and quality of service provided.
Fair Share has been designed to work for both the DMC and creditor, building on relationships and helping to fund this more expensive form of debt advice. The voluntary nature of Fair Share helps build better working relationships between the two sectors, which in turn creates better client outcomes.
Fair Share only accounts for a small percentage of CAP’s total income, due to the low-income nature of CAP clients. Although we understand that Fair Share is not the singlehanded solution for the provision of debt advice funding, it does, however, have many benefits. Therefore, during the ongoing review of funding, we should ask ourselves, why abolish a mechanism that works well for its intended place in the sector?