Using data to understand clients

StepChange Debt Charity has seen a significant shift in the demographics of its clientele, as its latest statistics yearbook bears out.

Using data to understand clients

To answer the conundrum “when does credit become problem debt?”, take a look at the StepChange Debt Charity statistics yearbook for 2017. This snapshot of our clients last year will be of great interest to the credit industry.

I’m a great believer in the value of data. Aggregate knowledge about our clients – and yours – is what helps us to improve our service, and also to pinpoint the issues that need to be addressed by policy.

On the service side, particular highlights that leap out for me are to do with the age of our clients, and the way they are accessing debt advice. The two are connected.

The people who get in touch with us about problem debt are getting younger each year. Although the mean average age of a new client is 41, the “typical” client is younger – two thirds of our new clients last year were under 40.

We also saw a huge shift in the balance between telephone and online advice. While 43 percent of our new clients spoke to an adviser by phone, 57 percent went online and used our Debt Remedy tool. This is a sharp acceleration of the trend we had already been seeing towards online advice.

It probably won’t surprise you that our younger clients are those who are more likely to go online. 72 percent of all new Debt Remedy users were under 40. This parallels experience in the credit industry – younger credit users are more likely to buy and service credit products online.

On the policy side, our data helps to point to where action priorities should lie. We see a particular concentration of problems among tenants and single-parent households. Two in five of our clients are behind on essential bills. A high level of unsecured debt persists.

Two thirds of our clients are carrying credit card debt with an average total £7,690 owed at the point they contact us. So we support FCA interventions to reduce the number of people for whom credit card borrowing stops being a useful revolving credit facility and becomes a long-term debt albatross.

With 50 percent of our clients carrying overdraft debt, averaging around £1,600 at the point they contact us, we have called for change on charges and more help to get people out of persistent overdraft debt. The helpful utility of overdraft borrowing becomes a permanent, costly debt for too many customers.

Nearly half our clients have personal loans, averaging around £8,300 each. These vary greatly – some are bank loans, others are high cost credit. Fewer of our clients are carrying catalogue, payday loan or home credit debt at the point they contact us, but these debts are not minor, each averaging over £1,500 among clients who have them. Although we recognise that responsible lending rules apply in all these markets, we think more effort is needed at the outset to reduce the number of customers who are set up to fail.

A measure we would really like to see is a more urgent impetus from the government to support better alternatives to high-cost credit. Using credit to make ends meet is a fact of life for many. We may wish it were not so, but we can surely collectively find a way to reduce the financial cost of borrowing among those who simply have to, against the backdrop of minimalist state benefits.

What the statistics can’t show you is that behind every single one of our 619,946 new clients last year, there is a human story about the worry of problem debt. Working together with you, we in the debt advice sector want to be able to help reduce problems from happening, as well as just help people get back on track when they do.