The church–based debt advice sector needs to challenge the assumptions of mainstream debt advice groups, writes Ryan Davey. The sixth in our debt series. 08/05/2019
In the unequal world we share, personal debt and state debt often increase existing levels of socio–economic inequality. In the UK there is what’s called a “poverty premium” where the poorer you are, the greater a premium you pay for credit. What can faith–based and secular civil society organisations do to counteract debt’s ability to exacerbate inequality?
As an anthropologist, my approach to religious responses to debt is to situate them within their political, economic and social context. By doing so we see that despite the best of intentions, inequalities of debt can prove remarkably difficult to resist. As well as providing vital support, sometimes religious and secular responses to debt can inadvertently reproduce inequality. But there is an opportunity here for things to be different.
Let’s take the case of a recent growth in church–based debt advice in the UK. Debt advice is support to those struggling to repay financial debts like loans or non–financial debts like missed bill payments or rent arrears. Mainly emerging in the 1980s alongside expansion of consumer credit, it’s conventionally delivered by paid employees funded by local or central government.
Since 2000 there has been rapid growth in a specific form of debt advice: run by and housed in local churches, provided by volunteers. Indeed, umbrella group Advice UK says this type of organisation makes up the biggest growth in its membership recently. Many of these church–based advice services belong to another group called Community Money Advice. To give you an idea of how the church–based type of debt advice has grown, Community Money Advice estimate it had two affiliate branches in 2003, and nearly 100 by 2011.
A key reason for this growth is that the government reduced funding for mainstream public debt advice. At the same time as church–based advice was growing, publicly funded debt advice was changing. In the 1990s a controversial new source of funding emerged whereby some advice providers raised funds by asking lenders to give them a share of the repayments they received, rather than relying on public funding. By 2012 this would become the type of funding for the vast majority of public debt advice.
This form of funding is almost always accompanied by the claim that debt advice can serve the interests of creditors and debtors at the same time, and so it should always look for ‘win–win’ solutions.
The effects on the ground of this type of funding at one of the advice centres with whom I have worked included, in 2012, a 60 per cent hike in targets. The advisers said this led their work to become more mechanistic, faster, one–size–fits–all, and harder to tailor support to individual needs. There was also a shift to delegating more of the tasks to the clients themselves rather than doing it for them. One advice manager said: “It’s changed so much it’s becoming unethical. I don’t see myself staying around.” Another told me that more and more advisers are finding they can no longer exercise compassion and care through their work, with some being signed off work with stress or even leaving their jobs altogether.
These two advice managers both started working part–time at church–based debt advice centres, managing teams of volunteers. They and others in this faith–based debt advice service feel they can now provide support to those with the greatest need or vulnerability. This obviously provides vital support and relief to those struggling the most. Several clients of the church–based services told me they thought they would have attempted suicide were it not for the help they received there.
Where and how does inequality creep in? With mainstream public debt advice almost entirely funded by a levy on the banks rather than the taxpayer, the presumption has also been made that debt advice serves both the financial industry and over–indebted people. In other words, an assumption was made that the interests of over–indebted people and the interests of the financial industry are compatible.
While the new church–based debt advice sector seems to provide the right kind of support to people who are not well served by today’s mainstream publicly funded debt advice, it effectively cordons off this group of over–indebted people – people who evidently aren’t served well by a model of advice founded on the assumption that the interests of debtors and the financial industry are fundamentally compatible. This group of people have experienced the greatest exploitation. Their very existence undermines the legitimacy of the financial industry and especially the notion that it is a benevolent force in society.
By cordoning off this group, in order to provide vital support to them, there is a risk of allowing the mainstream debt advice sector to carry on saying advice can and should serve the interests of debtors and creditors. This message glosses over the many forms of financial exploitation at work today – the types of debt relations that are making poor people poorer and rich people richer – the kinds of debts that increase inequality.
The people who are helped by church–based debt advice are often those who need more time, care and compassion. But we shouldn’t lose sight of the larger scale processes that create this need: de–industrialisation and a decline in the real value of wages; a rise in part–time, insecure work; a transfer of capital from public ownership into private hands, including through the rise of sovereign debt bonds; a poverty premium on credit that makes the reproduction of inequality a built–in feature of our system of consumer credit; and austerity cuts to welfare, made in the name of state debt repayment, that reduce lower income households’ access to essential goods and services.
Perhaps now it is well established, the church–based debt advice sector can become more vocal about the way the financial industry can generate economic inequality. This would include explicitly challenging some of the assumptions made within mainstream, publicly funded debt advice organisations, such as the assumption that you can reduce funding and increase “efficiency” or the assumption that you can always find win–win solutions.
In particular, isn’t it time we start to question the assumption that the interests of creditors and debtors are never opposed? Sometimes the financial industry does indeed profit at the expense of ordinary people. Sometimes we may need to be critical of the role the financial industry plays in reproducing economic inequality. This is not just a case of a few bad apples such as payday lenders, but instead a matter of a systemic tendency to extract wealth from the bottom and feed it to the top. In challenging it, churches could join in the struggle for a more equal society.
The views expressed in this article do not necessarily reflect the views of Theos and St Paul’s Institute. For our views, read our report on debt.
