Advice NI Response to the Money Advice Service’s (MAS) The Standard Financial Statement consultation

MAS recently consulted a new proposed Standard Financial Statement for use across the debt sector. Detailed below is Advice NI's response.

Advice NI is a membership organisation which exists to provide leadership, representation and support for independent advice organisations to facilitate the delivery of high quality, sustainable advice services. Advice NI provides its members with the capacity and tools to ensure the delivery of effective advice services. This includes: advice and information management systems, funding and planning, quality assurance support, NVQs in advice and guidance and social policy co-ordination.

Membership of Advice NI is normally for organisations that provide significant advice and information services to the public. Advice NI has over 68 member organisations operating throughout Northern Ireland, providing information and advocacy services to approximately 150,000 people each year dealing with over 270,000 enquires on an extensive range of matters including: debt, social security, housing, consumers and employment issues. We also deliver advice services directly (face to face, helpline, text and online) including HMRC Tax and Benefits service, Business Debtline and Debt Action NI.

Presently, Advice NI manages the Department of Enterprise Trade and Investment’s money and debt programme. Debt Action NI has been operating since 2009. Since then the project has helped nearly 17,000 people deal with over £263 million in debt.  Over 12,200 of these clients and nearly £175.5 million of debt were dealt with by the new integrated Debt Action NI service which has been operating across NI since August 2012. The new service offers a number of access points and integrates telephone, face to face and web based advice services. For further information, please visit www.adviceni.net or www.debtaction-ni.net. Since 2012, the Money Advice Service (MAS) has provided DETI with part funding, which supports the face-to-face element of the service.

Response to Consultation Documents

General Considerations

Advice NI is concerned about the consultation time line. We believe a four week window to respond on the final document is too short and unreasonable given other workloads and priorities. It does not give sufficient time to carry out research and consult properly with our members and advisers on issues that will have an impact on their work.

Advice NI is unsure which organisation/s will be responsible for the administration of the SFS, for the purposes of this response we have assumed MAS are as they are the consulting body. However, if this is not the case we would ask for this to be clarified by MAS.

Advice NI supports the development of a single Standard Financial Statement (SFS). However, we believe it is paramount that MAS should get full agreement that the SFS will be the only financial statement recognised by creditors and advice providers. To date, the sector has used a variety of statements, with different allowed amounts, making it more difficult for advisers to negotiate with creditors who might recognise a different statement.

We believe that not all relevant information regarding the proposed SFS has been provided in order to fully appreciate the rationale behind the proposed format. We are therefore forced to make certain assumptions for particular areas, for example the rationale behind the categories, terminology and the layout. It is also difficult to assess the triggered categories without having the full information, i.e. the actual amount allowed for each category.

We believe that creditors should recognise exceptional circumstances when the adviser has explained why certain trigger figures have been exceeded. Therefore, under 2.1 Principles, we would like another bullet point added or the following statement strengthened to reflect this, “A commitment from creditors that offers made by independent money advisers using the Standard Financial Statement will be accepted where expenditure is within the trigger figures and principles and guidelines have been followed”. Our concern would be that the above statement could be used by creditors as a blanket policy of not accepting any SFS where trigger figures have been exceeded. We recognise that creditors have a right to question any figures in excess of the trigger figures but this should not be an automatic rejection of the SFS, which is something that our Debt Action NI advisers have experienced in the past. 

We would like more in-depth information about how registration for the SFS will operate. Will it be similar to the current Common Financial Statement (CFS) scheme which is voluntary? As an advice provider we invest heavily in the process and would like to know what redress can be taken where there is poor practice or if the principles are consistently not adhered to by creditors or advice providers.

We would recommend that MAS should provide information on any changes to the SFS. Advice NI uses Advice Pro as a case recording system which has integrated the current CFS. We are keen that the SFS be integrated into Advice Pro and as an organisation we will bear no costs for this. This system upgrade would need to be timely with no interruption to the service as any delay could be detrimental for the client.

We agree with the guidance outlined in Annex 1 and 2. We believe this will only help promote good relations between creditors and advice providers. However, we would like another bullet point added to Annex 2 that creditors should negotiate directly with the identified third party advice providers. We believe that negotiating with third parties eases the stress and burden of the client.

We would like reassurance that when an adviser provides information on the reasons why a client is in financial difficulty, that this information is treated sensitively and the client will not be judged or that it would hinder their case.

Consultation Questions

Question 1: Do you have any comments about the income and expenditure headings and categories?

Advice NI is unsure of the terminology used in the new SFS, for example fixed/flexible. Fixed would indicate that each category is stagnant and will not fluctuate which could be misleading as a number of items will depend on external factors and personal circumstance. Perhaps MAS should consider renaming these to better reflect the nature of these collective categories.

We are similarly unsure of the rationale behind some of the groups under fixed costs. Using the definition provided by MAS regarding fixed costs – Fixed costs cover items of regular essential spending – could it not be argued that food and household items are as essential as transport and travel? Yet by the definition provided for flexible costs – Flexible costs cover items where there is a greater degree of spending choice and will vary with the number of people in the household – again this will affect all expenditure categories. It would have been useful to have a detailed rationale behind the decisions in order to understand the process better.

Advice NI strongly opposes separating smoking out as a category. We do not feel this is appropriate and would like a further explanation as to the rationale of separating this category. We would question why this addiction was singled out. We believe this is intrusive and are concerned that creditors will object to these. We believe that creditors may use this information against clients which may penalise people who smoke. Again, it is hard to gauge how substantial this category is as there is no trigger information provided. We would strongly suggest that this category, along with alcohol, is either subsumed into the communication and leisure or the personal costs category. We would recommend that smoking products be the sub category encompassing cigarettes/tobacco/nicotine replacements.

We would like reassurance that creditors will accept the non-triggered categories. Without this reassurance there could be issues around what is acceptable and what is not acceptable when negotiating with creditors. To what extent would advisers have to verify or provide further information to the creditors? Will this put more onus/work on the advisers to supply evidence?  We believe the ethos behind gaining recognition and agreement of the SFS is to make the negotiation process easier and to build trust. Perhaps MAS should provide further guidance on this so that creditors and advisers are clear regarding boundaries.

We believe that the asset and equity information that is currently used in the CFS should be incorporated into the detailed SFS. This is good practice and aids the adviser to provide full and proper advice. However, it should not be added to the summary SFS.

Question 2: Do you have any comments about the savings category and our proposal for the way in which the savings amount is calculated?

Advice NI is delighted to see that a savings element has been built into the SFS. However, we would like to see the level of saving set at £5 rather than the £10. If this higher level was set then very few clients would be able to avail of this initiative. Since 2012, only 14% of our Debt Action NI clients had a surplus income of £100 or more, in comparison to 20% who have surplus of over £50 per month. Therefore, if the figure was lower a larger number of clients could avail of this. This will help promote and encourage good money management and will help in future potential emergencies that the client has a safety net.

Advice NI would like reassurance that this savings element will be accepted by creditors and that they will not seek evidence of saving amounts or how it will be spent and no stipulations are placed on the client. If the client decided to save it must be at their discretion.

Question 3: Do you have any comments about the spending guidelines methodology?

We agree with the methodology to assess levels of expenditure observed among typical households within the bottom income quintile and that these will be updated annually to reflect changes to expenditure patterns. However, we would like an explanation as to why the Consumer Price Index instead of the Retail Price Index.

We would recommend that MAS also consider and compare expenditure figures with the Family Expenditure Survey. This is what the Official Receiver uses for its figures. We would also recommend that MAS work with the Official Receiver and the Enforcement of Judgements office so that they accept this new SFS. As already alluded to using different financial statements only increases workload and creates confusion.  

Different regions have differing costs for certain items and we would recommend that creditors consider this when assessing expenditure, for example NI has higher fuel costs, while people living in London and the South East may have higher rental costs.

Question 4: Do you have any comments about the format?

Advice NI believes that the summary SFS is too detailed and should be shortened. We would recommend that after home, contents and utilities all the other categories could be provided under the group heading rather than detailing all the sub categories. Again it would be important to clarify that creditors will accept this as it stands or whether verification will be expected from advisers.

Will the form be adapted for each region, as in Northern Ireland we do not have council tax instead we have rates, could this be added to that category? Also, could Magistrates or Sherriff court fines be simplified to court fines? This would incorporate the differences in each region.

We would recommend the layout of the summary SFS follow the advice giving process, therefore income should be first, followed by expenditure and finally creditor details and offers.

Could MAS provide an explanation for what Annex 3: Single Financial Statement Format Page 1 is or what it would be used for as we are unclear of its purpose. Our advisers already record this information on Advice Pro, our case recording system, therefore it would be duplication of work. 

We would recommend MAS add a category – Unfit to Work – in the Budget Detailed Version under employment.

We would like an explanation as to why it is important to have the licence number (licence holders) in both SFS. We are unsure of the purpose of needing this level of information and what benefit it would be. We are unaware of any database that this information could be verified against. Also we would recommend taking out the partners details and DOB for both client and partner as this is surplus personal information and not relevant to the negotiation process, especially if adviser is only representing one person.

As trigger figure information is missing, we would like to know the rationale behind setting an age difference for children at 14? We would recommend that children reaching secondary school age should be allowed different school costs than those in primary school. The age of the child/children may also have a knock on effect on the amount for childcare costs, are MAS allowing for any differences in this category?

We recommend that the agency contact telephone number should be included on the summary SFS.

Under school costs we would recommend that school meals should be included into this category, as we would consider this an essential cost.

There are a number of inconsistencies including:

·         In the detailed SFS under Utilities there is a sub-category - other income - which does not fit with the category.

·         Housing repairs is in the summary SFS but missing from the detailed SFS

·         Client details are repeated in the summary SFS – why?

·         The box for – Client has consented to their information being shared – is on the detailed SFS but not on the summary SFS. We would suggest that by inserting this on the summary SFS it would replace the need for advisers having to send a Form of Authority.

Question 5: Do you have comments about the timescales?

Advice NI would recommend that the consultation period should be 3 months to allow proper research and consultation with our members and money and debt advisers. We are unclear why user testing would happen while the process was still out for consultation. It would make more sense that the feedback is taken into consideration and any amendments should be made before it goes out for user testing.  

We would want reassurance that all IT systems will be upgraded within the timescale outlined and at no cost to organisations especially charities, that cannot absorb such costs.

 

Contact information on this consultation response:

Bob Stronge (Chief Executive)

Sinéad Campbell (Head of Money and Debt Services)

Kevin Higgins (Head of Policy and Research)

Advice NI

1 Rushfield Avenue

Belfast

BT7 3FP

Tel: 028 9064 5919