Changing Fortunes: Results from a Randomized Trial of the Offer of Debt Advice in England and Wales

Abstract

A randomized trial was conducted to assess whether the offer of advice to those experiencing debt problems and who had yet to obtain any formal advice, had a positive impact on their financial and general circumstances. The participants were drawn from 16 Jobcentres (welfare offices) in 13 areas of England and Wales. In all, 402 participants were included in the trial at its outset; 234 participants remained in the trial at the 20‐week followup. There was no significant difference in the rate at which intervention and control group respondents had resolved their debt problems at the 20‐week followup. However, the former were significantly more likely to describe their financial position as “better” than at baseline. There was also evidence that they became more knowledgeable about their financial circumstances, more focused on dealing with priority debt, and more optimistic about their future prospects, relative to control group counterparts. These findings, though, fell short of statistical significance. The findings provide the first experimental evidence of a positive impact of the offer of debt advice. The study also highlights the difficulties of applying experimental methods in a social setting. One lesson drawn from the difficulties encountered in running this trial is that takeup is likely to be low for some forms of pro‐active advice for sensitive problem types experienced among disadvantaged communities.

The relationship between personal unsecured debt and mental and physical health: A systematic review and meta-analysis

“…However there is little research on how the impact of debt on health might be reduced. For example increasing repayment flexibility and offering debt advice have been found to reduce stress and increase optimism about finances (Field, Pande, Papp, & Park, 2012;Pleasence & Balmer, 2007), however whether this impacts on health is unclear. The specific mechanisms by which debt is related to health are therefore key to examine in further research in order to develop preventative interventions both to ensure that those with poor health are not at greater risk of problem debt, and that those in debt are not at a greater risk of developing mental health problems.…”

Access to Civil Justice and Race, Class, and Gender Inequality

“…Scholars investigate, for example, how common are problems with debt, what they entail, who has them, and what people do about them (Pleasence & Balmer 2007). In investigating how people respond, scholars examine people's contact with parts of the civil justice system, such as consulting lawyers or pursuing a claim in court.…”

The Impact of Financial Counselling on Alleviating Financial Stress in Low Income Households: A National Australian Empirical Study

“…Studies in the 1990s indicated that debt advice leads to short-term alleviation of financial pressures, but that over time debt problems resurface, especially in low income households as these struggle to maintain payment plans (Hinton and Berthoud, 1988; Mannion, 1992; Jones et al ., 1993; Money Advice Trust, 1999). Recent research underlines the positive short-term impact of debt advice (Muller et al ., 2012; Stamp, 2012) and, although evidence remains patchy, is more optimistic about the intermediate and longer-term effects, pointing to enduring positive effects not only on clients’ financial situation, but also on their health, wellbeing and outlook for the future (Balmer et al ., 2006; Pleasence et al ., 2007; Turley and White, 2007; Orton, 2010).…”

“…Frequently individual, environmental and structural issues conspire to place low income, marginalised or vulnerable individuals, families and groups in precarious financial situations. Debt problems stem from a variety of causes, including changing circumstances, ill health, relationship breakdown, loss of employment, parenthood, credit over-commitment and poor money management (Kempson, 2002; Edwards, 2003; Pleasence et al ., 2007). Debt problems are a significant cause of anxiety (Drentea, 2000; Reading and Reynolds, 2001; Jacoby, 2002), and the literature consistently identifies a link with physical and mental illness (Stansfeld et al ., 2002; Pleasence et al ., 2007; Wesley Mission, 2010; Fitch et al ., 2011; Nelthorpe and Digney, 2011).…”

“…This trend is also evident in the types and modalities of debt and money management advice aimed at low income households, which favour programmes that promote individual responsibility and self-sufficiency via financial literacy and low income saving schemes. However, for many of the most vulnerable individuals such an approach is not realistic, as their financial stress is often not caused by irresponsible spending or poor budgeting, but is rooted in complex and intertwined personal, environmental and structural factors (Kempson, 2002; Edwards, 2003; Pleasence et al ., 2007) that they find difficult to overcome on their own.…”