Poor people pushed into debt by harsh benefit deductions

Debt family

Claimants say they are being forced further into poverty  

14th September 2017 by Robert Armour 0 Comments

Poor people on benefits are being pushed into destitution by having direct deductions taken from their benefit payments, says a leading charity. 

Research conducted by StepChange Debt Charity shows the deductions can deepen existing financial problems.

The process known as third party deductions (TPD) involves the Department for Work and Pensions (DWP) taking a fixed amount from benefit payments to clear household arrears, most commonly housing costs, fuel costs, council tax, unpaid fines, and water and sewerage charges.

The amount deducted is paid directly to a creditor until the debt is cleared. At present the level of deduction is set by DWP at £3.70 per bill, per week. However under Universal Credit the amounts that can be deducted are significantly higher.

In its survey 71% of respondents said that it had caused their family hardship, 40% reported falling behind on essential household costs and a quarter said they found it difficult to pay for food, clothing and heating.

Where cutting back spending was not viable, one in five of the charity’s clients with TPDs said they had to resort to credit in order to keep on top of essential bills.

Mike O’Connor, chief executive of StepChange, said: “With the ongoing roll out of Universal Credit raising the amounts that can be deducted from benefits, the Department for Work and Pensions as well as creditors must take steps to ensure deductions do not worsen problem debt for the most vulnerable.

“Third party deductions should only be used when they are affordable and helpful to individuals, allowing them to keep up with essential bills.”

A Freedom of Information request by the charity revealed the scale of TPD use, with 1.1m deductions occurring in a typical month.

The practice was one familiar to the charity’s clients, with just over a quarter (26%) reporting they have had money deducted from benefits to go towards arrears, and those in a vulnerable position even more likely (28%) to be subject to the practice. 

O'Connor added: "Regulators must provide guidance to firms on supporting vulnerable clients and steer them away from using deduction rates as a benchmark for debt collection."

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