Rationing to pay debts and Bank Account Closures

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BBC Sounds. Music, radio, podcasts. Hello, I'm Paul Lewis and welcome to this Moneybox podcast. ... ... ... ... ... ... ... extra help they didn't know they were entitled to. But first, exclusive data for Moneybox suggests that one in five UK adults have had to ration essentials like heating or electricity to keep up with their credit repayments. One in eight have changed the food they eat for less healthy options.

The survey carried out by the debt charity Step Change found a third of adults questioned, said they were in financial difficulties, but half would be reluctant to contact their lenders to try to sort things out, which, of course, is always the best. Let's hear from Sarah, that's not her real name, a senior teacher from Yorkshire who spiralled into debt after being made redundant and then missed just one mortgage payment. She spoke to Moneybox reporter Dan Whitworth.

I was rationing everything, everything including pet food, heating, eating, all of the basic things that you normally take for granted. I wasn't... It was a case of having to go without. So working really, really hard, having your wage at the end of the month, but not being able to pay even for basic things. I was going to food banks. I was asking my family for support without actually admitting the mess that I was in. How did your finances begin to get out of control?

So I tried really hard to sort of keep to the financial commitments I had, but it was like spinning plates. I missed. one mortgage payment and all those plates that I had spinning they just all dropped. So the first payment I missed was my monthly mortgage payment of about £750. and i was playing catch up month on month on month on trying to pay little bits towards the mortgage payment i missed meant that i was missing payments to my credit cards to my car loan to my other

financial commitments that I had and before I knew it everything had got out of control. Friends obviously noticed that I'd lost my sparkle so they were worried about me. And they were all helping, but without knowing why, because of the stigma that I felt that was attached to having, or mismanaged in my eyes, mismanaged my finances. At the time my wage was enough so I didn't feel like I was mismanaging anything. I felt that everything was in control. I could pay for what I'd taken out, my job.

security was there and it just literally went overnight. My emotional health hit rock bottom and I actually contemplated the worst thing which was just ending it all. I just couldn't see a light at the end of the tunnel. describe to me how you were when you started getting into this debt about all the people you owe this money to. Would you have contacted your lender? I was terrified about approaching my lenders. I didn't know what kind of response I would get.

I didn't know how to explain how I'd found myself in this situation. It happened so quickly, going from the security of having a well-paid, full-time, regular job to having absolutely nothing. And I was really scared.

Where are you now and when do you hope to have all this paid off? The amount that I owed at my worst period was about £24,000. I've paid off quite a bit of that now, but I've been... told through the advice and the regular updates that I get from StepChange that I will have cleared all my debts within five and a half years and now

There's a light at the end of the tunnel. I feel really positive. I feel happier. I know exactly what money I've coming in, what money that I owe to people. I feel like a massive burden's being lifted off my shoulders. I feel like I can breathe again.

Sarah talking to Dan Whitworth. Listening to that is the chief executive of the debt charity Step Change, Vicky Brownridge. Vicky Brownridge, Sarah began by setting out that she'd had to ration food, heating, all the basic things that people take for granted. as she put it, and one in five of the people you surveyed had done something similar to afford their credit repayments. Did that shock you?

Sadly, no, Paul. We see people every day and advise people every day in very, very similar situations to Sarah. Often a life shock like redundancy like Sarah or illness or bereavement or some kind of relationship breakdown. can spiral things out of control. But at the moment with inflation at levels that we've not seen for over 40 years, households are really feeling the strain as they seek to manage the impact of that. So people are making difficult decisions every day.

You mentioned life shock, redundancy, and I suppose she missed one payment and that led to this spiral of debt. It could be any of us, couldn't it, after a change like that? Absolutely, yes, it could be any of us. And often people use credit to try and manage that situation for a period of time, and that's when it really can spiral out of control.

And Sarah said she didn't want to talk to her creditors. She was afraid to do so. How can you break down that fear people might have that Sarah described, perhaps a stigma associated with going to your lender and saying, look, I've got a real problem. So there is no stigma to debt. People use credit all of the time for very valid reasons and things happen which make them unmanageable.

Your lenders are there to help you. They will assist and they will at times even refer to organisations like ourselves as they actually did with Sarah. It was her mortgage lender that actually referred her to us for help. So my advice would be... reach out to your lenders. They will listen and they are there to treat you as fairly as possible. Yes. And, you know, you said, Sarah said that she was using her...

She said that she was rationing so she could pay her credit and she was managing perfectly well until things went wrong. And your survey found, didn't it, that a third of the people had a balance on a credit card. Now, that's quite normal, isn't it? Not all debt's bad, is it? No, absolutely not. Not all debt is bad as long as it's affordable. But the point at which you feel it's no longer affordable or maybe you are using credit for your day-to-day household expenses, that's the point.

at which it becomes a problem. And it's at that point that you should reach out to your lenders and organisation like ourselves, StepChange, to get help. Now, you do these surveys from time to time regularly. How do these figures from September compare with earlier surveys? Are things getting worse? Yes, we are seeing more people reaching out for support. We're helping more people this year than we did last year. We're seeing increasing levels of arrears on priority.

priority commitments like mortgages and energy debts for example. And we are seeing people struggling with their day-to-day households. So certainly we're seeing more difficulties this year. And actually the sheer cost of living is becoming a challenge for people and being the main cause actually for people.

seeking help at the moment. Yes, and we heard from the Bank of England this week that the value of UK mortgage arrears jumped by almost a third, up to £17 billion, I think. Are you expecting that to bring more people to you? Yeah, absolutely. And albeit the vast majority of people who we help at the moment are in rented accommodation, we are seeing an increase in people coming to us who are actually who do own their own homes and are in mortgage situations.

In the main, those people are already in arrears. And Vicky, for anyone listening who's struggling with debt, perhaps it's keeping them awake at night or they know someone who is, what would your advice be in a few words? My advice would be reach out to your lenders and seek help from an independent, impartial debt advice organisation like ourselves.

Like yourself, Citizens of Ice, National Debt Line. Vicki Brownridge, thanks very much. And if you've been affected by any of the issues raised by Sarah or Vicki, search online for BBC Action Line, which has help and support.

A number of listeners have emailed or tweeted us about banks closing current accounts of small, voluntary or charitable organisations without, they say, any reason given or indeed a way to appeal. Lynn is the part-time manager and company secretary for the Residents Association.

of the LIMES, that's a sheltered housing scheme for vulnerable elderly residents in Suffolk. The association has three community accounts with Barclays, but for months Lynn has struggled to get details on those accounts updated. So a week ago... She visited her nearest Barclays branch in order to update them. She got a nasty shock. I went in to make some payments and to update the admin part of it because I had just had to change some names at Companies House.

to find out that our account had been closed. Somebody tried to look into it for me. I got transferred between various departments, went through fraud and all sorts of other things because that was what I was thinking had happened, to then find out, no, you've been shut down.

Not only have those accounts been closed, Barclays hasn't allowed her to access them and Lynne has no idea where the funds are. She says it could mean her organisation can't function. I don't think I slept all weekend because just... The stress of it, the clientele are elderly. Some are in hospital. Some have got dementia. They have standing orders set up that go into our account. That's our only income. And with that money, I buy the things to keep the...

the place running. So they will be getting their money bounced back, which will really upset some people. It also gives me an administrative nightmare. Meanwhile, all of our suppliers and people that, you know, insurers. oil, garden, refuse collection, everything like that. Their standing orders and direct debits have been cancelled. I don't know how we can get through. I don't know. And in my business career... This is the first time that I've reached that point.

We asked Barclays about Lynn's case. It told us it has had various communications with her to clarify shareholder details, signatories, etc. on the account. It says some information was provided, but some wasn't. So it closed all the accounts on the... of September. Barclays insists it has, quote, made no errors in dealing with Lynne, but after Moneybox got in touch it told us it had taken the decision to reopen the account, but adding that may not happen until the 25th of this month.

It also made clear that Lynne must provide the details at once within 30 days or the accounts will be closed again. Lynne told us the bank's statement is not correct in some details. Listening to that is Sid Venkata Ramakrishnan, Banking Coruscant.

at the Financial Times. Sid Benkata Ramakrishnan, Lynn's case is not the only one we've had. We've had several emails about similar ones and I think you've had similar emails at the FT. Can banks just close accounts without a reason? Yeah, absolutely. We definitely had several similar emails. And yes, so there's a difference between personal sort of basic accounts, which the large providers are required to provide, and then the more sort of...

business accounts. But yes, fundamentally, banks can close accounts for that information. And although the Financial Ombudsman Service, which people can complain to, does say it's nice if banks do tell them, there's no requirement currently under law. Yeah, very nice. But, you know, a bank account is essential, isn't it? Not just for individuals, but for thousands of these small...

voluntary-run community groups like Lynn's, and she told us she needs these accounts to accept some money in, pay people, pay bills, pay fees. Without a bank account, this important community organisation can't function. Do you think banks realise? What a big deal it is just to close an account. I think there is some recognition, but there is also, I mean, in some ways, account closures do feel somewhat, at this point, perfunctory in some ways, that sort of people don't tick certain boxes.

and therefore fall out of the system. And I realise that banks do have a lot to do around compliance and anti-money laundering systems, but it does feel at points that more is needed in order to protect accounts for businesses.

And we are going to have a new code of practice the government's introducing. I mean, that was talked about after all that fuss about former UKIP leader Nigel Farage's bank account being closed for other perhaps different reasons. What's going to be in this code of practice?

That's right. So what's going to happen is that basically the government wants banks to give account holders 90 days of notice rather than the current 30 days minimum, which would give people a lot more time to figure out what's happening and also to move funds around.

And also, they'll have to explain more clearly the reason for termination to customers, which, although we'll potentially have some issues around when cases of suspected fraud are there, will definitely help in a lot of cases where customers are simply... at the mercy of somewhat opaque decision making.

Yes, because if they suspect some sort of crime, they can't tell you the reason, can they? Because then they'd be tipping off a criminal, and that is itself a criminal offence, but obviously not the case with someone like Lynn. Do you think they distinguish well enough between account closures for all sorts of...

other reasons and account closures for this legal reason? No, I don't think so. I think that tipping off is usually the excuse I hear given in most cases why banks can't go into more details, if not GDPR. And people in the sector are quite critical of that. And briefly, if you would, Sid, what can people in Lynn's position do? I think the first thing is to talk to the bank. And I know that this is often quite a laborious process for understanding.

and people have to go through multiple stages. But I do know cases where people have found out the reason why their account was closed. And it is something that turns conditions which... The bank should have flagged much earlier on, but is unfortunately in the terms and conditions. But if they are still unsatisfied, then they can go to the Financial Ombudsman Service, who is, you know, trying or working on this as an area, obviously, of focus.

given the number of complaints. So I think that's the next stage if they do have complaints. Yes, though of course it can take a very long time. Sid Venkata, Ramakrishna of the Financial Times, thanks very much.

Senior figures in the energy industry have been quizzed in a parliamentary committee this week about a Moneybox investigation which revealed that hundreds of thousands of households missed out on... £400 of help with last winter's fuel bills. You may remember our reports on that by Dan Whitworth. And Dan's here now with news from that meeting. Dan.

Well, Paul, this was about how those households, and we're talking about people living in places like care homes, canal boats, park homes, or the traveling community, how they missed out on what's called the Energy Build Support Scheme Alternative Fund. So whereas most people got the government...

Government's £400 help direct into their bank accounts or as credit onto their bills, these people, well, they had to apply for it. And as you know, Paul, we spoke to dozens and dozens of people in this situation who didn't even know about the scheme, let alone managed to apply. And that's what chair of this committee, Angus McNeill, MP, asked the chief executive of Ofgem, Jonathan Brearley, about. You'll be well aware that...

BBC Radio 4's Moneybox has put quite the magnifying glass in this. And of the 900,000 people that were eligible for the scheme, 141,000 got it, 750,000 missed out. It's quite a staggering failure of a scheme you're administrating. Do you think the government should be relaunching this scheme? So, Dan, that was the key question. What was the answer? Well, Mr Brearley said it wasn't for him to give an answer, but more a question for government or the new Secretary of State for Energy.

Claire Coutinho. Now, her department told us it spent £40 billion to protect families as prices rose over the winter, covering nearly half a typical household's energy bill. Now, Ms Coutinho wasn't at the hearing, but Caroline Flint, chair... of the Fuel Poverty Commission was and did have an answer to that question. Well, I think, you know, the money was made available. The money was available.

So I think there is a justice question about whether that should be redeemed for those people, if that is possible. But linked to that... is looking forward to this, which not many people are looking forward to, is looking ahead to this winter and what additional package of support is going to be necessary. We do believe there may be the need for that. Prices are still high.

Caroline Flint. And as soon as the committee hears from the new Secretary of State for Energy, we'll report it here on Moneybox.

Millions of pounds of pension credit have been claimed by thousands of older people in London who didn't know they were eligible. The welfare data analysis company Policy in Practice worked with the Greater London Authority and some London boroughs to find people who should be... getting pension credit, but don't. Letters were sent to 8,200 individuals in 17 London boroughs, telling them they should be eligible for more money if they just claimed it. As a result, more than 2,000 people did claim

and got an average of nearly £4,000 a year extra, and that money will continue every year into the future. Siobhan was one pensioner who successfully claimed after being contacted by her local council, Islington. Siobhan owns her home. and was surprised to find out she was entitled to extra payments. I thought pension credit was automatically included in the state pension. I didn't realise it was too separate.

entities like the state pension is one thing and then you have to apply for pension credit. The fact that it didn't occur to me because I didn't know about it. I didn't know I could even apply. There just isn't enough information out there. And she says it came at a good time with all her bills going up. So financial relief, you know, with everything going up, all of a sudden, petrol.

gas, electricity, house insurance, car insurance. So to have that extra on my pension was a relief. And then one gets help with opticians. and dental, which is, you know, is great help because opticians and dental care is very expensive. So it's a great help.

With me is Devon Galani, the Director of Policy and Practice, which ran this campaign. Devon Galani, Siobhan thought that as a homeowner with a state pension already, she just wasn't eligible for pension credit. How common is misunderstanding like that?

It's all too common. I think sometimes, you know, I think Siobhan said there's not enough information out there. Sometimes there's too much information. It's very hard to find out what support you're eligible for. There are three main reasons I think people don't access the support they can.

Firstly, it's awareness. As you said, they don't know that they're eligible. But the other one's administration complexity. They don't know how to claim or they don't have the support around them they need to be able to complete an application. And then finally, it's stigma. It's great that Siobhan came on and talked about this, but actually we talked to many pensioners who we helped who didn't want to go on the radio and say,

You know, we needed the support. Yes, it's the way you have to declare your poverty for means-tested benefits, isn't it? And I noticed that out of you sent 8,000 odd letters out and 2,000 people claimed, or as I might say... Only 2,000 people claimed. One in four is very good, of course, for that sort of campaign. But 6,000 who you say definitely could claim didn't. Yeah, well, I think we're focused on the positive impact this campaign had.

Again, when you think about it, almost £4,000 on average each. But when you factor in the additional support they're able to access, so most of those got backdated payments because they should have been claiming much earlier.

They're able to access cost of living payments that were available to pensions last year if they were on means-tested benefits. They can also access a free TV licence, the warm home discount. Almost 200 also claimed attendance allowance, which, again, they should have been receiving. And they're going to get the support each year for the rest of their life. We think this campaign had around £100 million worth of economic impact across London. But beyond that, I think the campaign also...

worked with local authorities, worked with local AGKs, which meant that if people needed help to apply, they were out there engaging with their local authority, AGK, and were engaging with the other services that they have to offer. So if they needed help with... housing or if there were exercise at home classes or things they could participate in, they're now able to just improve their lives in that way as well. So I think the impact of this campaign went well beyond.

just the financial. Yes, and £100 million and, you know, 8,000 people. And I think your estimate is 850,000 pensioners don't claim pension credits. So, you know, there's a lot of money not being accessed, isn't there? Do you think with this data that you've used... and you use data from local authorities, as I understand it, to find the people. Do you think it's possible to use that for these other things? You identified 19 billion of unclaimed benefits in a report recently.

Yeah, and I'm really pleased to say we're going to be expanding the campaign to working age support. So healthy start, free school meals from next year. I mean, I think the campaign is important because... We use this data to identify people who identify fraud or chase people, chase arrears. But actually using the data to help people seems to be a place where we've often gotten stuck in the past. So it's great to be...

part of turning that around and if you can you know it's a very complicated area if you can just get the support to people much more easily or let them know that they're eligible you can make a huge difference to people's lives and a pound spent up front so people are accessing the support who need it and are eligible for it, can save a lot of money down the line because they're able to participate.

much more. Yes, and you're very familiar with this data because you process it for local authorities. That's part of the way you make your living. What about Siobhan's point, though, that she thought people got it automatically? You've got all this information. You identified all these people. Who would get the money if they claimed? Why do they have to claim? Why can't they just be paid? I mean, it's a great point. So this campaign focused on...

The practice side of, you know, letting people know that they're eligible and going through the process as it currently stands. If you want to automate processes further, I think it's very possible to do, but it requires changes in policy. changes in how data can be used and shared between departments. And we campaign very hard on the policy side as well to enable more of that to happen. So briefly, I mean, DWP, the department, has...

has its own take-up campaign, do you think that it should be going further and actually paying people automatically as well, in a word? Yes, I mean, absolutely. It's great that they're doing that work and I think it's great to be building on that in partnership with them.

Devon Gilani, thanks. And if you're age 66 or more and short of money, or you know someone who is, check whether you might be eligible for pension credit. Go online to gov.uk, search pension credit, or call 0800 99 1234 0800 99 123. in Northern Ireland it's 0808 100 6165 0808 100 6165

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In this podcast, the reporter was Dan Whitworth, researcher Sandra Hardiel, studio manager James Bradshaw. Our editor is Jess Quayle. I'm Paul Lewis, and this was a BBC News money and work production for BBC Sounds. And now... The It Boys. Who's in the news for all the wrong reasons? Step inside the world of crisis management and so-called spin doctors with me, David Yelland. And me, Simon Lewis. In our new podcast from BBC Radio 4, we tell you...

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Because Vivint adjusts your thermostat when it knows you're out, it's a smarter way to save. When Vivint guards your packages from Prowlers, it's a smarter way to protect. And when you can lock the doors and dim the lights for movie night with a single tap, Well, that's a smarter way to live. To get the smarter home system that just gets you, go to Vivint.com or call 1-855-4-VIVINT. Live intelligently.