When I started my first job, I met with our finance officer. She was looking quite stressed, so I asked what was going on. She explained she was working out how much of our ‘bad debt’ to write off as an organisation. I was confused, naively.
Turns out, this is probably what most people know, but every year companies and organisations write off debt. They decide that even if someone owes them £50, they are likely never to get that money back - in short, it costs them more to chase the debt, than they’d ever make getting it back.
But then, some enterprising people worked out that there was a market there. Now, companies can get some of that back. So rather than writing it off completely, and getting nothing back, they can sell that debt to a debt market, for around £5 (on average, 10% of the debt value).
They get something, and a debt collection agency now gets the £50 debt. They now own the debt, and they specialise in getting that money back at all costs. Bring on threatening letters, bailiffs, property confiscation, and interest payments. Sometimes that initial £50 debt starts to climb with the interest every year, trapping people into regular repayments that they can’t ever meet, or pay off.
All for a debt that the original company has already forgotten about.
Debt impacts all of us, but it impacts people in poverty more. People who are struggling to make ends meet, who are in vulnerable jobs, or who have been laid off, are more likely to be in debt. Just think about the impact of Covid-19. Perhaps someone was in a secure job, and took out a mobile phone debt, knowing they would pay it back in monthly instalments? But now they’ve lost their job.
There’s help for them, sure, but there’s also a shady, heartless debt market that is waiting to swoop in and make a massive profit on suffering and vulnerability.
So, we live with this big lie. We pretend to ourselves as a country that debt is a fixed thing, that the only people who wrestle with debt are lazy, or irresponsible, when both are absolutely not true. Debt is flexible, and is definitely not fixed. And people who wrestle with debt are working families, young people in the service industry, and those who fall into difficult times. The links between mental health, homelessness and debt, for example, are so apparent.
This is why I am so passionate about the policy I pushed for within the Welsh Liberal Democrats. Inspired by Occupy Wall Street, I am suggesting that we create a limited fund for the period of the next Senedd, to step in and buy bad debt when it comes onto the market.
People have put on debt during Covid-19, through no fault of our own, and for a fraction of the cost, we could give people the space to breathe and start over.
If we win the Senedd elections, we will create a £200,000 pot for use over five years. That is debt purchasing power of around £2m! We will buy debt that companies are no longer pursuing.
And we will write it off. Gone. No more. Never again.
Imagine the difference that will make to struggling families.
On #DebtAwarenessWeek, that should be an idea we all hold onto firmly when we are campaigning.
It’s time we had a Government that was aware of market forces – but rather than letting them take over, guiding them and using them to make a huge difference to our communities and families.
The Welsh Liberal Democrats can be that Government.
Oliver Townsend is the Welsh Liberal Democrat Senedd candidate for Islwyn and is also standing on the South Wales East regional list. You can donate to his campaign here: www.valleyslibdems.wales/donate.