The fight to help young people struggling with the vicious cycle of debt


  By Lynn Malone
While reports published today suggest that young Scots are taking out loans to pay existing debt, a high street bank has launched a national competition for 16-24 year olds to help them with “money management skills.”
As “drowning in debt” stories continue to appear in the media two pieces of crucial information emerged today.

The Debt Advisory Centre (DAC) Scotland claimed that Scots continue to take out new loans to make debt payments with six per cent aged between 25 and 34. In all, around 160,000 people borrowed money to make a repayment towards an existing loan with men being more likely to borrow to repay the debt than women.

People aged 25 to 34 were most likely to take out new loans, including payday loans, to make payments towards old ones, with six per cent in this age group admitting it.

Citizens Advice Scotland (CAS) is all too familiar with the cycle of Scots juggling several loans at once:

“Sadly, ‘roll-over’ loans are a common problem in the debt cases we see in the Citizen’s Advice Bureau (CAB) service.  The pattern is very familiar.” said Scotland’s Chief Executive Margaret Lynch.

“You are short of money one month, so you take out a quick payday loan, but the interest rates are so high you soon find you can’t repay it, so you have to take out another loan to pay it off, and then another one to repay that one.  Soon you have three or four – or more – loans on the go, all of them paying off each other, and all of them building up late fees and high interest,”

She added: “It’s a vicious cycle, and people quickly lose control.  This is what we mean when we talk about people ‘drowning in debt’, and sadly it is very common in the cases we see at the CAB service.  We’re not surprised either by the finding that it is mainly young people who get into this position, because this fits with our advisers’ experience.

And the need for financial literacy is growing in importance due to payday lenders and extortionate interest rates that people find difficult to understand.  Now a national competition to help young people manage money better is being backed by the SNP for East Kilbride, Linda Fabiani.

The MSP is encouraging education and training organisations to support the Bank of Scotland’s Money for Life Challenge, a national competition for 16–24 year olds in further education, work-based learning, adult community learning or training organisations.  The Challenge is delivered in Scotland by College Development Network and Young Scot.

As well as forming a key part of the Curriculum for Excellence, financial education means young people will learn vital money management skills, as well as helping provide financial and sustainable education to their communities.

The Challenge is supported by Bank of Scotland and seeks to find the most successful and innovative projects that young people can use to improve their money management skills, and those of their friends, families and communities.

Teams of up to ten young people in further education, work-based learning, adult community learning or a training organisation can apply for a £500 grant to enter, with the support of an individual project sponsor from their learning provider.  Teams have until Friday 22 November 2013 to enter the competition.

The Scottish national finals will take place in April 2014, followed by a UK Grand Final in London on 15 May 2014 to select the overall competition winner.

Ms Fabiani said:  “With financial education becoming part of the national curriculum from next September, I’d like to see at least one education or community organisation in my constituency encourage teams of young people to take part in the Money for Life Challenge.

“It’s important that young people in my constituency improve their financial skills and share their new knowledge with others in the community, and the Challenge is a great way to do this.  Applications for this year’s competition are open until Friday 22 November 2013, and I look forward to hearing about the wonderful projects that will be proposed.”

Citizens Advice Scotland’s Chief Executive Margaret Lynch had a message for those currently experiencing debt and needing help. 

She said: “One of the worst aspects of this is that some lenders deliberately target vulnerable people with roll-over loans.  This is where, for example, a customer contacts the company to say they can’t make a payment, and the company responds by offering them another loan.  Lenders are not supposed to do this, but we see evidence that many still do.  This is the sort of thing that we need to stamp out.

“If you are in debt, the answer is not to take out more loans.  What you should so instead is get help.  The CAB service offers free, confidential and impartial advice, and our expert debt advisers will help you get control of your debts, no matter how bad they seem.  Contact your local CAB office or call our consumer advice line on 08454 040 506.”