Advisers lay debtors' options on the line

HEADACHE cures for New Year hangovers of a financial nature are stacked up ready to be put in envelopes in the poky Birmingham offices of National Debtline, the telephone advice helpline.

The patented remedy takes the form of a comprehensive booklet, Dealing with Your Debts, which National Debtline sends free to callers. Debtline's team of money advisers offers assistance over the telephone for tackling debt problems. But the treatment for the hangover, as the advisers point out, has to be self-administered.

'Christmas is a huge time of stress for families on a tight budget, and there's very noticeably a large increase in the number of calls afterwards. By mid-January the phone's going crazy,' says Simon Johnson, head of money advice at the Birmingham Settlement, where National Debtline is based.

But he and his staff are careful not to apportion blame or make moral judgements. The vast majority of clients, he says, are in difficulty not because of extravagant living but due to unexpected changes in circumstances - for example, illness, redundancy or marital breakup.

National Debtline was set up six years ago. Last year it took about 12,000 calls - many of them fielded by an over- worked answering machine. However, in November the service was able to relaunch, having equipped itself with new telephone and computer equipment. More important, it tripled the number of advisers from two to six.

After years of survival on limited funding, Debtline has now persuaded NatWest Bank, Birmingham Midshires Building Society and the Money Advice Trust to lend their support. Mr Johnson says that Debtline can now take up to 35,000 inquiries a year.

As he speaks, some of them are coming in to Debtline's main office, upstairs. Telephone headset in place, Brendan Boyle, one of the advisers, is half an hour into a conversation. His colleague, Karen Dyson, is making notes about her last call.

'This morning I've dealt with calls about credit card debts, business debts, a bankruptcy enquiry, mortgage arrears, an HP problem and someone who should have been getting Family Credit,' she says. 'These people will all get packs sent out to them.'

One of the advantages of a telephone advice service, according to Ms Dyson, is that people tend to get in touch before problems become too serious. 'We're trying to encourage people to contact us as early as possible, and not just when they're due to go to court or when the bailiffs are knocking,' she says.

The advice the Debtline team gives callers follows a basic pattern. 'We have a few golden rules: don't ignore the problem and don't borrow money to pay off the debt,' says Tessa Farrell, advice co-ordinator. 'So many of our callers are contemplating taking out a consolidated loan when they phone us. We discourage people from that, because normally they're securing debts that are otherwise unsecured.'

As she explains, the important point is to identify which are the priority debts and where the sanctions for non-payment are serious - for example, home repossession or imprisonment. 'You pay your priority debts first and then look at unsecured debts like credit cards,' she says.

With fewer legal sanctions at their disposal, unsecured creditors are often the ones who shout loudest for money. However, Ms Farrell cautions that paying individual creditors on an ad-hoc basis when they demand money frequently leads to further debt problems.

By contrast, Debtline encourages each person who is in money difficulties to draw up a personal budget, establishing what his or her weekly or monthly income actually is, and how much of that is needed for basic everyday living expenses.

'The personal budget is fundamental to sorting out a debt problem, and the pack we send out explains how you can work it out. We encourage people to put down sensible amounts for house-keeping,' Ms Farrell says. 'Then if there's anything left after paying the priority debts, divide that among your secondary creditors on a pro-rata basis.'

This approach to money advice has become the established model in Britain. To work, however, it requires at least the grudging co-operation of creditors, who must be prepared to accept reduced payments and, perhaps, agree to freeze interest into the bargain.

'It's not universally true, but I believe that it is now easier to negotiate with most commercial creditors than it was five years ago. What has got more difficult recently is the general economic climate,' Simon Johnson says.

Debtline's approach to money advice has been challenged recently by a pilot Consumer Credit Counselling Service in Leeds, based on an American model of debt counselling. CCCS, which charges 15 per cent commission on debts repaid to creditors, hopes to become self-financing shortly. Ironically, however, it has found it difficult to find enough debtors wanting help.

Debtline has the opposite problem. In the Birmingham office, the lights on the telephone monitoring equipment are flashing urgently: more callers are on the line.

National Debtline 021-3598501. Staffed 10am-4pm (Monday & Thursday), 2pm-7pm (Tuesday & Wednesday); 24- hour phone answering machine.

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