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Social workers turning to payday loan providers to manage debts

The British Association of Social Workers (BASW) is hearing from increasing numbers of social workers facing financial difficulty, with some turning to payday loans with extortionately high interest rates to cope.

The number of social workers approaching the Social Workers Benevolent Trust, an independent charity originally established by BASW, and receiving some financial support from the Association, increased by 61% last year and is set to rise yet further in the current financial year. Some social workers are approaching the charity with unsecured debts as high as £35,000.

Responding to this trend, BASW has launched a debt advice service to offer help to social workers in need of financial support.

Traditionally low salaries, public sector cuts and consequent reductions to pay and conditions have contributed to the increasing numbers of social workers facing financial difficulties. These factors have prompted BASW to launch the debt advice service, in partnership with the Consumer Credit Counselling Service, which members can contact by calling a dedicated helpline on 0800 652 1640.

Social Workers Benevolent Trust figures show that during the financial year 2010/2011, a total of 97 applications were received and 63 grants were made. This compares with 63 applications and 43 grants during 2009/10. The trust has already received 100 applications this year.

Because of its limited income, the small grant giving charity was only able to offer assistance worth £23,606 in total to all applicants during the year, a sum less than the total of the debts some individual social workers owe. The rise in applications has forced the trust to take the unusual step of using some of its capital investments to meet requests. BASW will be considering an increase in its contribution to the charity at its AGM in June.

Commenting on the growing problem of social worker debt, Simon Cole, Chair of the Social Workers’ Benevolent Trust, said:

“We have seen an increase in the number of applicants with very large debts, in some cases as much as £35,000. In cases like that, the trustees feel that the size of grant that we are able to give will have little effect on such large debts.

“There has also been a relatively new phenomenon of applicants needing help to repay ‘pay day’ loans, which are advertised as a quick fix solution. Some of these companies have an APR of 4214%. These loans, often relatively small, when not repaid on the due date, can grow very quickly and often cause people’s overall situation to worsen. It is a cause for concern that social workers feel pressured to turn to the same loan providers they might caution their clients against using.

“Trustees agree that the economic downturn, coupled with reduction in staffing levels in many local authorities and a reluctance to use agency staff have all had an impact. Many applicants, who were previously working through agencies, are now struggling to get sufficient amounts of work.”

The situations causing financial hardship amongst applicants vary, but lack of work, ill health (often from stress) and relationship breakdown are amongst the most common factors cited.