Thousands of benefit claimants are being forced into crisis because of benefit overpayments being clawed back, warns Money Wellness, an organisation providing free debt help.

Money Wellness, which supports around 1,000 people a day, says 30% of benefit claimants seeking debt support do so as a direct result of being unable to repay a benefit overpayment.

Those in debt due to being overpaid are more likely to be women (58% v 50%) or considered vulnerable – 75% compared to 36% of those with no benefit income - with 55% telling Money Wellness about a mental health concern, 13% mentioning a physical disability, and 8% a learning disability.

79% of all those forced to seek debt help because of benefit overpayments were not employed, with 29% not working due to long-term sickness or disability, 18% seeking employment, and 10% remaining at home as a carer or to look after children.

For 60% of them, benefit payments are their only source of income, greatly restricting their ability to repay the debt.

Sebrina McCullough, Director of External Affairs at Money Wellness, said: “The figures are truly shocking, with thousands of the lowest income households in the country being plunged into crisis due to errors, which are often no fault of their own.

“Many of these households are just about making ends meet month to month, and the consequence of having to repay overpayments, resulting in a drop in their monthly income, leads to many unable to feed their families. It’s a double whammy.”

Money Wellness figures also reveal 88% of benefit claimants seeking debt support due to overpayment are in priority arrears (compared to 76% without overpayment debt), with 43% reporting debts in three of the following categories - utilities, water, rent, council tax, and phone or internet.

On average they owe a total of £13,000 across 12 debts compared to £11,700 of those not claiming benefits, meaning they’re juggling more creditors demands, making it difficult for them to know where to start.

And because their income plunges overnight when overpayments are recouped (with disposable incomes falling to minus £321 on average), Money Wellness has had to refer 64% for food vouchers.

72% of those who received overpayments were ultimately recommended a debt relief order to help with their debts.

McCullough adds: “The eradication of the £90 administration fee on debt relief orders last month directly helps people like this drowning in debt with very little disposable income.

“Previously we were seeing these distressed households either having to save over a number of months or seek grant support to be able to afford the £90 fee and access the debt help most suitable for them.

“My advice to anyone who finds themselves in this position is to seek free debt advice as soon as possible.”

ENDS

Notes to Editors

Press Contact: Caroline Chell @ Money Wellness - caroline.chell@moneywellness.com/07814448564

CASE STUDIES

We have several customers who are open to being interviewed by the press. This includes:

Case A

A lady who lost her brother, father, and grandmother in a short space of time. She came out of work and struggled to find employment, resulting in her falling significantly behind on priority bills. She received a suspended possession order as a result of failing to pay her rent. The customer has built up £20k of debt, including a £4k bill for historic benefits overpayments. Money Wellness recommended a Debt Relief Order.

Case B

Is a lady who has learning difficulties and is partially sighted. She also has severe anxiety which she requires a support worker for. She sometimes struggles to understand things and has built up some debt with her priority bills but most of what she owes (5k from 8k) is a result of historic benefits overpayment. The debt has impacted her mental health as she also has a young child to support. Money Wellness recommended a Debt Relief Order for her.

Case C

The lady was in an abusive relationship that she managed to flee but in doing so had a mental breakdown and lost her business - she was a pub landlord – resulting in her building up around 9k of debt. She has been unable to return to work since and is reliant on benefits but has been told that she has been overpaid by £900. This has started being deducted from her benefits, leaving her overwhelmed and having to borrow money from her mum. Money Wellness recommended a Debt Relief Order for her.

Case D

A man who has 7 kids - 2 of whom are disabled - leaving him and his wife unable to work as they both need to be full time carers. He has no consumer credit debts. All debts accrued are due to the cost of living crisis and struggling to pay for his ongoing priority bills. He says he has often had to choose between paying for food over bills. He received a letter last year (in July) stating he had received a tax credit overpayment which he now has to pay back through his Universal Credit. The deductions haven't started yet, (he thinks this is because he already has advances and budgeting loans to pay back). He receives no additional support or help and is now scraping by as he doesn't want to lend money from friends or family and get further into debt. Money Wellness recommended a Debt Relief Order for him.

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