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Debt management

12th January 2022 · 6 minute read

Published by The Real Debt Guy

  • StepChange
  • StepChange Debt Charity
  • Debt charity
  • Free debt advice

About StepChange Debt Charity

StepChange Debt Charity - It’s not as simple as free advice

When struggling financially, people will often turn to Google, trying to find solutions or free advice to help put a stop to their problems. Depending on how you’ve found The Real Debt Guy, you’ll no doubt have seen the many websites and resources out there, including charities like StepChange. Charities are an interesting one when it comes to debt. So, as with all the information on this website, we want to make sure you have a full understanding of how exactly StepChange make money, so you can be fully informed if you choose to speak to them.

Not in the mood to read? We got you covered. Listen to the rest with the YouTube link at the bottom of the page

Who are StepChange & what do they do?

When you are struggling with debt, StepChange is one of the most recommended places that you will be advised to go to by Creditors. Anyone can call up StepChange and speak to them for free. You’ll be put through to an advisor who will listen and discuss your situation with you. They are authorised to "advise" you on what they believe is the best course of action for your situation. They won’t charge you directly for any of the services you use. However, despite being a charity they do still make money from their products and services.

Let’s find out more about how StepChange make money, who pays them, and the extent to which their services are free.

How do StepChange make money?

After learning how often people were being pushed towards entering an IVA after speaking to StepChange - when it just didn’t seem necessary – alarm bells began to ring. Was this a money thing?

Upon first visiting the StepChange website, there was no clear route to find information about how StepChange makes money. However, tucked away in the ‘Partner with us’ section (an unlikely place to visit if you are looking for help with your debt), there is a breakdown of how StepChange are funded and how they make money.

We're going to go through this section now, you can also read the details on the StepChange website by clicking here.

The StepChange revenue streams

To have clarity over the different routes StepChange make money, there are three big features of StepChange that are important to understand:

  • Fair Share Contribution
  • Other Income
  • StepChange Financial Solution

Let’s start with....

1. Fair share contribution

The Fair Share Contribution (FSC) is a funding model whereby Creditors ‘make a donation’ to the StepChange charity. When a FSC Creditor receives a payment from one of their customers who is on a StepChange Debt Management Plan, they pay a percentage-based contribution back to StepChange for their service, based on the payments they receive.

If StepChange receive a percentage based contribution payment, does that mean the more money they collect on behalf of the Creditor the more income they earn? It certainly makes you question whether this is a donation.

2. Other income

The following extract is taken from the StepChange website about any other sources of income:

“We receive money from StepChange Voluntary Arrangements which arranges and supervises Individual Voluntary Arrangements. The firm earns fees that are agreed with the creditors at the outset of the arrangement, and which are deducted from the subsequent distributions made to those creditors. Our other subsidiary, StepChange Financial Solutions, also contributes to our income. It provides advice and the arrangement of both equity release plans and mortgages aimed at helping people out of problem debt.

Other income sources include donations from utility companies, statutory fair share payment for distributing funds of our Scottish Debt Payment Programmes, and interest on cash balances."

StepChange make money through each one of these services.

3. StepChange financial solutions

The following extract is taken from the StepChange website about their Financial Solutions:

“If you're considering releasing the equity in your home to top-up your retirement income or manage your debt, our award-winning subsidiary StepChange Financial Solutions offers free, impartial advice you can trust.

As well as equity release, our expert team also offers mortgage advice, whether you're a first-time buyer or looking to remortgage for a better deal. We’ll take the time to understand your whole situation and guide you through the entire process, so you can feel confident you’ve made the right decision in choosing us. "

StepChange make money through these financial solutions.

StepChange, it's not as simple as free advice

StepChange make the following claim on their website in this section as the header:

"We don’t believe anyone should have to pay for debt advice when they’re struggling. We’re only able to deliver free debt advice to so many people because we’re funded almost entirely by voluntary donations."

It’s important to make clear that yes StepChange do provide free debt advice, and a valuable service to people in debt. However, it’s also important to highlight the "Fair Share Contribution" setup between StepChange and the Creditor contributors. This relationship doesn’t consist of your standard black and white voluntary donations. There is an agreement in place between creditors and StepChange compelling them to pay.

You are indirectly paying StepChange

This free advice comes with the sale of their products. The word ‘sale’ might seem confusing, as you are not directly buying a product off them. However, if you sign up to their services, and pay any creditors via StepChange, you are indirectly paying StepChange. They receive a percentage of the money you pay to the creditors.

Let’s break this down with an example....

If you are interested in a car, the car salesperson will take you on a free test drive. There is no charge for this service. Once the test drive is over, the car salesperson will try to sell you the car, or another car. Let's say the showroom is owned by Porsche. You decide you want to go ahead with the purchase of the Porsche you took out for a spin, you then write a cheque out to Porsche. Porsche will take the cheque, clear the money and then pay the salesperson a commission from the monies received from the sale. Therefore, you have indirectly paid the salesperson through Porsche.

The same model is used by StepChange. The free advice is the equivalent of the test drive. Unfortunately, they don’t appear to be transparent about the fact they are incentivised to encourage you to take on their most profitable product options, or that they have a financial arrangement in place with creditors.

Don't forget to read The Real Debt Guy's final thoughts below!

The information in this article is considered to be true and correct at the date of publication.

The Real Debt Guy's final thoughts.

It’s important that before you enter into a service with StepChange you understand this glaring conflict of interes,t and bias, that may influence StepChange's behaviour towards you.s.

That niggle of doubt about the number of people being pushed towards StepChange is sadly true. People questioning why they have been advised to go down the route of IVA, bankruptcy or equity release, when their situation could have been managed without such drastic actions.

When you are in a vulnerable or desperate situation, this is when you need to take the most care. Sadly, not everyone has your best interests at heart.

Simplifying complicated matters.

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