Recommendation 19

The Department continues to claim that Advances are not loans, but we find that argument impossible to accept. Advances must be repaid at a set rate, over a set period. The Department risks misleading claimants, and damaging its own credibility, if it insists on denying the obvious fact that Advances are interest free loans. Unlike firms in the consumer credit sector, where the FCA’s guidance stipulates that repayment rates should be set at levels that are affordable, there is no equivalent body that regulates public sector lending. While Advances can be a vital source of income for new claimants waiting for a first payment, we are concerned that some people find that they are unable to afford repayments later on.