Credit Management September 2019

OPINION
AUTHOR – Heather Greig-Smith
Peter Wallwork
Phil McGilvray
John Glen
Phil Andrew
Joanna Elson
FROM 2021, people with problem
debts will be protected from
enforcement action and will
have their interest frozen for
60 days as long as they engage
with professional debt advisers
to find a long-term solution and get back on
track with payments.
For the private sector debt collection
industry, the change is unlikely to be seismic.
The Credit Services Association (CSA) Code
of Practice has included the provision of
breathing space since 2012. What is different
is the inclusion of public sector debts in the
plans, a decision that should go some way to
tackling the gap between public and private
sector collection practices.
Peter Wallwork, CSA Chief Executive, says:
“It will address the potential disconnect
between the treatment received by a customer
owing debt to a bank or credit card company,
for example, and those owing debt to public
sector organisations including HMRC.”
“Allowing Breathing Space has long been
a part of our approach with customers
experiencing problem debt,” confirms Sean
Gallacher – Interim Head of Operations at
Hoist Finance UK.
“The proposed legislation formalises a
process across both other public and private
sector areas where customers may not be
currently offered this level of support. It will
mean that someone experiencing problem
debt will no longer have to rely on goodwill.”
Phil McGilvray, Chief Operations Officer, UK
Debt Purchase, for Cabot Credit Management,
says in fact the scheme should make things
easier for creditors as well as consumers.
“The difference to current practices should
be seen as a positive, in that the customer is
required to actually seek debt advice and be
assessed as needing the breathing space and
that creditors will be formally notified of
entry into and exit from the scheme,” he says.
NEW PROPOSALS
Under the proposals, individuals receiving
NHS treatment for mental health crisis will
not need to seek debt advice during the 60-day
period. They will continue to receive the same
breathing space protections for the whole of
their treatment.
John Glen, City Minister says the scheme
will give people access to the advice, time
and support they need to get their finances
under control. “Problem debt can have a
devastating impact on people’s lives, putting a
huge burden on individuals which can lead to
family breakdown, stress and mental health
issues. No one should be stuck in an endless
cycle of debt and facing the ever-looming
threat of invasive debt collectors.”
As well as breathing space and the
support for those in mental health crisis,
government announced plans for a Statutory
Debt Repayment Plan. It will offer similar
The Recognised Standard / www.cicm.com / September 2019 / PAGE 27
protection to the breathing space scheme,
helping individuals to repay their debts over
a manageable timeframe.
Phil Andrew, CEO of StepChange Debt
Charity, says the changes will level the playing
field. “People looking for a sustainable way
to repay their debts have traditionally had
little protection, leaving them vulnerable
to inconsistent approaches by different
creditors.”
Likewise, Joanna Elson OBE, Chief
Executive of the Money Advice Trust, believes
the decision to include public sector creditors
is “a game-changer in our efforts to tackle
problem debt as a society”.
However, the complexities of Universal
Credit mean it will be phased into the scheme
rather than included from the beginning.
Gillian Guy, Chief Executive of Citizens
Advice, says government figures show 57
percent of people who claim Universal Credit
experience deductions, with £1 in every £10
awarded being deducted to repay debts and
costs.
“We’re concerned thousands of people with
debts and deductions under Universal Credit
are going to miss out on this support initially.”
PROBLEM DEBT
The proposals will be put to Parliament later
this year for implementation in early 2021.
The schemes are to be administered largely
by debt advice agencies – who will assess
whether an individual is in ‘problem debt’,
check against a private register whether
they have used breathing space in the past
12 months, and add them to an Insolvency
Service portal.
The debt advice agency will supply
originating creditor details to the Insolvency
Service portal and they will then be notified
that the individual is protected from action and
all interest and charges must be suspended.
The originating creditor will be responsible
for notifying third-party collection agencies.
The government response makes no mention
of debt purchasers and their rights as owners
of debts under this system.
It will be down to creditors to notify debt
advice agencies if customers are failing to
meet ongoing liabilities, with government
keen to ensure debt advice bodies have
discretion about whether or not to remove an
individual from breathing space protection.
Hoist Finance’s Sean Gallacher says the
industry will rely on proper IT systems
integration to identify those to whom
protection applies. “Failure to do so
could result in delays in application and
administrative burden for all parties.
“Further, it is important that the notification
contains sufficient details (including the
debtor’s personal details, known creditors,
and, if possible, account information)
without this we may not be able to identify
the individual, leading to further delays.”
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