Credit Management September 2019

OPINION
AUTHOR – Heather Greig-Smith
Gillian Guy
Sean Gallacher
David Sheridan
Caroline Sumner
Phil McGilvray agrees this is an area that
needs careful attention. “This system will
need to be accessible for all creditors to
ensure smooth operation, this will link to the
original creditor so there could be delays in
notification to the ultimate debt purchaser.
We will also need to ensure that we are able
to quickly identify notifications for onward
submission to our DCA population,” he says,
adding: “Communication from the debt
management companies will be critical.”
DIFFERENT EXPERIENCES
Phil says customers will also have different
experiences depending on the debt type.
“The obvious example of this will be where
an account is still ‘live’ (prior to default).
Breathing space on an account of this type
would currently have consequences for
the customer in terms of arrears accruing,
degrading credit status and ultimately formal
default of the account.”
David Sheridan, ARC Europe Operations
Director, believes that the extended breathing
space for those suffering a mental health
crisis is important. “The customer needs to
focus on their recovery,” he says. “We just
need to understand the details of legislation
so that we can ensure our approach reflects
the requirements and assess the practicalities
of supporting it. What if some customers
want to sort their debts out during treatment,
will this be possible?”
Caroline Sumner, Technical and Education
Director at insolvency and restructuring trade
body R3, also welcomes the Government’s
plans and says R3 is hopeful Government is
listening to the practical concerns raised by
stakeholders.
“Not all of the creditors who will be caught
up by breathing space’s restrictions will be
large or sophisticated financial institutions,
and their rights need to be taken into
consideration, too,” she says.
“For example: How will a debtor’s creditors
be notified of the breathing space? How
quickly can this be done in practice? How
will the administrators of the breathing
space ensure they are communicating with
the current owners of a debt, if it has been
sold on? How should pre-existing debts
There is certainly
a lot to be ironed
out, either through
regulations or through
guidance, and engaging
with the Government is
critical.
which were not identified at the start of
the breathing space, but which are brought
to light once the 60 days are underway,
be handled? What sanctions are there for
creditors who accidentally or deliberately
breach the restrictions around contacting
someone in debt during their breathing
space? There is certainly a lot to be ironed
out, either through regulations or through
guidance, and engaging with the Government
is critical.”
Caroline adds that, while the breathing
space scheme fills a much-needed gap, there
are potential issues around sole trader debts
that will add complexity and could restrict
access to help.
This system will need
to be accessible for all
creditors to ensure smooth
operation, this will link
to the original creditor so
there could be delays in
notification to the ultimate
debt purchaser.
NEED FOR CLARITY
In addition, issues such as creditor-petitioned
bankruptcies and breathing space have not
yet been dealt with, and R3 is concerned that
some terminology used – such as ‘problem
debt’ – needs clearer definition.
Questions remain also about how a
statutory debt repayment plan will work
alongside existing insolvency solutions such
as IVAs and debt relief orders.
Ultimately, the attempt to tackle the
inconsistencies around the treatment
of public and private sector debts is
much needed and should go a long way
to transforming the experience of those
struggling with their finances. The past
decade has seen considerable change in the
private sector and now it’s time to apply these
standards across the board.
David Sheridan says the change for those
with rent, council tax and other government
debt will be significant. “These categories of
debt are priority bills so customers facing
such arrears will be more likely to require
the benefits of breathing space to find a longterm
solution to their debt problems.”
The Recognised Standard / www.cicm.com / September 2019 / PAGE 28