Credit Management September 2019

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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
The Recognised Standard / www.cicm.com / September 2019 / PAGE 29
Page 1 and 2: CREDIT MANAGEMENT CM SEPTEMBER 2019
Page 3 and 4: SEPTEMBER 2019 www.cicm.com 26 OPIN
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Credit Management September 2019

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