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In Focus Risk
We need a plan
DEMSA reaction to HM Treasury consultation on Statutory Debt Repayment Plans
Kevin Still Director, DEMSA
On Friday 13 May 2022, HM Treasury (HMT) published their latest consultation around Statutory Debt Repayment Plans (SDRPs), building on their response from June 2019 that followed the October 2018 consultation and 2017 government manifesto commitment. This heralded the introduction of the Debt Respite Scheme in May 2021, probably better known as ‘Breathing Space’. This came after Economic Secretary John Glen MP visited Rethink in Solihull on 9 May 2022, to highlight support on off er for people suff ering with problem debt. He refl ected that one year on from the launch of the Debt Respite Scheme on 4 May 2021, over 60,000 people have accessed the government’s scheme. Final fi gures show that between the launch on 4 May 2021 and 30 April 2022, there were 63,856 registrations, comprised of 62,843 ‘Standard Breathing Space’ registrations. Only 1,013 of those taking this support entered “Mental Health Crisis Breathing Spaces”, which extends the protections while they receive mental health crisis treatment. Overall, total volumes are signifi cantly below HMT estimates from February 2020, raising doubts around the reliability of projected SDRPs volumes in their impact assessment whilst the FCA Financial Lives surveys continue to project upwardly the volume of consumers needing debt advice. John Glen MP said: “Mental health is a
challenge for us all – but these concerns can be exacerbated for people who are experiencing a mental health crisis and are in problem debt. “That is why I launched the Breathing
Space scheme one year ago and will shortly be consulting on proposals for a Statutory Debt Repayment Plan – to give people the confi dence, support and clarity they need to tackle problem debts.”
36 Debt Managers Standards Association
(DEMSA) participated in the initial consultation around SDRPs and will actively engage with HMT in the process between now and August 2022. This consultation follows closely after the
Credit Services Association (CSA) published its ‘wide of the mark’ paper on 3 May 2022. The report entitled ‘Wide of the Mark? Assessing the Delivery & Value of Free-To- Client Debt Advice’ argues that consistent and high-quality debt advice serves a very important role in helping people navigate fi nancial challenges, especially when the cost-of-living is rising, but also believes it is essential that the questions of value for money, effi ciency and accountability are addressed. DEMSA agrees with the CSA that consistent and high-quality debt advice (irrespective of channel of advice) serves a very important role in helping people navigate fi nancial challenges, especially during the cost-of- living crisis. There is a major value for money debate around the merits of introducing SDRPs in 2024. Larger providers like PayPlan are defi nitely seeing a substantial rise in creditor referrals, above pre-pandemic levels. This, however, is not consistent across the sector as yet. The SDRP impact assessment speculates on future demand for debt advice and debt solutions, which is very reliant on data from the Money and Pensions Service (MaPS). DEMSA is on the Standard Financial
Statement (SFS) governance group and MaPS has provided a ‘heads up’ on the imminent changes to the SFS spending guideline fi gures as a result of the continuing rise in infl ation. The intention is that these are published on 30 May 2022 and are put into action by 20 June 2022. We are obviously expecting further
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Larger providers like PayPlan are defi nitely seeing a substantial rise in creditor referrals, above pre-pandemic levels. This, however, is not consistent across the sector as yet. The SDRP impact assessment speculates on future demand for debt advice and debt solutions, which is very reliant on data from the Money and Pensions Service (MaPS)
rises in infl ation and energy costs, which put into perspective some of the limited tolerances proposed in the HMT consultation for SDRP variations from May 2024. They are far less fl exible than in an IVA or DMP. Whilst HMT has taken onboard some
industry feedback in the period from June 2019 in light of the pandemic, outcomes from the tailored forbearance schemes, the emerging cost-of-living crisis and the experience from the Debt Arrangement Scheme (DAS/DPP) in Scotland from November 2019, urgent industry engagement is required. The impact assessment really does need some critical analysis, especially around creditor, debt advice sector and consumer benefi t statements. DEMSA continues to highlight a number
of fundamental aspects that may infl uence a successful launch: A robust business case. An 18-month implementation window is
May 2022
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