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Statutory Debt Repayment Plan: Citizens Advice response to HM Treasury's consultation

5 Awst 2022

Citizens Advice response to the HM Treasury consultation ‘Statutory Debt Repayment Plan’

At Citizens Advice, we offer free, independent, and confidential advice and information to anyone who needs it. In the first six months of 2022, we helped 174,983 people with issues related to debt on a one-to-one basis and received more than two million visits to our debt and money webpages.

We welcome the opportunity to respond to the HM Treasury consultation on the Statutory Debt Repayment Plan (SDRP).  SDRP has the potential to fill a significant gap in debt solutions, providing guaranteed protections for people repaying debt through a long-term repayment plan. Although we expect a relatively small proportion of Citizens Advice clients to qualify for an SDRP, it is important that this type of statutory solution should be available alongside insolvency and informal options. We welcome SDRP features such as the broad approach to qualifying debts, incorporation of the Standard Financial Statement and recognition that FCA-authorised debt advice should be the gateway for accessing SDRPs. However, there are some key challenges in the current proposals which we think will make it difficult for SDRP to achieve its policy aims. 

Recommendations

  • Reverse the decision to exclude Universal Credit advances as a qualifying debt and to delay bringing third-party deductions from UC into the scheme. HMT and DWP should work together to resolve any technical challenges required to bring this forward.

  • Introduce 2 month payment breaks as standard (in place of one-month payment breaks subject to a discretionary extension) and allow payment breaks to be retrospectively applied.

  • Make provision for temporary reduced payment plans following significant income shocks or life events. Debt advice agencies should be enabled to temporarily vary plans to very low levels for a period of up to six months, waiving the normal rules on the maximum duration of a plan, giving people a realistic period of time to stabilise their situation and reinstate SDRP payments.

  • Remove the bar on reapplications within 12 months of a plan being revoked, allowing debt advice agencies to propose plans in such circumstances where they consider it appropriate and suitable.

  • Permit debt advice agencies to propose plans more than 7 years in duration where an adviser deems an SDRP to be a suitable option and in the best interests of the client.

  • Task the Insolvency Service with adjudicating on credit applications and plan revocations instead of debt advice agencies, and revise the language and approach to revocation to take account of best practice in debt communications.

  • Introduce a simple and effective creditor non-compliance sanction by enabling the Insolvency Service to suspend distribution of payments to non-compliant creditors. 

  • Use the opportunity presented by the regulations to maximise the impact of Breathing Space, extending the moratorium period to 90 days and widening the pool of qualified mental health professionals able to supply evidence for the mental health crisis route.