VIKKI BROWNRIDGE.
Head of Relationship Management,
StepChange Debt Charity
Priority debts have become an increasingly common
feature of our clients’ problems. Back in 2011 a
quarter of our clients were in arrears on at least one
priority bill, last year this figure reached 41%. In
most cases, the amounts owed on priority debts
have been rising steadily over the years.
Our ‘breathing space’ proposal, where
appropriate, would guarantee those who
seek debt advice a temporary freeze on interest,
charges and enforcement action across all their
creditors. It would be modelled on Scotland’s
Debt Arrangement Scheme.
Do we need more priority debt solutions? At
StepChange Debt Charity we’ve argued for some
time that there is a hole in the protections available
to people with financial difficulties and that there is
a clear need for a new statutory ‘breathing space’
scheme. The problem is broader than the issue of
priority debts.
The Government is set to announce details of
a review of such proposals in the near future.
We’re confident with the right design and
implementation such a scheme will ensure
the range of debt solutions matches the
changing needs of those in difficulty.
Existing statutory remedies are generally only suitable
for people with long-term intractable debt problems.
So while someone entering into bankruptcy or an IVA
gets a guarantee of protection from all their creditors,
those who have the potential to recover their finances,
and who don’t need such a drastic solution, get no
such guarantee.
Those people not entering into a formal solution
are covered by a patchwork of voluntary schemes
and protections. Priority debts provide a particularly
difficult problem, because of the different regulations
by which creditors as diverse as energy companies
and private landlords are governed.
The FCA has rules and guidance for consumer credit
firms to ensure the fair treatment of customers who
are in difficulty. Ofgem are increasingly scrutinising
how energy firms treat customers. But elsewhere
protections vary greatly. There are little or no
protections to help people living in private rented
accommodation to pay back arrears in affordable
instalments, while local councils’ approach to
arrears collection has prompted widespread concern.
8
“THERE IS A CLEAR
NEED FOR A NEW
STATUTORY ‘BREATHING
SPACE’ SCHEME.”