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We submitted our Open Letter to the Economic Secretary on 12th January 2021. This gathered over 180 signatories in support from front-line debt advisers: a fantastic achievement in such a short space of time.
The full text of the letter that we sent is below. And you can now read the Economic Secretary’s response here. We are currently consulting with the signatories of the Open Letter about our next steps.
“Dear Economic Secretary,
We are front-line debt advisers, working in a wide variety of organisations across England and Wales and we are urging you to amend your proposals for the delivery of the new ‘breathing space’ scheme, due be introduced on 4th May.
The economic forecasts for the coming years are not good. Unemployment is set to rise, and many more people will face financial difficulty and poor mental health. Even before the pandemic, approximately one in eight British households was struggling with debt. A long-term trend of increasingly complex debt cases, larger ‘priority’ debts and lower disposable incomes looks set to continue.
The proposed 60-day limit for the ‘breathing space’ is too tight. For example, someone whose poor health means they are unable to work currently waits for at least three months for a Work Capability Assessment. The outcome of which can significantly impact income. Where decisions need to be appealed, the process can take several months longer.
We will be advising people to claim benefits, and to access employment support programmes, only for them to find that their ‘breathing space’ is over before those first steps towards financial stability have been fully taken.
We need discretion to extend the breathing space where this is warranted. Creditors also need to have confidence that incomes have been maximised before people are advised to enter possible debt solutions.
The proposed arrangements will also waste valuable time and resources. We are being asked to conduct a review of debtor compliance with ‘breathing space’ requirements after just twenty-five days, and to have completed these within the next ten. For many people, such as those making benefit claims, it will not be valuable to offer return appointments within this prescribed timeframe. The unnecessary exercise will add to an already considerable work burden and negatively impact our capacity to deliver.
It will also mean that some debtors who fail to respond to us in this narrow window could have their ‘breathing space’ protections removed. This will happen even if people have genuine reasons, such as a lack of phone credit or illness, for their delay. The rules provide too little discretion, and a debtor getting in touch even one day late will find they cannot access any ‘breathing space’ for a further year.
We need to retain our professional discretion to determine when it is best to contact our clients. Debtors should also be able to access the scheme’s protections on more than one occasion per year.
Finally, any ‘breathing space’ can only be successful if there are effective and accessible debt solutions available at the end of it. This is not currently the case. The high fee for bankruptcy applications excludes those in the deepest poverty, and restrictive eligibility criteria for Debt Relief Orders limits access for those with higher debts. Low spending guidelines for debtors, which also form the basis of Debt Relief Order eligibility, force too many people onto lengthy debt repayment plans. This is despite many debts having already been written off by originating lenders and sold for a fraction of their value on the secondary debt market.
We need a full review of debt solutions in England & Wales.
Economic Secretary, we all want the ‘breathing space’ to be a success. But for that to happen, changes are urgently needed. We hope you will work with us to create a better ‘breathing space’ and future for people in debt.
Yours sincerely…”
