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Giving debtors breathing space is not something new, so don’t be fooled

Wednesday, 25th October 2017

Giving debtors breathing space is not something new so don’t be fooled into thinking this was the idea of the Conservatives when it featured in their manifesto in the election earlier this year. It really started back in 2006/7 when Enforcement Restriction Orders (EROs) were considered. EROs can still be brought in as it was included in the Tribunals, Courts and Enforcement Bill see chapter 2. 

The idea of an ERO was to provide a short term legal way of relief to a debtor that finds him/herself unable to meet their obligations through a sudden and unforeseen change in their financial circumstances from which they are likely to recover.

The key points of the then proposed ERO;

  • No need for there to be a judgement debt
  • Orders limited to a period of 12 months during which creditors cannot enforce the debt without the leave of the court
  • Consideration must be given to creditors' objections to an order, grounds for this not yet defined
  • The court can require the debtor to update them with his/her finances and any disposal of assets
  • A repayment programme set up during the order if the debtor has sufficient surplus funds to so
  • The debtor will by order of the court, make aware of any changes to their occupations, marital status etc as the inc & exp which dictates the monthly basis will only be reviewed every 12 months
  • Debtor to inform the court of any windfall or money gain in excess of £500

Debts to be excluded from the ERO

  • Business debts
  • Secured debts such as mortgage repayments
  • Debts that are not provable in a bankruptcy such as court fines, student loan debts, child maintenance payments
  • Rent arrears if still residing in the property
  • Council tax liabilities and Utility bills.

Credit Services Association (CSA) - 30 day rule

Then in 2009 the Credit Services Association (CSA), which represents debt agencies, agreed a 30-day rule resulting in collectors not contacting debtors/borrowers for payment of debts. This was granted provided they could prove they had made contact with an accredited debt adviser such as Citizens' Advice or the then Consumer Credit Counselling Service, now StepChange

Financial Conduct Authority (FCA) - 30 day rule

Back to 2017 we have a 30 day rule written in the FCA Debt Collection Guidelines which is helpful but does not go far enough.

Forget the 30 day rule

But is 30 days really long enough? Six weeks is just 42 days. I argue it is not. From my considerable experience in the debt management industry it is evident that debtors need greater protection from when they first start to explore their debt option in the so called breathing space period right through until any statutory repayment plan. This would include debt management plans (DMPs) and Individual Voluntary Arrangements (IVAs). With the latter we could go back to applying to the court for interim orders which previously protected the debtor proposing such an arrangement.

Personally, I would like to see a minimum 12-week period, 84 days with a central base recording all accredited agency contact with debtors, each debtor will be allocated a reference number pertaining to that agency which identifies the individual and agency. It should not be a public register but available only to those working within the debt management industry. This way a creditor can easily visit the register for current updates.

How to stop abuse from debtors

I accept this can be open to abuse by some debtors whereby they potentially can avoid any payment for nearly three months, just by citing the new rule when it comes in 2019. But in my experience, those will be in the minority and a central register as I mentioned above should eradicate this and assure the creditors.

Up until now I have always said the best place to be in debt in the UK is Scotland, they have for a number of years afforded far greater debtor protection for consumers regarding interest rates, assets and court action. Hopefully this will balance out when introduced in 2019. Another example of why the Scots have it is the cost for a debtor to petition for bankruptcy, Scotland £200, England and Wales £680.

Without breathing space there is no guarantee creditors would stop the crippling fees and add ons which is often applied to accounts. The Economic Secretary to the Treasury, Stephen Barclay, sums it up when he said: "For many people in the UK problem debt seems impossible to escape. Its effects can be far-reaching, impacting all aspects of a person's life and leaving them feeling helpless."

It's a fact debt controls your life, once you get on top of it you get your life back. The last debtor’s prison closed in 1869, life and society has moved on and we need to recognise this.





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