Recommendations for change: Scotland’s Debt Arrangement Scheme (DAS)
‘We had a large amount of debt, which we struggled to pay each month. Although we hadn’t missed any payments, life was tough. We were really frightened of losing our home and were spending very little on food. Having CAP’s help, advice and support made things much easier to get through. It had been a very frightening period, but we were committed to getting our debts paid off in full in the shortest possible time and DAS offered us a way to do that.’ – Andrew and Louise, CAP clients
The Scottish Debt Arrangement Scheme (DAS) is pioneering in the statutory protections it offers. Those repaying debts through DAS have the interest and charges frozen and gain protection from enforcement action. DAS is a fantastic tool, having helped thousands of people in Scotland since it was introduced in 2004. However, although advantageous for many, the number taking up the scheme is falling. Only 500 DAS applications are processed each quarter.
Accountant in Bankruptcy (AiB), the DAS administrator appointed by the Scottish Government, recently acknowledged that changes were needed. As the government look to implement a breathing space scheme in England and Wales, Christians Against Poverty (CAP) has made some recommendations, which support the AiB’s intention of building more flexibility into DAS. CAP has set out specific areas that need to be addressed to ensure DAS is in the shape we need it to be.
Areas for change
CAP has identified six key areas where DAS could be improved, both in its accessibility and sustainability.
CAP suggests that the requirement to include all debts in a Debt Payment Programme (DPP) should be removed. It is not always in a debtor’s best interest to include all debts in the plan, especially with regards to rent arrears or debts to friends and family.
DAS should accept reasonably up-to-date balances already held by money advisers. There is a heavy burden placed on money advisers to confirm all debts and balances, which can even cause delay in the submission of the DAS application. There is currently a requirement to confirm verbally the balance of each debt included in the DPP with the creditor, taking note of the date and time of the phone call and the name and department of the person they spoke to.
Jean and Peter, a couple in their late 70s and in ill health, sought help from CAP with debts totalling over £45,000, including a large tax debt from a failed business and five other debts. The couple were facing court action to take them through sequestration. However, they did not want to lose their home and could repay within three years, therefore DAS was the preferred solution. The court case was delayed to allow for the DAS application, but by the time balances could be acquired to process the application and conduct a ‘Fair and Reasonable’ test, the DAS could not be approved before the date of the next court hearing.
The six-week intimation period should be extended to six months. Submitting a DAS application triggers a six-week interim intimation period, giving intermediate protections from collection and enforcement before an official DPP is set up. However, there can be problems with compiling a DAS application resulting in delays, and therefore six weeks is often insufficient.
The ability to reinstate interest and charges retrospectively if a DPP fails should be removed. For clients on DPPs interest, fees and charges are frozen, yet interest and charges continue to accrue on statements which causes confusion. What’s more, if a DPP fails, the client is liable for these charges retrospectively. In contrast, for clients on a Debt Management Plan (DMP) the interest and charges are usually not included on statements, nor are they added retrospectively.
CAP suggests that the AiB improves the client experience when a debt is reassigned. Debtors are expected to deal with all correspondence themselves and have the responsibility to inform the money adviser if debts are reassigned. This is a big ask for people, especially those who are experiencing acute financial distress.
Two CAP clients have been paying into a DPP for the past 18 months. During this time, three different debts have been passed out or sold to separate collection agencies who have begun chasing for payments. This caused confusion, and the clients became anxious that the statement did not reflect payments that had been made (as these were received by the original creditors).
Lastly, there needs to be greater awareness built around DAS. There have been instances where DAS protections have not been abided by, due to lack of knowledge of the scheme. Part of this stems from the low volume of DAS cases a creditor sees, however, better communication could improve awareness.
DAS has the opportunity to set the pace when it comes to statutory protection schemes and as the AiB sets out to build more flexibility into the scheme, these recommendations highlight specific areas that need to be addressed. This is especially vital as the rest of the UK looks to learn from Scotland’s range of debt solutions.
Kiri Saunders, External Affairs Officer, Christians Against Poverty