Debt charity, StepChange has announced that it has launched a new 12-month reduced payment plan for households temporarily affected by Covid.
The company says that its new Covid Payment Plan (CVPP) is aimed at people who just need a bit more time and a bit more forbearance to get back to resuming full payments on debts built up during the pandemic. Plans will go live from mid-November.
The new plan is just one piece in the jigsaw of measures needed – specifically aimed at those expecting to face only short-term difficulty. Other debt solutions remain more appropriate for those in more severe difficulty that is unlikely to be resolved quickly, and public policy has an increasing role to play in targeting more support to those in greatest need.
The CVPP has been developed in consultation with HM Treasury and is supported by the Money and Pensions Service – which will be signposting potentially eligible consumers to it via its online Money Navigator assessment tool.
StepChange says that it has also consulted widely with the lending industry and other creditors while developing the new plan.
The company estimates that among those who have seen their finances affected by Coronavirus, nearly two million were not in financial difficulty before the pandemic but are now in a situation where they cannot meet their full contractual commitments.
This is the group of people who may benefit from using the CVPP, which provides a year-long window within which they can make reduced payments, allowing them a gradual transition to resuming full payments or, if their circumstances change for the worse, allow them an easier transition into a longer-term debt solution.
StepChange Debt Charity CEO Phil Andrew said “What’s driven our approach is the recognition that, within our own toolbox, most of the existing solutions that we could provide are long-term strategies to enable people to tackle entrenched problem debt – they were not designed to cope with the short, sharp, temporary debt shock that so many people have uniquely experienced due to the pandemic. As firms now begin to draw back from the blanket emergency support that got us through the past few months, new strategies are needed. We hope that the CVPP will make a valuable contribution to the transition to recovery, both for households and for the wider economy.”
The Economic Secretary to the Treasury, John Glen MP, said “Reducing the long-term impact of Coronavirus on people’s finances is crucial – that’s why we’ve delivered unprecedented support to protect jobs and livelihoods, most recently through our Winter Economy Plan. It’s important that people who are struggling with a temporary hit to their finances can access tailored support and so I welcome StepChange’s Covid Payment Plan, which will help people get back on to a stable financial footing in a shorter time frame.”
Craig Simmons, Head of Debt Policy and Strategy at the Money and Pensions Service (MaPS), said “It’s vital that people who are experiencing financial difficulty due to Covid-19 get help right away so they can avoid money problems spiralling out of control later on, so we welcome new initiatives and services which will help people find a way forward. With some support measures coming to an end, people wanting to understand what this means for their finances can use the Money Navigator Tool on the Money Advice Service website. The tool highlights the areas to consider taking action most urgently and suggests where people can get tailored support, such as free and impartial debt advice and the new Covid Payment Plan being offered by StepChange.”
“As we expect the need for debt advice to rise by 60% over the next 18 months in response to the pandemic, MaPS is continuing to provide funding in England and support for the debt advice sector to ensure people can access expert support.”