Government plan for problem debt only feasible with extra funding

29 January 2019

The Chartered Institute of Legal Executives (CILEx) has welcomed the government’s plans for a new breathing space scheme and statutory debt repayment plan provided that debt advice agencies are sufficiently funded to take on the extra workload.

Responding to HM Treasury’s consultation, targeted towards ‘problem debt’, CILEx said, “The decisions to not provide any additional funding for the breathing space scheme is likely to create substantial problems in practice.

“[T]he issue of funding needs to be carefully thought out to ensure that debt advice agencies are well equipped with the resources they would need to fulfil their new responsibilities. CILEx is not wholly convinced that the proposed funding streams, and lack thereof within the breathing space initiative, would be able to achieve this.”

It nevertheless welcomed the spirit of the proposals put forward, and their potential for empowering debtors to take control of their finances. Liaising with practitioners through its Civil Litigation and Private Client Specialist Reference Groups, CILEx received general support for both schemes, with a few suggested amendments on procedural matters such as allocated timescales.  

The professional body added that stronger incentives might be necessary in encouraging debtors to ‘meaningfully and honestly’ engage with the new debt protection schemes, and called for greater clarity around what it might mean to be in ‘problem debt’.

“Eligibility criteria must ensure that it is specific, clear and uniform to prevent any abuse of process and safeguard that debtors receive fair and equal treatment” said CILEx, whilst raising child maintenance and judgement debts as additional ‘ongoing liabilities’ for continued eligibility under both schemes.

On the issue of credit ratings, surveys into member opinion found support for the new breathing space and statutory debt repayment plan to reflect negatively on a debtor’s credit file. However, members thought if the debt was paid in full or expunged then this should be positively reflected.

CILEx endorsed a ‘working together’ environment for effective debt recovery and stressed that the interests of both debtors and creditors must be taken into account within these reforms for successful implementation.  

CILEx’s full response to the consultation can be read here.

ENDS