WIREDGOV

The Debt Arrangement Scheme (DAS), a Scottish Government debt management tool which allows individuals and couples to repay their debts over a longer period, has been improved to benefit more people in Scotland.

Following consultation with stakeholders during 2012, and as part of the wider consultation on Bankruptcy Law Reform, the amended Scheme will as of yesterday freeze interest and charges at an earlier date, potentially saving people in debt up to 6 weeks interest. The new regulations will also allow for a debtor to apply for a payment break of up to six months where there is evidence that there has been a reduction in income of more than 50 per cent and provides a new review process before appeal.

The number of people accessing DAS continues to grow at an unprecedented rate – a further rise of 40% in 2012 -13, making an overall ten-fold increase over the last six years. DAS helped debtors to re-pay a total of £23.2 million in 2012-13, an amount which compares very favourably with the £19 million repaid through Protected Trust Deeds (PTDs) in the same year.

Welcoming the amendments, Minister for Energy, Enterprise and Tourism, Fergus Ewing MSP said :

“Success of this Government’s Debt Arrangement Scheme speaks for itself, with the number of people accessing DAS continuing to grow.

“DAS is an adaptable solution designed to respond to market changes and we need to do what we can, to help people whose debt burden may have built up since DAS was last updated in 2011, partly as a consequence of high-interest lending.

“I am pleased with the broad welcome that our changes have been given by organisations such as Citizens Advice Scotland who have said that our amendments “should have a beneficial effect on their bureaux and clients”.

“Following the introduction to Parliament of the Scottish Government’s Bankruptcy and Debt Advice Bill, earlier this month, these amendments to the DAS regulations can only further aid us in delivering our vision of a Financial Health Service in providing rehabilitation to people who are struggling under the burden of debt”.

Background Notes

DAS is not bankruptcy, it is a government-run debt management tool which allows someone in debt to repay their debts through a debt payment programme (DPP). The DPP will allow a debtor to pay off their debts over an extended period of time while giving them protection from their creditors taking action against them to recover the debt in the DPP. The DPP can last for any reasonable length of time and, if approved, will freeze all interest, fees and charges on the debt included, resulting in them being written off if the debtor fully completes the DPP.

DAS aims to :

• Enable people to resolve serious debt problems in a dignified way
• Reduce the need for creditors to take legal action to recover their debts
• Extend the benefit of money advice to those people who have a particular need for it
• Improve the quality of money advice, through training and accrediting money advisers; and
• Minimise the impact of bad debt on both debtors and creditors

Key DAS Regulation Amendments

Based on the outcomes of the consultation and feedback from DAS workshops held during 2012, AiB have developed DAS policy in several key areas and, in addition to other more minor amendments, the instrument makes provision for the following principal changes:­

• To freeze the amount of debt owed on the date at which the DPP is applied for by a debtor
• To clarify when the DAS Administrator may correct accidental errors
• To make it clear that the continuing money adviser’s fee for setting up and administering the DPP is excluded from the DPP
• To make clear that payments distributors provide a service on behalf of the debtor
• To clarify that the maximum amount which can be charged by payments distributors as an administration fee is inclusive of any VAT incurred
• To remove the requirement that the two debtors in a joint DPP have a joint and severally liable debt included in the programme
• To make clear that where a creditor has sold on a debt incorporated in the DPP, they must notify the DAS Administrator that they have assigned the rights and provide details of the assignee
• To re-introduce an element of composition (i.e. circumstances in which creditors can agree to discharge the debtor in return for part settlement by the debtor) into DAS. Where a debtor has been making payments to their DPP for a period of 12 years (excluding any payment breaks) and has repaid at least 70% of the total debt outstanding when the DPP was approved, they would be eligible
• To introduce a review process within AiB which will enable the DAS Administrator to reconsider decisions
• To amend the Regulations to allow for a flexible payment break of up to 6 months rather than a fixed period of 6 months