Consumer Protection and the Bankruptcy and Debt Advice (Scotland) Act 2014 Money Advice Scotland: One Day Conference, 11 March 2015

BADA(S) Act – Key Changes BADA(S) Mandatory Money Advice Common Financial Tool Contingency Allowance Financial Education Scotland’s Financial Health Service Minimal Asset Process Decision Review Transfer of Court Functions BRO Changes Debtor Contribution Order Discharge Process

Mandatory Money Advice An application for sequestration may not be made unless the debtor has obtained advice from an approved money adviser: –Organisations accredited at Level 2 or above of Scottish National Standards –DAS approved MAs –Working for CAB –Council Money Advisers –IPs or those working for IPs

Mandatory Money Advice Primary operational change is automation – most applications will be submitted through BASYS There will always be a clerical option Significant Change – Debtor Application will be in two parts MA will lead on completion Part 1 and obtain all evidence of debtor’s circumstances and sign declaration Debtor signs relevant undertakings in Part 2 and these are attached to on-line submission

Mandatory Money Advice How does this help build financial capability? Money Adviser now has a key role in the application process – important change This means that conversations about income maximisation, budgeting, sensible spending and other ways in which the individual can best manage their finances are built into the process.

The Common Financial Tool A CFT (currently the Common Financial Statement) will be used as the standard mechanism to establish whether a debtor is able to make a contribution towards repayment of their debts Aim is to achieve consistency and transparency in relation to any determination of the level of contribution The use of the CFT will be mandatory in respect of all statutory debt relief and debt management solutions in Scotland This impacts on PTD and DAS Regulations All of the surplus income will form the debtor contribution order

The Common Financial Tool CFT includes “trigger figures” for reasonable expenditure within set categories Regulations allow for the trigger figures to be breached – but only where reasonable and supported by evidence which must be provided No contribution can be taken where only income is derived from Social Security benefits Contingency Allowance – provision made in Regulations AiB will publish guidance on the use of the CFT – now finalised – developed by a CFT Working Group

The Common Financial Tool The CFT will be embedded in the BASYS system and will be completed by the MA This will be available along with the information provided in the Debtor Application All calculations and explanations will be available to AiB staff AiB may question the information and explanations provided in the CFT Similar considerations for PTD and DAS

The Common Financial Tool How does this help build financial capability? AiB’s research showed that adopting the Common Financial Statement (available freely under license from the Money Advice Trust) should result in fewer breakages This means that the Scottish Common Financial Tool should support more sustainable assessments of the level of the debtor’s available disposable income – making them less vulnerable to unforeseen expenses and income shocks.

Contingency Allowance An allowance provided for in law: The Common Financial Tool etc. (Scotland) Amendment Regulations 2015 make provision for the debtor to retain a “contingency allowance” The amount to be retained can be 10% of the debtor’s disposable income, up to a maximum of £20 per month (or equivalent). We believe this amount strikes the best balance between the needs of the debtor and the interests of creditors.

Contingency Allowance How does this help build financial capability? The contingency allowance will be treated as expenditure for the purposes of an assessment using the CFT/CFS and will not vest in the trustee It will provide a buffer against unforeseen expenses and income shocks Help debtors access money when they need it and avoid costly borrowing, and Encourage people to get more used to the idea of saving for emergencies The contingency allowance will come into force, along with the rest of our BADA(S) changes, with effect from 1 April.

Financial Education Section 2 of the BADA(S) Act makes provision for debtors in certain circumstances to undertake a course of financial education Regulations specify that this course must be the Financial Education Learning Module published by Money Advice Scotland The module is available via the SFHS website.

Financial Education

How does this help build financial capability? The course is informative, providing information in a simple and easy to understand format. It presents questions to involve and test the user, covering 8 topics. It is intended to help individuals develop a better understanding of:- budgeting, sourcing affordable credit, the importance of insurance, maximising income and preparing for their future financial well-being.

Scotland’s Financial Health Service The Concept The Bankruptcy and Debt Advice (Scotland) Act 2014 (BADA(S)) provides the framework for Scotland’s Financial Health Service. People who need financial advice, need to know where to look. Hub for information / One-Stop Shop.

Scotland’s Financial Health Service Website Launched on 3 rd December 2014 at the ABCUL Annual Credit Union conference. The current website incorporates: –A search for your nearest approved money adviser and credit union; –Links to trustworthy advice and support agencies; –A link to the Financial Education Module; –Real case studies; –Information on saving and borrowing, budgeting tools and the dangers of high interest lending; –Links and information on various Government initiatives.

Scotland’s Financial Health Service

Marketing Campaign Scotland’s Financial Health Service Helpline. 30 Second Television Advert. Google Pay Per Click (PPC) Display takeover with advert banners on various websites such as Facebook. Daily Record Partnership: –Editorial features –16 Page insert –Money Doctor column/editorials –Record Woman column –Website homepage takeover. –Small space frequent insertions in various press (e.g. Scottish Sun, Daily Mail, etc.)

Scotland’s Financial Health Service Going Forward: Re-assessment from feedback. New year-long campaign. Development of more dynamic, interactive features. On-going stakeholder engagement e.g. with advice agencies, local authorities and credit unions.

Next Steps What happens next: BADA(S) implementation on 1 April Bankruptcy Consolidation Bill due to be published in the Autumn this year. Further development of Scotland’s Financial Health Service – brand, website and helpline – in 2015/16

Chris Boyland, Head of Strategic Reform , 1 Pennyburn Road, Kilwinning, Ayrshire, KA13 6SA T F W Thank You