Dealing with Insolvency: Government Proposals to help Debtors Sam Roberts – Policy Unit

The Consumer Credit and Personal Insolvency Review Consumer Credit Debt Enforcement Debt Advice and Personal Insolvency

Desired Outcomes Consumers and lenders making better borrowing and lending decisions Consumers and lenders increasingly managing existing borrowing in the consumer’s long term interest People in difficulty should be able to access the most appropriate debt remedy

Interim Period Five new rights for credit card customers Right to withdraw from any credit agreement within 14 days OFT’s Irresponsible Lending Guidance OFT’s revised Debt Management Guidance

Where we are now Summary of responses on all issues published 19 July 2011 Next steps on Coalition Agreement issues Research into cap on total cost of credit in the high cost credit market Government response on the way forward on the debt advice and personal insolvency issues published 19 July 2011

Coalition Agreement Issues Cooling off period for store cards Unfair bank charges Interest rate cap on store and credit cards High cost credit

Personal Insolvency – responses Impartial, high quality debt advice is key to getting debtors into the most appropriate options Current range of options strikes a reasonable balance Concern that profit drives advice on offer More sophistication in credit scoring

Government Response How to get free-to-debtor advice on a sustainable footing Working with the debt management industry Build on existing codes on forbearance Future proposed consultations: Improving access to basic bank accounts Increasing the petition debt level for creditors Repeal county court administration order provisions

The Future of Debt Advice Debt advice is recognised as an important element in ensuring people can access the most appropriate debt solution Yesterday it was announced that the Money Advice Service have agreed to take a central role in the coordination of debt advice services Aim = to offer a coordinated, flexible and cost- effective solution to consumers debt advice needs Run a review of the current debt advice landscape – what exists, what to consumers need and want, what are the gaps? Develop a model to ensure that outcomes are delivered in an effective, sustainable way

Improving standard in the debt management industry Biggest concern = profit drives advice Need to improve our knowledge and understanding of this industry OFT’s revised guidance – gives very clear steer to providers Protocol – will build on this and involve all players

Breathing Space Voluntary codes already exist OFT’s Irresponsible Lending Guidance makes it clear that failing to offer the 30-day ‘breathing space’ would be deemed irresponsible lending We will seek to engage with non-financial creditors to assess the scope for widening voluntary codes

Future Proposed Consultations Improving access to basic bank accounts Increasing petition debt levels for creditors Repeal county court administration orders

Access to basic bank accounts Financial rehabilitation following bankruptcy can be lengthy Lack of banking facilities has definite financial impact Banks tell us they would like to offer the facilities were it not for the risk of becoming liable to claims by a Trustee in bankruptcy

Increasing petition debt levels The debt level for creditors is £750 and has been since 1986 It is the right remedy in certain circumstances BUT, to be able to ‘threaten’ bankruptcy for such a small amount is, we believe, disproportionate

Repeal of Deeds of Arrangement and County Court administration orders? Both would require primary legislation Deeds of arrangement fallen into disuse Numbers entering administration orders rapidly declining Consultation process to go through

Contact Details Sam Roberts Assistant Director, Policy Unit Zone B, 3rd Floor 21 Bloomsbury Street London, WC1B 3QW Tel: Mobile: