1. Money Advice Scotland Annual Conference & Exhibition 2016
Crieff Hydro, 2nd & 3rd June 2016

2. Money Advice Scotland Conference 2 June 2016
Debt Arrangement Scheme and Protected Trust Deeds– Review of Legislation – Initial Findings

3. Debt Arrangement Scheme – Review
Purpose
To review and determine the effectiveness of the changes brought into force by the:
Debt Arrangement Scheme (Scotland) Amendment Regulations 2013; and
Debt Arrangement Scheme (Scotland) Amendment Regulations 2014.
To enable a wider policy examination to be carried out.
To identify any potential development work that could be carried out to enhance DAS.
Review of DAS
The overall aim and purpose of this review is to determine the effectiveness of changes brought into force through the following legislation:
Debt Arrangement Scheme (Scotland) Amendment Regulations 2013 which came into force on 2 July 2013; and
Debt Arrangement Scheme (Scotland) Amendment Regulations 2014 which came into force on 11 December 2014.
This review will also enable a wider policy examination to be carried out. This will highlight any potential policy development work that could be carried out in the future to enhance the Debt Arrangement Scheme.

4. Debt Arrangement Scheme - Consultation
Consultation formed part of the DAS Review, giving you the opportunity to give your view on the changes that were introduced in 2013 and 2014
Consultation ran between 22 March – 4 May 2016
40 responses received
40 responses to DAS consultation (23 group responses, 17 individual responses).
The responses were predominately from the debt advice sector. However, responses were also received from 9 creditors, legal and accountancy firms, and regulatory / industry bodies.
In some group responses it was clear that there were opposing views amongst members.

5. Debt Arrangement Scheme Initial Key Findings
AiB Introduction
Debt Arrangement Scheme Initial Key Findings
All Debts
The majority of respondents said that all debts should not have to be included in a DPP.
Most found that including all debts is too prescriptive and restrictive.
There was a general view that including all debts creates problems with secured debts such as mortgage and rent arrears; where a viable repayment plan is already in place for a specific debt; or where there is a guarantor debt involved.
There was a wide range of views on which debts could be excluded from a DPP, with many saying that the debtor and money adviser should be able to determine together which should be included.
Suggested improvement included all debts being declared in the proposal with discretion on which debts to be included in the DPP.
All Debts
The 2014 regulations introduced a need to include all qualifying debts, at the time of application, in a DPP.
28 respondents said that all debts should not need to be included in a DPP. 10 said they should and 2 didn’t answer.
Most found that including all debts is too prescriptive and restrictive.
There was a general view that including all debts creates problems with:
secured debts such as mortgage and rent arrears, hire purchase and utility arrears;
where a viable repayment plan is already in place for a specific debt; or
where there is a guarantor debt involved.
There was a wide range of views on which debts could be excluded from a DPP, with many saying that the debtor and money adviser should be able to determine together which should be include.
Suggested improvement include all debts being declared in the proposal but discretion allowed in which debts to be included in the DPP. Ultimately it will be for the creditors to determine if they are happy with the proposal.
A /12/2013

6. Debt Arrangement Scheme Initial Key Findings
Common Financial Tool
Most said that the CFT should be used to determine that DAS is the right product.
Most said they had encountered issues when using the CFT.
Many felt the CFT should only be used as a starting point but that there are other factors to consider.
Too restrictive for a product that doesn’t offer any debt relief.
Concerns that the CFT and triggers are not used properly.
Problems where income fluctuates e.g. overtime, commission.
COMMON FINANCIAL TOOL
The 2014 regulations introduced the use of the Common Financial Tool (CFT) to apply to DAS.
 22 respondents said that the Common Financial Tool should be used to help determine that DAS is the right product for a debtor. 14 said it shouldn’t be used. Other responses were either mixed or no answer was given.
24 respondents said they had encountered problems with using the CFT. This included issues with inputting the data, and the system not being user friendly.
Many felt that the CFT is a useful starting point but that other factors should also be considered when establishing how best to help a client. Others thought it wasn’t needed as they’d managed fine before.
There are concerns that the CFT is too restrictive for a product which does not offer any debt relief. There is anecdotal evidence that debtors are entering repayment plans with creditors rather than using DAS.
There was a concern that the CFT and the triggers are not being used correctly e.g. triggers are being maximised. Problems also exist when a client’s income fluctuates e.g. irregular overtime, commission; and there is no provision within the CFT to allow for inflation.

7. Debt Arrangement Scheme Initial Key Findings
Common Financial Tool – Contributions
Most said the CFT should be used to determine the level of contribution.
Most said that not all excess income should be taken as a contribution.
Taking the full contribution makes a DPP unsustainable.
Wide range of views on how to determine the level of contribution but most said it should be determined by the money adviser, with the debtor.
A wide range of views on what proportion of surplus income should be taken as a contribution. This ranged from 30% of excess income to 90%.
COMMON FINANCIAL TOOL - CONTRIBUTIONS
23 respondents said that the CFT should be used to determine the level of contribution to be made. 17 said it should not.
20 also said that not all excess income should be taken as a contribution. 12 said it should and 8 didn’t answer.
 There was a feeling that, given the length of time involved in a DPP, it is unfair to debtors to have all of the excess income taken as a contribution. This is a voluntary product, and all excess income being used as a contribution is unsustainable for a long period of time. A trust deed can be seen as being more attractive.
There was a wide range of views on how to determine the level of contribution that should be made, including money advisers having some discretion; a larger contingency allowance; a larger savings allowance; and the debtor being able to decide how much to pay. However, most felt that the level of contribution is something that should be determined by the money adviser, with the debtor.
There was also a wide range of views on what proportion of surplus income should be taken into as a contribution. For example: 30% of client’s disposable income; and a maximum of 90% of disposable income.

8. Debt Arrangement Scheme Initial Key Findings
Review Process
Most respondents had not encountered any issues with the review process.
There are still concerns about AiB reviewing its own decisions.
Greater clarity is needed on decisions.
Most respondents said that debtors should have longer than 14 days to submit a request for a review.
Review Process
The 2013 regulations introduced a new review process that enables decisions to be made by the DAS Administrator to be reviewed.
29 of respondents had not encountered any issues with the review process. 6 had encountered problems. The remaining either didn’t answer or didn’t have a view.
There remains concerns about AiB reviewing its own decisions and it was suggested that an independent panel should be established to make the final decisions.
There was a general view that greater clarity is needed on how decisions are made, together with plain English being used to communicate decisions.
Only 14 respondents felt that 14 days was the right timeframe to submit a request for a review. Most felt that debtors should have longer than 14 days. Suggested timescales included 21 days, 28 days and one month.

9. Debt Arrangement Scheme Initial Key Findings
Flexible Payment Break
Almost everyone said that up to 6 months was an appropriate timescale of flexible payment break.
Some said there should be more flexibility depending on circumstances, while others felt there should be no limit.
FLEXIBLE PAYMENT BREAK
34 respondents said that up to 6 months is an appropriate timescale for a payment break. 4 said 6 months was insufficient, 1 response was mixed and 1 made no comment.
Comments included that:
payment breaks should be more open ended;
6 months may be insufficient in some circumstances e.g. maternity leave or long term sickness.
Payment break should be linked to the overall duration of the DPP
There should be no limit.

10. Debt Arrangement Scheme Initial Key Findings
Composition
Most respondents said that composition should change.
There was a wide range of views including,
reducing the timeframe from 12 years to anywhere between 5 and 10 years.
Changing the percentage of total debt paid from 70% to between 50% and 80%.
Composition should be available at any point.
Composition should not be available at all.
Most respondents said that 21 days to accept the offer of composition was reasonable.
Other suggested timescales included having 14 days or 30 days to accept an offer of composition.
Another suggestion included composition being granted
automatically once eligibility conditions are met.
COMPOSITION
26 respondents said that composition should change. 13 said it is fine as is and 1 made no comment.
Suggested changes included:
the timescale being anywhere between 5 and 10 years.
% of debt ranged between 50% and 80%.
One response said that given most DPPs are completed within 7 years that composition as it is just now is not relevant.
Another said that the purpose of DAS was to pay the debt in full.

11. Protected Trust Deed – Review
Purpose
To review and determine the effectiveness of the changes brought into force by the Protected Trust Deed (Scotland) Regulations 2013.
To enable a wider policy examination to be carried out.
To identify any potential development work that could be carried out to enhance PTDs.
Review of PTD
The overall aim and purpose of this review is to determine the effectiveness of changes brought into force through the Protected Trust Deed (Scotland) Regulations 2013
This review will also enable a wider policy examination to be carried out. This will highlight any potential policy development work that could be carried out in the future to enhance Protected Trust Deeds.

12. Protected Trust Deed - Consultation
Consultation formed part of the PTD Review, giving you the opportunity to give your view on the changes that were introduced in 2013
Consultation ran between 14 March – 21 April 2016
26 responses received
26 responses to DAS consultation (7 trustees, 8 creditors, 5 money advice, 4 professional bodies, 2 individuals).
In some group responses it was clear that there were opposing views amongst members.

13. Protected Trust Deed Consultation Initial Key Findings
AiB Introduction
Protected Trust Deed Consultation Initial Key Findings
Common Financial Tool
The majority of respondents agreed that the CFT is an effective way to ensure transparency and calculate the level of contribution made by a debtor.
Almost half of respondents had experienced issues with the application of the CFT to PTDs. This included:
not adequately dealing with self-employed debtors or where income fluctuates on a regular basis; and
evidence requirements being too onerous.
A suggestion was made that, in order to incentivise debtors to work overtime, a formula should be applied to ensure that the full overtime wage is not calculated within a contribution.
Question 5a - Do you agree that the Common Financial Tool (currently the Common Financial Statement) is an effective way of ensuring transparency in calculating the level of contribution to be paid by each debtor?
YES 22
NO 3
UNANSWERED 1
Q5c - Have you identified any issues with the application of the Common Financial Statement to PTDs?
YES 12
NO 14
A /12/2013

14. Protected Trust Deed Consultation Initial Key Findings
AiB Introduction
Protected Trust Deed Consultation Initial Key Findings
AiB – Authority to refuse to grant a trust deed protected status
Most respondents agreed that AiB should have authority to refuse to protect a trust deed where contributions have not been assessed using the CFT.
Some said that as the trust deed is an agreement between parties, AiB should have no locus to intervene if creditors are content.
There was a range of additional reasons given why AiB should not protect, including:
if equity was not being dealt with ‘properly’,
where equity outweighs debt; or
if the debtor has acquired significant debt in the last 6 months.
Question 6a – Is it appropriate that AiB has the authority to refuse to protect a trust deed if they have determined that the contribution amount has not been assessed appropriately in accordance with the CFT?
YES 16 NO
Q6c – Are there additional grounds under which a trust deed should not be protected?
YES 19
NO 7
A /12/2013

15. Protected Trust Deed Consultation Initial Key Findings
AiB Introduction
Protected Trust Deed Consultation Initial Key Findings
Treatment of heritable property in trust deeds (1)
Respondents were split on whether Form 1B agreements, with Regulation 15, had adequately addressed the treatment of equity in trust deeds.
Suggestions on how to rectify the issue included:
making Form 1B mandatory;
directing trustees to use existing legislation introduced through the Home Owner and Debtor Protection Act.
One suggestion included directing trustees to use existing legislation introduced through the Home Owner and Debt Protection Act. This would allow equity to be excluded only by agreement with creditors and to provide clear guidance on the treatment of equity on the Form 1B.
Question 8a – Have the changes introduced through Form 1B agreements, and Regulation 15, adequately addressed the treatment of equity in trust deeds?
YES 10 NO
UNANSWERED 3
Q8c – Is a trust deed an appropriate solution for someone who has assets, including heritable property, which exceeds the level of debt?
YES 11
NO 14
UNANSWERED 1
A /12/2013

16. Protected Trust Deed Consultation Initial Key Findings
AiB Introduction
Protected Trust Deed Consultation Initial Key Findings
Treatment of heritable property in trust deeds (2)
Respondents were split on whether a trust deed was an appropriate solution where assets exceed debt.
Of those who did not think it was appropriate, some further qualified their answer by explaining that in certain circumstances a PTD may be appropriate.
Question 8a – Have the changes introduced through Form 1B agreements, and Regulation 15, adequately addressed the treatment of equity in trust deeds?
YES 10 NO
UNANSWERED 3
Q8c – Is a trust deed an appropriate solution for someone who has assets, including heritable property, which exceeds the level of debt?
YES 11
NO 14
UNANSWERED 1
A /12/2013

17. Protected Trust Deed Consultation Initial Key Findings
AiB Introduction
Protected Trust Deed Consultation Initial Key Findings
Introduction of the fixed, single fee
The majority of respondents agreed that the introduction of the fixed, single fee has brought greater transparency to the administration fees and costs of a PTD.
Of those who responded ‘no’, some were of the view that there was transparency prior to the regulation changes.
Almost two thirds of respondents do not think that further changes are needed to the PTD fees and costs structure.
Suggested improvements included:
minimum dividends;
a reasonable fee scale set centrally by SG; and
a uniform fee scale agreed by the main creditor agents
Question 11a – Has the introduction of the fixed, single fee brought greater transparency and control over the administration fees and costs of a PTD?
YES 18
NO 5
MIXED 1
UNANSWERED 2
Q11c – Do you consider that further changes are needed to the PTD fees and costs structure?
YES 6
NO 17
A /12/2013

18. Debt Arrangement Scheme/ Protected Trust Deeds Reviews
Next Steps
A report will be sent to Ministers with a view to publishing findings by the end of June 2016.
With Ministerial approval work to introduce changes during 2017/2018.

19. Any other comments/views?
Final comments/views
Any other comments/views?

20. Thank you Alex Reid, Head of Policy Development,
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