Introduction
Registry Trust runs the public Register of Judgments, Orders and Fines under contract to the Ministry of Justice. Registry Trust has successfully maintained and expanded the public Register, operating on an impartial and not for profit basis since 1985.
Access to the Register of Judgments, Orders and Fines is open to all. Users and customers of the Register include individuals and small businesses who want information when they have been refused credit; small businesses who want to check potential clients; credit reference agencies who support lenders for the underwriting of debt, and making of informed credit decisions; employers who wish to check on present and potential employees; and the Insolvency Service prior to processing a petition for bankruptcy.
We welcome the opportunity to comment on the Statutory Debt Repayment Plan consultation. In our response, we make comments and suggestions on how the process could be made more efficient and effective.
Registry Trust recognise that the existing debt and finance landscape is far from perfect, with guidance and legislation now significantly out of step with current lending and borrowing practice, as well as providing little meaningful support to those willing, but currently unable to repay some or all of their debt.
Registry Trust would welcome the chance to build a productive collaborative relationship to discuss potential improvements to the wider debt landscape in full.
Statutory Debt Repayment Plan: Consultation
Question 1: How long do you think the implementation period should be?
The proposed implementation period of 18 months is appropriate.
We have seen how quickly the world can pivot when forced to do so. Lenders, big and small should be able to make required changes within 18 months. There is another side to this argument, which is how long can individual consumers wait for matters to be resolved? Eighteen months may feel like a blink of an eye to a business, but an eternity to an individual, especially if already under financial strain.
Question 2: Do you have any other comments on the issues raised in this introduction?
Registry Trust are happy to contribute to the wider work ongoing to improve the consumer credit landscape.
As the independent Registrar service who maintain the Register of Judgments, Orders and Fines, we are well-placed to provide intelligence on the ebb and flow of judgment levels, providing a useful indicator of the state of the economy and the effectiveness (or otherwise) of measures taken to support consumers. Should the Ministry of Justice start to provide claimant data, we would be able to provide supporting analysis there too. This data would be invaluable in helping build a clear picture of the consumer credit and debt landscapes.
The Consumer Credit Act 1974 is now also pending reform, with stakeholders calling for reductions in legal frameworks to allow for greater flexibility in treatment of consumers. There is also a new Call for Evidence around the insolvency framework, with specific concerns on the current procedures within the framework, and how well they are working. It won’t necessarily be right to delay the implementation of the SDRP, but any changes to SDRP should be considered with a view to consequences or likely changes as a result of upcoming reforms across the sector, and increased demand on the various supporting services.
Question 3: Do you agree with the approach to debtor eligibility?
Registry Trust are pleased to see that joint plans are now permitted, eligibility permitting.
This partially mirrors an existing set up (Scotland) and is reflective of the nature of some debts (joint loans etc). The exceptions (death of one party/bankruptcy etc) are practical and make sense. It will be important to ensure that the methods of making changes, particularly in a strongly emotive scenario like bereavement be clearly understood and simple to navigate.
Question 4: Do you agree to the approach to qualifying debt?
The qualifying debts definition rightly remains broad, and notwithstanding some questions over the idea of ‘priority debts’ we welcome the expansion of priority debt to include internet and mobile phones.
We believe this change is reflective of the way in which people are now able to engage with support networks and work opportunities. We would encourage ongoing flexibility in this definition, to future-proof the scope of what can be allowed under this plan. Greater analysis could be done of existing county court judgments to see which sectors and industries are driving the rising levels of judgments coming through to provide a clearer understanding of what a consumer may currently consider a ‘priority debt’. This would inform decisions on what a priority debt may be to different groups and should be considered when reviewing the definitions of both qualifying and priority debts.
Question 5: Should debt already due to be repaid under a pre-existing payment arrangement or payment plan be treated as non-eligible debt?
The proposals around pre-existing repayment plans remain in line with the earlier proposals and therefore excluded. The stated aim of an SDRP is to allow for the repayment of debt in a way that works for both debtor and creditor, so excluding previous arrangements may hamper any such arrangement.
Creditors may feel that previous arrangements should be excluded, to prevent further delay to repayment of the debt owed to them, however Registry Trust believe that any pre-existing arrangements should at least be considered as a possible debt to be included under the SDRP scheme, with each case decided on merit. Payment plans which only have a short period left to run, or a small amount left to repay might be excluded. Even if an existing payment plan is not to be included within the SDRP, care must be taken to ensure that acknowledgement of that budgetary constraint is taken into consideration, to avoid the failure of the SDRP at an early stage.
Question 6: Should it be possible for debtors to exclude very small debts from a plan?
Registry Trust would agree that excluding very small debts should be a consideration.
The argument made is that including a very small debt in an SDRP may see the creditor paid off at a very low and slow rate for many months or years. Impractical for a small debt and onerous for the creditor. However, if these small debts are to be excluded, on the basis that the individual will be able to pay them off in one go immediately, this repayment still needs to be factored into understanding either affordability, or the start date of the SDRP. Otherwise the debtor trying to enter this SDRP is immediately on the back foot, because no allowance for or recognition for a one-off payment has been made.
Question 7: If you think it should be possible to exclude very small debts, what amount of debt would you consider to be very small? Should excluding these debts be required, or optional? How should these debts be dealt with if they are excluded from a plan?
Defining what is a ‘small’ debt will depend greatly on the circumstances of the individual, and their income and outgoings. Registry Trust would suggest basing this decision on the data available, rather than making assumptions.
Reviewing the current Register of Judgments, Orders and Fines, we can see that judgments are taken out for amounts as low as £50, indicating that debtors may not be able to afford to pay that in one go, and that creditors consider it worth pursuing a sum that small.
Any sum that is to be excluded, on the basis of an immediate repayment, as the sum owed is so small, should have an impact on the start date of the SDRP, or the total amount of the first payment. So if a debtor is to pay their mobile phone debt of £20, then their first repayment under SDRP either needs to be £20 lower than the remaining payments under the plan, or the start date of the plan needs to be a month later to allow for the small debt(s) to be repaid.
Including a small debt should be subject to the same review as the other debts within the SDRP, allowing the creditors to make an objection should they wish to do so.
Question 8: Are there scenarios in which a debtor may occur incur additional debt during a plan without intending to (e.g. due to an administrative error by a creditor)? What might these scenarios be and how should debt incurred in these scenarios be treated?
Registry Trust would recommend that any debts further incurred during an SDRP need to be reviewed on a case-by-case basis.
If an administrative error by the creditor, it might depend on the amount. If the amount was insignificant, we would anticipate a creditor simply waiving that amount of money in recognition of their error. If the amount was significant, consideration needs to be given on what is fair. This may depend on whether it was realistic for the debtor to have realised that a further amount of credit was not included in the total sum owed.
Registry Trust would not anticipate such a challenge being particularly likely, given the level of scrutiny involved to set up the SDRP, the review time granted to creditors and the broad nature of the eligible debts.
Question 9: Do you have any further comments on or concerns about debtor eligibility for the SDRP?
No.
Question 10: Do you agree with the proposed protections of the plan?
The proposed protections strike a good balance between providing a level of respite for the debtor(s) and encouraging ownership and responsibility for the debt repayment. The protection from interest charges will make calculating the figures owed easier, and are a practical step towards ensuring that the debt owed does not mount further still.
The ‘voluntary’ application of protections to a debtor to be used when developing a plan is inconsistent and unhelpful guidance (3.9). This is likely to cause confusion, and to generate complaints, as well as a level of mistrust in the SDRP as a whole.
Question 11: Do you agree with the proposed flexibilities provided for in payment breaks and plan variations?
Registry Trust are pleased to see the recognition that payment structures are variable, and flexibility being built into repayment breaks.
We’re also pleased to see recognition that payment breaks may be urgent and treated accordingly, although this may be unpopular with the creditors involved. This may risk some future administrative burdens, in that a creditor cannot prevent the granting of a repayment break, but can challenge the entirety of the plan as a result.
The idea of the ‘saving allowance’ within the SDRP is a nice concept, and may indeed see some behavioural changes for individuals. We anticipate any change being minimal, and hard to quantify in any real sense. Of greater value in changing consumer behaviours around debt, or encouraging a ‘saving mindset’ would be the societal structural changes and support mechanisms which would enable this behavioural change on a far greater scale.
There is a risk of inconsistency, or greater administrative burden added to the debt advisor when allowing their discretion for an extension to an existing payment break. Clear guidance should be given to both advisors and creditor firms as to what might constitute exceptional circumstances, and what (if any) proof might be expected.
Question 12: When a plan is varied, should there be a minimum value (above zero) to which payments can fall?
Registry Trust would recommend using data on budgets and income availability to make this decision.
It is likely that some households will have more disposable income than others. Ultimately the repayment needs to find a balance, being realistic and sustainable for the debtor and the creditor.
Question 13: Given the government’s proposal to use a private register, do you agree that debtors should be required to disclose the fact they are in a plan to potential creditors? Or should creditors’ own due diligence and processes regarding credit affordability and risk be relied on?
The intention behind the creation or a Register needs to be clearer.
If the idea is that the SDRP Register be accessible to all creditors, then the question is moot. Creditors will be able to do their own due diligence on individuals applying for credit, without individuals making further disclosures.
Alternatively, if the idea is that creditors will only be able to see the individuals on an SDRP that they already have a relationship and payment agreement with, then it makes the idea of an SDRP Register irrelevant. At that stage, you could require debtors seeking further lending from any source to disclose that they have a payment plan, but what would the consequences be if they did not? To demand repayment of any monies owed immediately? The likelihood of that being achieved is incredibly slim.
Access to a private SDRP register also doesn’t allow for all of the other types of due diligence that might need to be done. As keepers of the public Register of Judgments, Orders and Fines, Registry Trust are aware that it’s not just financial institutions that rely on this data. It is also used by employers, landlords and housing providers, insurers etc.
The likelihood is that if a private SDRP register is created, it will simply be ignored, with creditors choosing to use TrustOnline or credit reference agency data instead, to build a far clearer picture of an individual’s circumstances.
Question 14: Based on the draft regulations, how should SDRPs be reflected on a debtor’s credit file?
There are a variety of options to allow for the reflection of an SDRP on a credit file.
CRAs already have different mechanisms to reflect payment plans, and indeed to amend credit scores as a result of those plans. The bigger challenge will be how quickly those structural changes can be put in place within CRAs with legacy systems which operate a certain way. Ultimately, any kind of payment plan will have a detrimental effect on the credit score of the individual, meaning they will struggle to borrow money from a reputable source, or will only be able to access higher rates of interest. It might be possible to have a ‘Do Not Lend’ marker, but that would be more relevant at the lender level rather than a CRA. And ultimately the decision to lend or not is one to be taken by the lender who risks the loan going into default. It’s optimistic, but not realistic to think that a debtor will not need to borrow money again (even with a savings element to the SDRP).
Question 15: Do you have any further comments on or concerns about the protections and flexibilities provided by the SDRP?
Registry Trust are pleased to see some of the lessons learned from previous schemes being implemented, and the mirroring of elements of the Breathing Space initiative.
Question 16: Do you agree with the approach to personal details, including the proposal not to require all previous addresses but only addresses likely to be linked to a plan debt?
Registry Trust are concerned by the idea of limiting the available data when it would still be considered relevant under any data protection scheme.
An issue that has been raised repeatedly by Registry Trust and Credit Reference Agencies to the Ministry of Justice has been the issue of data matching. Currently dates of birth are an optional field in the existing Register, making it hard to discern who a record should be registered against, when names are similar or the same. This happens when a child is named for a family member, or in instances of common first and surnames.
A concern would be that in removing previous addresses, there is the chance to miss a debt registered at a previous address, thereby causing problems with the set-up of the plan. There is also the risk that the Register of SDRPs would be of even less use than currently thought if it provides little by way of a due diligence check for lenders and creditors.
Question 17 – For debt advice providers: What details do you consider necessary to be provided by creditors if they identify an additional debt to ensure that it can be appropriately identified and included in a plan?
N/A
Question 18: Is the proposed mechanism for allocating payments to creditors on a pro-rata basis by debt value suitable? Do you foresee any problems with how this will work?
Allocating payments on a pro-rata basis has the benefit of being an established and understood method of payment allocation.
It may work to address creditor concerns about not being able to charge interest or fees once a plan has been entered into, if their debt is valued appropriately. Consideration should still be given to the minimum amount that might be acceptable to ensure that creditors are not then unduly penalised through administrative costs.
Question 19: Is 30% a suitable proportion to allocate to priority debts? Should this be higher/lower?
Choosing a priority debt is interesting, and seems likely to be hugely divisive.
Currently priority debts are proposed as housing arrears, utility arrears; hire purchase debt and debts owed to government. Companies who have loaned money will doubtless feel strongly about the delays they are likely to see before the debt owed to them starts to get paid in any meaningful way. That doesn’t make the allocation of priority debts a bad idea, but a contentious one, which may serve to alienate key stakeholders. If this is the case, then to what end? Is there a reason that the repayments could not be split fairly across the debt owed and allocated funds available?
In terms of rent and mortgage appears, they are likely to be the biggest debts. Typically a debt advisor suggests paying off the debt incurring the most amount of interest, but as interest and fees will be frozen, that is no longer a concern. Arguably 30% of the amount set aside to pay back debt is not a significant sum, against what seems likely to be higher debt levels. If using priority and non-priority debts is taken forward, then we’d encourage a higher percentage to go to priority debts, at 50%. This would at least have the benefit of allowing for a sense of achievement once that priority debt was cleared and would pave the way for the remainder of the plan to be concentrated on the smaller or non-priority debts that remain in the plan.
Question 20: Do you consider that debtors should be given greater flexibility in deciding the size of the payments they make into their plans? If so, how should this flexibility be provided?
It seems unrealistic to place the burden of deciding on the size of payments on the debtor in question.
Arguably at the time the debtor is considering entering the plan, they’re likely to be in need of support and may not be making sustainable financial decisions for themselves. They should be able to rely on the debt advisor guidance at this stage, with greater independence and autonomy once they’re becoming free of the debt burden. It also seems likely that there will be more creditor support of a plan which relies on an independent third party (the debt advisor) to help draft the repayment structure.
Question 21: Do you consider that debtors should be able to make additional payments into their plans outside of the regular payment frequency?
The circumstance of an individual being able to make any additional payment(s) into their plan doesn’t seem likely, but arguably no one should stand in the way of someone reducing a debt faster than originally planned.
In the event an individual had a significant lump sum for any reason, we would suggest restructuring the plan to allow for quicker debt repayment overall. In the event the amount to be considered is a smaller regular amount (perhaps via increased wages, or hours worked), it might be prudent to encourage the saving of that amount into the savings element of the SDRP, with a lump sum reduction being made at the next appropriate annual review. This would hopefully mean increasing the ‘savings mindset’ in addition to allowing for cash for emergencies. In the event that emergency never occurred, it would be less administratively burdensome to have a one-off payment made to the SDRP than a number of smaller payments.
Question 22: Do you consider that the information proposed to be provided to creditors is suitable and sufficient? If not, why?
The information proposed to be provided to creditors is suitable. We remain of the view that it should include details of the debtors previous addresses to ensure that the SDRP takes into account all outstanding debts at the time of the plan being drawn up.
Question 23: Are the grounds for objection that have been proposed suitable and sufficient?
The grounds for objection point should be expanded slightly to read ‘the information relied upon in development of the plan was inaccurate or incomplete’.
Question 24: Do you have any further comments on or concerns about the processes set out in this chapter for developing and initiating a plan?
No.
Question 25: Do you consider that the proposed mechanism for implementing payment breaks is appropriate?
It’s important to understand the mechanisms by which a representative or authority might be able to request a payment break (in the event of hospitalisation for example). Given the issues that might give rise to such a request, it’s vital that the experience of doing so is as straightforward to manage as possible.
Question 26: Is the creditor review mechanism a sufficient route for creditors to challenge plans they deem to be unfair, unsuitable or inaccurate?
Yes
Question 27: Do you consider that the additional creditor and debtor review processes are appropriate and sufficient? If not, in what ways do you think they could be amended?
Yes
Question 28: Do you agree with the proposal to have a private register?
Registry Trust do not agree with the proposal to have a private Register.
It’s not clear how such a register is to be used. If not publicly accessible, then what purpose does it serve? Creditors will already be aware of debts, by being included in the SDRP; debtors and debt advisors will be aware, because they have created or entered into the SDRP. If the Register is private, and limited to those groups, then why is there a need for this Register at all?
This proposal, if taken forward, will be an unnecessary (and expensive) layer of bureaucracy with no purpose. This will add a further level of administrative burden to the Insolvency Service who will be responsible for the upkeep and administration of this Register. UK data protection laws specifically state that individual data retention needs to be proportionate, and necessary. The proposed Register seems to be neither.
Question 29: Do you have any further comments on or concerns about the processes that have been proposed to operate during a plan?
No.
Question 30: Do you agree with the proposed grounds for both mandatory and discretionary revocations? Are there any grounds for revocation that you consider have not been captured?
Yes.
Question 31: Do you agree with the proposed approach to discretionary revocations in scenarios where conditions cannot be applied?
Yes.
Question 32: Do you consider that the proposed methods for limiting abuse of the revocation process are sufficient and appropriate?
Yes.
Question 33: Do you consider that the proposed limitations to reapplication for plans are suitable?
Yes.
Question 34: Do you have any further comments on or concerns about the ways that plans are ended?
Section 6.26 isn’t completely clear. Does this mean that interest and charges cannot be applied retrospectively? Irrespective of the decision, this needs to be well-understood by all parties to the SDRP.
Question 35: Do you agree with the proposed approach to funding?
Yes.
Question 36: Do you have any views on how the electronic system, register, or fair and reasonable assessments should work?
As already stated, Registry Trust remain unclear on the purpose and value of this Register of SDRP.
In terms of fair and reasonable assessments, there are a number of perfectly sensible options used by debt advisors across the UK. One needs to be chosen and then applied and used consistently.
Question 37: Do you agree with the proposed approach to payment distribution, and the oversight of payment distribution?
Yes
Question 38: How and when do you think payment details of creditors should be provided to or obtained by payment distributors?
Payment details for creditors should be completed as part of the set up of the SDRP, so that when the first payment is due to go out (up to 45 days after the start of the plan) there is no further delay. Ultimately creditors won’t be paid without providing their details. The 14 day review period of the SDRP by creditors would give them time to ensure that their repayment details were recorded accurately, and would be easier to administer by doing it all in one go, rather than a series of e-mails or letters going back and forth.
Question 39: Do you have any further comments on or concerns about the funding and administration of the SDRP?
No.
Question 40: Are you supportive of the proposed changes to the 2020 regulations?
Registry Trust are broadly supportive of the proposed changes to the 2020 regulations, albeit with the stated reservations over the idea of priority debt, and the creation of a private Register.
Question 41: Are there any other changes to the 2020 regulations that would result in (a) greater eligibility and/or applications for the scheme (b) better debtor outcomes?
Better debtor outcomes could be achieved through the creation of a way to recognise partially settled debts once a CCJ has been created, the requirement for all regulated firms to submit satisfactions once a debt has been fully paid and the provision of claimant data to better understand the drivers behind the ebbs and flows of CCJ numbers. Registry Trust would be pleased to provide more details on how to achieve these improvements.
Question 42: Are there any other changes to the 2020 regulations that you believe, and can evidence, would significantly lower the administrative resource required to 55 make or deal with applications for breathing space, for debt advice providers and/or creditors?
No.
Question 43: Do you have any further comments on or concerns about the breathing space regulations and the amendments being proposed?
No
Q. 44- Q.63 – not applicable
Question 64: Do you have any further comments on the consultation stage impact assessment or what is included within it?
No.
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