The credit sector was already aware of a new requirement that would see providers required to provide 60 days’ breathing space to borrowers in financial difficulty, but now the Government has confirmed that the scheme will commence on May 4 2021.
Once the 60 days of breathing space has commenced, firms must refrain from applying interest and charges, and from taking action to recover the debt. During the breathing space period, the borrower is required to speak to a professional debt adviser. Hopefully, they will then put in place a plan to repay their debt.
For borrowers who are receiving mental health treatment on the NHS, the breathing space period will not end after 60 days and will instead last for as long as their treatment continues.
Debts to be covered under the scheme include credit cards, loans, council tax, utility debts and HMRC debts. Court fines, child maintenance payments, student loans and personal injury liabilities are not covered by the new scheme.
The Government estimates that the breathing space scheme will assist 700,000 people in the first year and will then assist more than 1.2 million people every year once the scheme has been up and running for 10 years.
Joanna Elson OBE, chief executive of the Money Advice Trust, said:
“Breathing space will provide the time and protections that people in financial difficult need to begin to deal with their debts and gives us a powerful tool to incentivise people to seek free debt advice.”
“As households deal with the economic and financial impact of the Covid-19 crisis, the benefits that breathing space will bring cannot come soon enough.”
StepChange head of policy Peter Tutton said:
“We look forward to working on the detail of implementation constructively with the government, to ensure that it fully meets the policy objectives of getting more people to the debt advice they need.”
Helen Undy, chief executive of the Money and Mental Health Policy Institute, said:
“This scheme could genuinely save lives. Everyone experiencing a mental health crisis should have the opportunity to recover free from escalating debt fees, charges and the threat of bailiffs arriving at their door.
“We are delighted that the Government acted on our call to protect people from being hassled about debts while they’re receiving crisis care, and we look forward to working with ministers to put these plans in place over the coming year.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article