The Government has asked for consumers and the industry to give their views on new plans that would give people in serious debt trouble a six-week ‘breathing space’.

The central idea behind the proposals is that, during this six-week grace period, affected individuals would be legally protected from firms wishing to take action to recover the debt, and/or to impose additional interest charges. During the six-week period, consumers would therefore be free to seek advice on their debt problems. A similar scheme already exists in Scotland.

During the next 12 weeks, the Government will meet with representatives of charities, debt advice organisations, lenders and creditors to discuss the proposals. Meanwhile all interested parties are welcome to reply to the call for evidence on the Treasury website, which lasts until January 16 2018.

Some of the questions asked in the call for evidence include:

  • How should the Government determine who is eligible for breathing space?
  • Should breathing space be permitted on all forms of debt?
  • What must a breathing space participant do in order to be considered eligible for the scheme, e.g. attend advice sessions, make repayments where their financial situation allows?
  • Could a breathing space period potentially end before the six weeks are up, say if the person’s financial situation improved?
  • Should the fact that someone entered a breathing space period appear on their credit file?

Initial legislation is expected to be drafted during 2019, and any parliamentary bill is likely to enjoy cross-party support.

Economic Secretary to the Treasury, Stephen Barclay MP, said:

“For many people in the UK problem debt seems impossible to escape. Its effects can be far-reaching, impacting all aspects of a person’s life and leaving them feeling helpless.

“That is why we are working to give people who are overwhelmed by debt more time to seek advice, find a workable solution, and help get their lives back on track.”

Jane Tully, director of external affairs at The Money Advice Trust, said:

“Many banks and credit card companies already offer ‘breathing space’ by freezing interest and charges as a matter of good practice, but a statutory scheme will extend this significantly.”

National advice charity Citizens Advice has called for the Financial Conduct Authority (FCA) to act to curb the problem of rising debt. This follows the issue of new data from the Bank of England, which show that consumer borrowing increased by 9.9% in the 12 months to September 2017, and now stands at £204 billion.

Gillian Guy, Chief Executive of Citizens Advice, said:

“The rise and rise of consumer debt is a cause for alarm at a time when large numbers of people are already in financial difficulty.

“The FCA must step in to curb the worrying rise in debt – by banning credit card firms from pushing more credit onto people who haven’t asked for it, and compelling them to offer support sooner when it’s clear people can’t pay.

“The FCA’s own research shows that 8 million people are already struggling with debt  – leaving them vulnerable to falling into a debt spiral should interest rates rise or a life change sets them back on their repayments.

“It’s essential that the regulator and credit card companies act together to prevent people getting stuck with ever-growing debts that they can’t afford to repay.”

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.