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Dealing with Insolvency: Government Proposals to help Debtors

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.

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Dealing with Insolvency: Government Proposals to help Debtors

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

  2. The Consumer Credit and Personal Insolvency Review • Consumer Credit • Debt Enforcement • Debt Advice and Personal Insolvency

  3. 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

  4. 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

  5. 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

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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

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

  13. 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

  14. 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

  15. 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

  16. Contact Details • Sam Roberts • Assistant Director, Policy Unit • Zone B, 3rd Floor • 21 Bloomsbury Street • London, WC1B 3QW • Tel: 020 7291 6822 • Mobile: 07837 107781 • sam.roberts@insolvency.gsi.gov.uk

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