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Debt is dealt with better in Scotland - we need the same for England and Wales Debt is dealt with better in Scotland - we need the same for England and Wales
(6 months later)
When Carole, a full-time nurse in Glasgow, found herself in credit card debt and unable to meet even the minimum repayments, she was, in one way, fortunate.When Carole, a full-time nurse in Glasgow, found herself in credit card debt and unable to meet even the minimum repayments, she was, in one way, fortunate.
Following an appointment with a debt adviser, Carole decided that the security and protection offered by a debt payment programme was the best option. This enables Carole to repay her debts over an agreed period, based on a fair assessment of what she can afford. She won’t face escalating interest or penalty charges and the Scottish legal protection provided by the scheme means she does not have to worry about creditors harassing her for payment.Following an appointment with a debt adviser, Carole decided that the security and protection offered by a debt payment programme was the best option. This enables Carole to repay her debts over an agreed period, based on a fair assessment of what she can afford. She won’t face escalating interest or penalty charges and the Scottish legal protection provided by the scheme means she does not have to worry about creditors harassing her for payment.
But if Carole had lived in England or Wales, where agreements between debtors and credits do not offer the same protection, things would have been very different. Under Welsh or English debt management plans, creditors are under no obligation to provide breathing space, or to freeze interest or charges while the debtor is making repayments.But if Carole had lived in England or Wales, where agreements between debtors and credits do not offer the same protection, things would have been very different. Under Welsh or English debt management plans, creditors are under no obligation to provide breathing space, or to freeze interest or charges while the debtor is making repayments.
Related: The big danger today is people don't realise they have a debt problem
In England and Wales, each time a creditor refuses to give breathing space, a carefully balanced debt plan can instantly become unaffordable. This often means the person who owes money has little incentive to seek help before their problems get out of hand; they get statutory protections only after they become unable to pay back and are forced to enter an insolvency option.In England and Wales, each time a creditor refuses to give breathing space, a carefully balanced debt plan can instantly become unaffordable. This often means the person who owes money has little incentive to seek help before their problems get out of hand; they get statutory protections only after they become unable to pay back and are forced to enter an insolvency option.
The Financial Inclusion Commission, of which I am a member, wants to see the UK government set up a new debt support programme for England and Wales, based on the Scottish debt arrangement scheme, as part of our request for measures to empower struggling families and individuals who want to help themselves out of problem debt.The Financial Inclusion Commission, of which I am a member, wants to see the UK government set up a new debt support programme for England and Wales, based on the Scottish debt arrangement scheme, as part of our request for measures to empower struggling families and individuals who want to help themselves out of problem debt.
The Scottish scheme provides debtors with legal protection from their creditors while they get help with their debts – and this protection continues if they go on to use a formal debt payment programme. These programmes are legally binding formal agreements between debtors, creditors and debt arrangement scheme advisers. It offers something which is lacking at present in England and Wales – a sustainable solution that offers protection for vulnerable people in debt.The Scottish scheme provides debtors with legal protection from their creditors while they get help with their debts – and this protection continues if they go on to use a formal debt payment programme. These programmes are legally binding formal agreements between debtors, creditors and debt arrangement scheme advisers. It offers something which is lacking at present in England and Wales – a sustainable solution that offers protection for vulnerable people in debt.
Our proposal for England and WalesOur proposal for England and Wales
The Financial Inclusion Commission’s proposal builds on our 2015 report, Financial Inclusion: Improving the Financial Health of the Nation, and we are also calling on the government to bring forward primary legislation to establish this new approach in the next session of parliament.The Financial Inclusion Commission’s proposal builds on our 2015 report, Financial Inclusion: Improving the Financial Health of the Nation, and we are also calling on the government to bring forward primary legislation to establish this new approach in the next session of parliament.
At a minimum, a debt support programme in England and Wales should include the following:At a minimum, a debt support programme in England and Wales should include the following:
A programme like this could have a range of positive consequences. For those in debt, it will mean stronger protections and support to help them tackle their financial problems. For many lenders, it will mean seeing a greater proportion of debts repaid in cases where they would otherwise have received very little, if anything. For the country’s broader economy, this can help to reduce worrying levels of household debt, currently threatening economic stability.A programme like this could have a range of positive consequences. For those in debt, it will mean stronger protections and support to help them tackle their financial problems. For many lenders, it will mean seeing a greater proportion of debts repaid in cases where they would otherwise have received very little, if anything. For the country’s broader economy, this can help to reduce worrying levels of household debt, currently threatening economic stability.
Reports suggest that 8.8 million people face debt problems in the UK, owing a staggering total of £1.43tn. Unmanageable debts are mainly caused by life-changing events such as a bereavement, long-term illness or loss of employment. It can impact people who have worked hard and have managed their finances responsibly all their lives, but find themselves in difficultly due to events out of their control.Reports suggest that 8.8 million people face debt problems in the UK, owing a staggering total of £1.43tn. Unmanageable debts are mainly caused by life-changing events such as a bereavement, long-term illness or loss of employment. It can impact people who have worked hard and have managed their finances responsibly all their lives, but find themselves in difficultly due to events out of their control.
Having mechanisms in place to protect those facing debt issues is vital if we are to achieve true financial inclusion in the UK. It is never a bad time to pass a good law.Having mechanisms in place to protect those facing debt issues is vital if we are to achieve true financial inclusion in the UK. It is never a bad time to pass a good law.
Lord Wilf Stevenson of Balmacara is a member of the Financial Inclusion Commission and a shadow business minister in the House of Lords. Talk to us on Twitter via @Guardianpublic and sign up for your free weekly Guardian Public Leaders newsletter with news and analysis sent direct to you every Thursday.Lord Wilf Stevenson of Balmacara is a member of the Financial Inclusion Commission and a shadow business minister in the House of Lords. Talk to us on Twitter via @Guardianpublic and sign up for your free weekly Guardian Public Leaders newsletter with news and analysis sent direct to you every Thursday.