As part of its election manifesto, Labour has announced its intention to introduce a version of Scotland’s Debt Arrangement Scheme (DAS) into England and Wales. The DAS gives people in Scotland struggling with their debts extra breathing space to repay the money in full. Once the scheme has been put in place, debt charges are frozen and a debt payment programme is created that allows debtors to spread the cost of their repayments over an extended period of time.
This is in contrast to the options that are currently available to those struggling with personal debt in England and Wales, such as debt management plans, where no protection is provided from the debt charges. The result is that a debtor’s situation simply gets worse as the amount they owe continues to grow.
How does the Debt Arrangement Scheme work?
Under the terms of the Debt Arrangement Scheme, a debtor can set up a debt payment programme (DPP) to make one monthly repayment at an affordable rate. This payment is based on the amount of money the debtor has left every month once they have paid all their household costs like food, accommodation and utility bills. Importantly, it is not based on the amount requested by creditors. Once the DPP has been set up, creditors are not allowed to contact the debtor, increase the debt in any way or take further legal action.
Once the DPP is in place, any interest or charges being applied to the debts will normally be frozen. If the debtor’s situation changes at any time, they can apply to vary the payment or even take a six-month payment break. 10 percent of the monthly payment will be taken as fees to cover the running costs of the scheme.
Therefore, for those who have some income left each month after paying their living costs but are currently struggling to repay their debts, this could be the most appropriate solution.
StepChange Calls on Other Parties to Follow suit
Following the inclusion of the DAS in Labour’s election manifesto, the debt charity StepChange is now calling on all political parties to follow suit and include proposals that give people who are struggling to manage their debt problems extra breathing space.
Household debt in the UK is currently rising quickly, with nearly nine million people in the UK using credit to cover their everyday living costs. Mike O’Connor, the chief executive of StepChange Debt Charity, has said: “Problem debt is rarely just a financial issue, it impacts on mental and physical health, it impacts on productivity and employment and it impacts on the lives of children in affected households.
“We need continuing efforts to crack down on harmful high-cost credit. And we need to help families build up savings to help insulate them from problem debt. These policies could limit the most harmful effects of debt and significantly reduce the £8.3bn it currently costs in the UK.