15/03/2010 – Support for people in debt
A lifeline for people in debt was agreed today. The Ministry of Justice working with the British Bankers' Association (BBA) and the Consumer Credit Counselling Service (CCCS), and with input from Citizens Advice (CitA) developed a package to assist people suffering an unexpected 'income shock' for example, illness, redundancy, or reduced hours. The initiative will allow debtors to make minimal token payments if appropriate until their financial situation recovers.
The package is a response to a Ministry of Justice, Department of Business, Innovation and Skills and Insolvency Service consultation on Debt Management Schemes, published in September 2009, also to ongoing work by the Lending Standards Board to monitor and enforce the recently established lending code. Responses to the debt management consultation are still being considered and immediate legislative action is unlikely.
Under the new initiatives:
• Building societies, banks and credit card lenders following the Lending Code will supply additional protections to people finding themselves in financial difficulties. Under guidance issued by the Lending Standards Board, lenders will consider freezing or reducing interest and charges. If appropriate Lenders will also accept token payments.
• After Easter the CCCS will introduce a new payment arrangement for consumers with at least two unsecured debts and unable to meet their debt repayments, allowing them to make token payments of as little as £1 per debt a month, provided they take responsibility for their debts, engage with their creditors, and pay what they can. This is to show the customer's creditors that, despite currently not being able to meet debt repayments, they are keen to repay when they can. Customers can benefit from this scheme for an initial six month period, with the hope that after this they will be back on their feet financially and able to resume their debt repayments, or alternatively another form of debt remedy will have to be considered.