THE DEBT ARRANGEMENT SCHEME A CONSULTATION IMPROVING ACCESS DOCUMENT

Transcription

1 TH IM E PR D OV EBT IN A G RR AC A CE NG SS EM A LT T SU EN N O UM C A OC D EN O TI T N SC H EM E

2 THE DEBT ARRANGEMENT SCHEME IMPROVING ACCESS A CONSULTATION DOCUMENT The Scottish Government, Edinburgh 2009

3 Crown copyright 2009 ISBN: The Scottish Government St Andrew s House Edinburgh EH1 3DG Produced for the Scottish Government by RR Donnelley B /09 Published by the Scottish Government, September, % of this document is printed on recycled paper and is 100% recyclable

4 CONTENTS 1. Ministerial Foreword 3 2. Consultation Arrangements 4 3. Executive Summary 6 4. Background The Debt Arrangement Scheme 8 5. Improving Access to the Debt Arrangement Scheme Access to DAS Administration Consent Rules and Fair and Reasonableness Debt Payment Programmes Joint and Several Liabilities Single Debts Payment Distribution Annex A The Scottish Government Consultation Process Annex B Responding to this Consultation Paper Annex C Consultation Questionnaire Annex D Respondent Information Form 27

5 1. MINISTERIAL FOREWORD In the current financial climate many people are finding themselves in a situation where they are unable to repay their debts in full as they fall due. The Scottish Government has a responsibility to support the people of Scotland by providing mechanisms to allow them to take control of their debt. I am therefore issuing this consultation to ask you to contribute to the future of one of Scotland s debt management mechanisms, the Debt Arrangement Scheme (DAS). The Debt Arrangement Scheme was introduced in vember 2004 by the Debt Arrangement and Attachment (Scotland) Act DAS allows those who enter the scheme time to repay their debts in full over an extended period. Currently access to the scheme is only through an approved money adviser. Debts are repaid through structured Debt Payment Programmes (DPPs) which allow people to make regular payments without the fear of action from their creditors. In many cases, the extended repayment period will allow those people breathing space to get back on their feet. For those with mortgages, as long as they continue to service their secured debts, the family home is protected from repossession. Since inception, the number of people participating in DAS has been lower than anticipated. As a result, changes were made to the scheme in June 2007 which allowed charges and interest on debts in a DPP to be frozen. A review conducted last year concluded that DAS worked well for those who were able to access the scheme. However, it highlighted that access to the scheme is varied across the country thus there is a need to consider what can be done to extend access to a much wider group of people. In order to develop the scheme I have set out a number of questions for your consideration. I invite comment from the public and interested parties to help shape the future of the Debt Arrangement Scheme and thereby contribute to a wealthier and fairer Scotland. I look forward to receiving your comments which will greatly assist in the further development of a robust and effective debt management tool for the people of Scotland. 3

6 2. CONSULTATION ARRANGEMENTS The Scottish Government is carrying out a Review of the Debt Arrangement Scheme (DAS) and seeks your response to a number of questions to help shape the future of DAS. Your comments should be made by 14 December Your responses should be made: by to in writing to DASconsultation@aib.gsi.gov.uk Sandy McFadyean Accountant in Bankruptcy 1 Pennyburn Road Kilwinning, KA13 6SA Any queries can be directed to Sandy by telephone on or by at alexander.mcfadyean@aib.gsi.gov.uk. A full list of the consultation questions is contained in Annex C of this document. We would be grateful if you would use the consultation questionnaire provided or clearly indicate in your response which questions or parts of the consultation paper you are responding to, as this will aid collation of the responses received. This consultation, and all other Scottish Government consultation exercises, can be viewed online on the consultation web pages of the Scottish Government website at The Scottish Government now has an alert system for consultations (sgconsult: ). This system allows stakeholder individuals and organisations to register and receive a weekly containing details of all new consultations (including web links). This system complements, but in no way replaces Scottish Government distribution lists. It is designed to allow stakeholders to keep up to date with all Scottish Government consultation activity, and therefore be alerted at the earliest opportunity to those of most interest. We would encourage you to register. Handling your response We need to know how you wish your response to be handled and, in particular, whether you are happy for your response to be made public. Please complete and return the Respondent Information Form (Annex D) which forms part of the consultation questionnaire as this will ensure that we treat your response appropriately. If you ask for your response not to be published we will regard it as confidential, and we will treat it accordingly. All respondents should be aware that the Scottish Government is subject to the provisions of the Freedom of Information (Scotland) Act We would therefore have to consider any request made to it under the Act for information relating to responses made to this consultation exercise. 4

7 Where respondents have given permission for their response to be made public (see the attached Respondent Information Form), these will be made available to the public in the Scottish Government Library and on the Scottish Government consultation web pages by 31 December We will check all responses where agreement to publish has been given for any potentially defamatory material before logging them in the library or placing them on the website. You can make arrangements to view responses by contacting the SG Library on Responses can be copied and sent to you, but a charge may be made for this service. What happens next? Following the closing date, all responses will be considered along with any other available evidence to help us develop the future of the DAS. We aim to issue a report on this consultation by 31 December The report will be posted on the websites of both the Scottish Government and the Accountant in Bankruptcy ( Comments If you have any comments about how this consultation exercise has been conducted, please send them to Sandy McFadyean. We welcome your views on any or all of the issues covered by this paper. To help you make a response we have prepared a summary response paper which is enclosed with this document. There is additional space at the end of the response paper to add any further comments you wish to make. 5

8 3. EXECUTIVE SUMMARY The Debt Arrangement Scheme (DAS) allows people time to repay multiple debts over an extended period, through a formal Debt Payment Programme (DPP). Applications must be submitted through an approved money adviser. Since inception, take up of DAS has been lower than anticipated. To encourage increased participation, the Bankruptcy and Diligence etc. (Scotland) Act 2007 introduced changes to the scheme on 30 June These changes included the freezing of charges and interest on debts included in a DPP. A review of the scheme following the changes was carried out last year and the report has been made available on the website of the Accountant in Bankruptcy (AiB) at: The review examined all 536 DPPs approved between 1 July 2007 and 30 June It reported that, despite increased numbers as a result of the 2007 regulation changes, information from some money advice organisations supported a view that the number of people entering DAS did not reflect the number of debtors who could benefit from the scheme. Additionally, usage of the scheme varied greatly from area to area across Scotland. In particular there are significant areas of Scotland in which debtors either do not have access to an approved money adviser, or where approved money advisers have put forward no DPPs in the five years during which the scheme has been in place. The review also found that some approved money advisers felt that there was a heavy administrative burden on them when proposing and maintaining a DPP. The review showed that almost a quarter of DPPs approved in the review period were expected to run for more than 10 years and that monthly payments in some programmes were particularly low, indeed in a very small minority of cases payments were less than 10 per month. In addition, a number of separate meetings and workshops were held with representatives from the money advice sector, approved money advisers, creditors and debtors. Responding to the results of the review and contributions from stakeholders, the Scottish Government felt that the case for change was sufficiently clear. Legislative changes were subsequently proposed to ensure DAS was accessible to all those who could benefit from the scheme, particularly in view of the current economic climate. The purpose of the Debt Arrangement Scheme (Scotland) Amendment Regulations 2009 was to extend access to DAS by allowing debtors who had not been able to obtain advice from an approved money adviser to apply directly to the scheme. While the Government recognised the importance of good money advice, it sought to remove a barrier created by varied availability or engagement of approved advisers across the country. The Regulations did not prevent any money adviser, having considered all available courses of action with a debtor, from assisting that debtor with an application for DAS. The Regulations also transferred many of the administrative functions involved in setting up and maintaining a DPP from approved money advisers to the DAS administrator. They also set the minimum amount which could be paid each month under a DPP as the greater of 100 or one percent of the total debt due, which resulted in a maximum programme duration of 100 months. 6

9 It became clear, however, during the Parliamentary progress of the Regulations that some stakeholders had serious concerns about the proposed changes to DAS. They were particularly concerned about the removal of mandatory money advice, the introduction of minimum payment and programme duration criteria and an application method which would allow debtors to apply directly for their own DPP online. In view of these concerns, the Regulations were revoked before they came into force and the Scottish Government agreed to consult formally with stakeholders. This public consultation provides information on the scheme and invites responses from interested parties to contribute to the continued development of a robust and effective mechanism to allow the people of Scotland to manage their debt. Responses to the consultation are invited by 14 December 2009 and will be collated by the Accountant in Bankruptcy in a report to be published on the Scottish Government Consultation Website on 31 December The report will also be available at Once responses to this consultation have been received, the Scottish Government will engage with interested parties including the money advice sector to consider what changes, if any, are necessary to the Debt Arrangement Scheme with a view to introducing new Regulations as appropriate in the spring of

10 4. BACKGROUND - THE DEBT ARRANGEMENT SCHEME Following consultation carried out in 2000 on a number of issues, including multiple over-indebtedness and whether there should be a statutory debt arrangement scheme, a working group was set up to consider how such a scheme might work. The membership of the working group included representatives from both Money Advice Scotland and Citizens Advice Scotland. The work of this group contributed to the introduction of the Debt Arrangement Scheme by the Debt Arrangement and Attachment (Scotland) Act The Debt Arrangement Scheme (Scotland) Regulations 2004, building on the recommendations of the working group, set out the details of the Scheme and came into force in vember DAS allows people who have a reasonable level of surplus income, but who are unable to pay their debts in full as they fall due, to pay those debts over a longer period. Whilst a DPP is in place debtors are protected from action by their creditors and the threat of bankruptcy. The impact of bad debt on both debtors and creditors is minimised and debtors are able to make a fresh start once their DPP is approved. However, it should be noted that a debtor has restricted access to credit while a DPP is in place. The debtor in DAS is protected from the risk of losing their family home providing they maintain payments under the DPP, in contrast to bankruptcy or trust deeds where the trustee can realise the value of land and buildings in order to pay a dividend to creditors. Unlike bankruptcy and trust deeds, DAS does not require full surrender or realisation of the debtor s assets (subject to any specific discretionary condition). DAS is supervised by the DAS administrator who is the Accountant in Bankruptcy (AiB). AiB is an Executive Agency of the Scottish Government under the terms of the Scotland Act The Agency operates independently and impartially whilst remaining directly accountable to Scottish Ministers. AiB is responsible for supervising and administering the process of personal insolvency and recording corporate insolvencies in Scotland as well as administering DAS. The DAS Administrator approves money advisers, DPPs and payment distributors under DAS and maintains the DAS register. Currently DAS can only be accessed through approved money advisers who submit applications for approval of DPPs on behalf of their clients. Money advisers wishing to become approved must undergo specific assessment and certification by MATRICS (Money Advice Training, Resources, Information and Consultancy Service). MATRICS is a money advice training service administered jointly by Money Advice Scotland and Citizens Advice Scotland. Currently, anyone can train through MATRICS and can subsequently apply to become an approved money adviser for the purposes of DAS. The DAS administrator will take into account the criteria in regulation 8 of the Debt Arrangement Scheme (Scotland) Regulations 2004 when considering the application for approval. Once granted, approval as a money adviser lasts for 3 years. 8

11 If an approved money adviser is of the view that a DPP is the best option for a debtor s circumstances they will explain the effect of the proposed DPP and prepare and submit an application for approval of the DPP on behalf of their client The approved money adviser will normally intimate an intention to apply for creditors consent to an application to the DAS administrator before the formal application for approval is submitted. This has the effect of protecting the debtor from any action by their creditors whilst preparing the application for approval of their DPP. The approved money adviser then contacts each creditor requesting their consent to the proposed DPP. Creditors currently have 21 days in which to respond and creditors who fail to respond within that period are deemed to give their consent. If all creditors consent or are deemed to consent the DPP will be approved. If one or more creditors actively object, the DAS administrator may approve any proposed DPP which is fair and reasonable, in accordance with specified criteria. Once the programme is approved the debtor no longer makes individual payments to each creditor but instead pays a single amount to an approved payments distributor. The approved payments distributor in turn distributes the money to the creditors. If the DPP is completed the benefit to creditors is the possibility of recovering almost all of the debt without the usual costs incurred in recovering bad debt. Entry to DAS is normally free to debtors but the payments distributor can deduct a fee of up to 10% from the payments made to creditors. Therefore creditors will receive at least 90% of the amount that was owed to them at the date the DPP was approved. Key reforms to DAS were introduced on 30 June 2007 by the Bankruptcy and Diligence etc. (Scotland) Act The reforms included making the DAS process easier for approved money advisers and the freezing of interest and charges on debts included in a DPP. These reforms increased usage of DAS but take up is still variable across the country. The following table demonstrates the number of approved DPPs in each financial year since DAS came into force. Number of approved DAS Debt Payment Programmes / / / / / /10 (ytd : Apr-Jul) 9

12 5. IMPROVING ACCESS TO THE DEBT ARRANGEMENT SCHEME 5.1 Access to DAS The DAS review found significant problems in gaining access to DAS under the current legislation. During the period under review, there were 107 approved money advisers in Scotland, of which 14 were unavailable due to various reasons, such as sickness or maternity leave. There were variations in the number of applications for approval of DPPs submitted by approved money advisers across the country. There are 32 local authority areas in Scotland and in seven of these no DPPs were proposed in the review period. Approved money advisers in just six local authority areas submitted applications for and maintained 61% of all DPPs. 43 approved money advisers did not submit any applications at all during the period under review and only 17 approved money advisers each put forward an average of at least one DPP per month. Although the number of DPPs is low, a Citizens Advice Scotland report entitled Restricted Access published in September 2008, found that 19% of CAB clients were suitable for DAS. Currently it is estimated that less than 5% of CAB clients apply for DPPs. Some approved money advisers have expressed concerns that the process for being MATRICS approved is very burdensome on the individual money adviser, especially the on-going assessment process. Feedback from advisers has suggested training should still be provided to ensure quality DAS advice, however, the MATRICS certification process may not be required. Some money advisers have also suggested that DAS approval should be granted to the adviser s office, bureau or organisation and not the individual money adviser. Respondents are asked to consider whether mandatory training from MATRICS should still be a requirement and if the approved money adviser status should be removed altogether. More money advisers, insolvency practitioners, accountants and other financial or money advice providers might engage with DAS and suggest DPPs as an option to manage their clients debt if the approval requirement was removed. Question 1a: Should applications for DPPs only be made by approved money advisers? Question 1b: Should some form of accreditation be required? Question 1c: Should DAS training remain an essential element of any accreditation process? Question 1d: If the approved money adviser route is no longer essential, who should be able to submit applications for DPPs? 10

13 Respondents are asked to consider whether debtors should be able to make direct applications for approval of DPPs. This would mean that money advice would not be a mandatory requirement before applying for approval of a DPP. Although recommended, there is no mandatory requirement that a debtor should receive money advice prior to applying for their bankruptcy. Question 1e: Should debtors be able to apply for a DPP without having obtained money advice? Question 1f: Should debtors be able to make direct applications for a DPP online? 11

14 5.2 Administration Currently approved money advisers have a number of duties in connection with the administration of the DPP. They provide advice to their clients and draw up a DPP proposal. They liaise with creditors on behalf of their client and collate creditor responses prior to submitting the DAS application. Approved money advisers also have ongoing responsibility to review the DPP annually and provide advice to the debtor. The findings from the DAS review suggested that the work involved in the on-going administration of DPPs might mean that some approved money advisers are more reluctant than others to suggest DAS to their clients. Some approved money advisers considered that reducing the administrative burden of DAS, especially the on-going maintenance of DPPs, would allow them to focus their activity on the provision of advice for existing and new clients. Ready access to money advice is especially important in the current economic climate. The 2009 Regulations, which did not come into force, transferred other administrative functions from approved money advisers to the DAS administrator. The Regulations allowed the debtor, or a money adviser on behalf of the debtor, to submit a DAS application to the DAS administrator without seeking the consent of creditors. The duty to seek creditors consent and to liaise with the debtor would have become part of the DAS administrator s role. The practical implication of this change, as well as minimising administrative work for money advisers, was that money advisers would have more time to invest in providing advice to their clients rather than completing paperwork. Creditors would have benefited from the proposed change as they would have dealt with a central point of contact, the DAS administrator, rather than the 104 approved money advisers based throughout Scotland. The correspondence process would have been simplified for all parties. Question 2a: Should the DAS administrator take on more of the administration duties currently carried out by the approved money advisers? Question 2b: If the DAS administrator takes on more of the administration of DPPs, at what point in the process should the DAS administrator take on this function? Currently all DPPs are reviewed annually by the approved money adviser. If the DAS administrator takes on more of the administration of DPPs is the review still required or would it be sufficient to respond to specific events such as default or creditor intervention? Question 2c: Should there continue to be annual reviews of DPPs? Question 2d: If yes, should the DAS administrator take responsibility for this function? 12

15 5.3 Consent Rules & Fair and Reasonableness The current rules provide that all creditors are requested to consent to a DPP. However, if creditors do not respond to a request for consent within 21 days, they are deemed to have given consent. This means that DPPs are approved unless at least one creditor actively objects to the application within that period.. Respondents are asked to consider whether the 21 days allowed for creditors to consent is adequate. The time limit for creditors to respond to proposals for protected trust deeds is currently 35 days. Creditors may benefit from harmonising the response time for the DPPs and trust deeds. Question 3a: Should the timescale for creditors response be increased from 21 days to 35 days? If any creditor objects to a DPP, the programme may still be approved if the DAS administrator considers that it would be fair and reasonable to do so. The factors the DAS administrator must take into account when considering whether a proposal is fair and reasonable are listed in regulation 26 of the Debt Arrangement Scheme (Scotland) Regulations Factors include the amount of the debt included in the programme, the duration of the DPP and the method and frequency of payments, amongst others. However, where no creditors respond, perhaps because the request for consent was not received, the DPP will be automatically approved even if the programme would not have met the fair and reasonable criteria. This can result in an approved DPP that is very long or has very low monthly payments. Question 3b: Should the DAS administrator be able to consider whether a programme is fair and reasonable where consent or deemed consent is given by ALL of the creditors? Currently the DAS administrator only considers the fair and reasonable criteria after creditors have seen the proposals. However, if the Regulations were amended to allow the DAS administrator to accept an application from the debtor, or a money adviser on behalf of the debtor, prior to any contact with the debtor s creditors, then entry criteria could be defined to try to make the proposals meet the fair and reasonable criteria at the application stage. Question 3c: Should the entry criteria for DAS be defined to enable the DAS administrator to assess whether the proposal is fair and reasonable prior to seeking the consent of creditors? Question 3d: Where the DAS administrator receives a proposal that is evidently not fair and reasonable, should the debtor be given an opportunity to amend the proposal? 13

16 5.4 Debt Payment Programmes Duration and Payment Amounts Currently, if all creditors agree to a proposed DPP, it will be approved without any further assessment. However, where creditors have objected, the DAS administrator will consider whether or not it is fair and reasonable to approve a programme. As a general rule, the DAS administrator is likely to approve any DPP of up to 5 years in duration and refuse to approve anything over 10 years. DPPs falling between these periods will be a matter of individual assessment. One of the most important factors will be the level of creditor agreement. The greater the number of non-consenting creditors, the less likely it is that a programme will be approved if it will extend for more than 5 years. In the DAS review, 23% of approved DPPs were due to last for more than 10 years, mostly because of deemed creditor consent. The longest DPP was expected to last for over 40 years. There is concern about whether DPPs expected to run for long durations are a reasonable and sustainable prospect for debtors, and whether these DPPs provide a realistic rate of return for creditors because of low monthly distribution and payment processing costs. During the lifetime of the DPP, debtor s access to additional credit is restricted and should the DPP fail for whatever reason, all the interest and charges, frozen while the DPP is in place, once again become payable. The 2009 Regulations were designed to introduce a minimum monthly amount of 100 or 1% of the total value of the debt included in a DPP, which results in a maximum payment period of 100 months (eight years and four months). Concerns were expressed by some stakeholders that these provisions would preclude access to DAS for some debtors. Question 4a: Should there be a limit on the duration of a DPP? Question 4b: If yes, what do you consider to be a reasonable maximum period for a DPP? Often, a DPP is proposed for more than 10 years because the approved money adviser is aware of future expected changes to their client s circumstances. They may know, for example that the debtor s disposable income will increase, because their mortgage is due to be paid off within the lifespan of the DPP. If programmes in excess of 10 years are sometimes appropriate, respondents are invited to consider whether the application should provide creditors and the DAS administrator with additional information to explain why a period of longer than 10 years is justified. Question 4c: Should the DAS administrator be provided with additional information to explain why a DPP is likely to last for more than 10 years (or some other specified period)? Currently some DPPs are approved with very low monthly payments. Payments can be distributed either on a pro rata basis or on the basis of an equal payment amount per creditor. This means, in practice, that under the equal payment amount method of 14

17 distribution, creditors with smaller debts will be paid off more quickly than creditors with larger ones. In the large majority of DPPs, payments are currently distributed on a pro rata basis. This sometimes results in individual creditors receiving very small monthly contributions over the lifetime of the DPP. For example, depending on the number of creditors included in the programme, a DPP with payments of 10 per month could result in an individual creditor receiving as little as 20p each month towards the amount they are owed. Of the four payments distributors currently approved for DAS, three will not accept payments of less than 1.00 per creditor per payment instalment. The DAS administrator has concerns about the cost effectiveness of those DPPs which involve very low monthly payments. It may be possible to limit the duration of low value DPPs by setting a statutory minimum monthly payment or maximum duration. However, any restriction on the terms of DPPs might effectively exclude some debtors who are currently able to access DAS. Question 4d: Should there be a required minimum total payment per month in a DPP? Question 4e: If yes, what should the minimum total payment per month be? Question 4f: Should all payments in DPPs be distributed to creditors on a pro rata basis? To address small monthly distributions to individual creditors, payment distribution could be subject to a minimum monthly payment, for example, 5.00 per month, per creditor. If a minimum payment of 5.00 per month per creditor was introduced, this could result in a monthly payment of only where a debtor has only two creditors or, in contrast, a payment of 100 per month where the debtor has 20 creditors. Creditors who are owed small debts would be repaid quicker than creditors who are owed larger debts. This could be seen as unfairly preferential. Question 4g: Should there be a prescribed minimum payment per month, per creditor? Question 4h: If yes, what amount should be required per creditor, per month? Question 4i: Should there be both a minimum monthly payment and a maximum period for a DPP to combat low payments in excessively long DPPs? Discretionary Conditions All DPPs are subject to standard conditions. These include maintaining payments under the DPP, paying continuing liabilities as they become due, not applying for credit (except in certain circumstances) and notifying any material change in circumstances to the approved money adviser. The DAS administrator may also make approval of a DPP subject to one or more discretionary conditions, whether or not creditors have consented or have been deemed to do so, or whether the application has been subject to consideration of whether it is fair and reasonable. 15

18 Regulation 30 of the 2004 DAS Regulations specifies a number of discretionary conditions, and also allows the DAS administrator to impose any reasonable condition to secure completion of the programme. This could, for example, be the requirement to notify the DAS administrator of any change in financial circumstances, for example receipt of a lump sum or the completion of a mortgage, so that an application for variation can be made. Currently discretionary conditions are only applied in a minority of cases. Question 4j: Should the DAS administrator be required to make more use of discretionary conditions? For example, where a debtor has an expected future lump sum or anticipated additional income to put towards their DPP. 16

19 5.5 Joint and Several Liability Where two or more debtors have a joint obligation for any debt, the lender or creditor can recover the whole indebtedness from either, or any, of them. Currently this means that each person must enter into a separate DPP and make separate payments to the payments distributor for distribution to that creditor. If a requirement for a minimum payment per month, as discussed in section 5.4 of this document, was introduced, this might affect the ability of couples with joint debts to access the scheme. For example, a couple who have a joint disposable monthly income of 180 could not both have DPPs if the minimum payment was set at 100. If DAS was extended to allow couples with joint debt to apply for a joint DPP, this could reduce the administrative burden from the process. It may be possible for a joint DPP to include joint debts as well the individual debts of each person. Question 5a: Should joint DPPs for debtors with joint obligations for at least one debt be introduced? 5.6 Single Debts Most people want to pay what they owe, but some can only do so if given time to pay. A modern system of debt enforcement recognises that debtors should be protected from further action by their creditors and from the threat of bankruptcy if they need time to pay. The Debt Arrangement Scheme provides protection but under current legislation, is not available to a debtor unless they have more than one debt. The Debtors (Scotland) Act 1987 introduced two mechanisms which protect debtors from enforcement action by individual creditors. These mechanisms, often referred to as diligence stoppers, are time to pay directions and time to pay orders. Both of these only apply to single debts. These formal time to pay arrangements are not available unless the creditor is actively pursuing what they are owed through legal processes. There are therefore some debtors who currently cannot arrange to pay a single debt because their creditor is not taking action against them, yet are not able to manage their debt because they are not eligible for DAS. Question 6a: Should debtors be able to propose a DPP that includes only one debt? 17

20 5.7 Payment Distribution Only payment distributors who have been approved by the DAS administrator can currently be used to distribute payments made through a DPP to creditors. Payment distributors may also, if the programme proposal so requests, agree to make payments for ongoing liabilities such as council tax and utility bills. Whilst the debtor aims to repay all that they owe through their DPP, the payments distributor can deduct up to 10% from the amount distributed to creditors for their service. This amount has not been varied since the scheme was introduced. Question 7a: Should the DAS administrator invite applications to tender for this role with a view to achieving best value and improve returns for creditors? Question 7b: Should the DAS administrator take on the role of payments distributor with a view to achieving best value and improve returns for creditors? 18

21 ANNEX A THE SCOTTISH GOVERNMENT CONSULTATION PROCESS Consultation is an essential and important aspect of Scottish Government working methods. Given the wide-ranging areas of work of the Scottish Government, there are many varied types of consultation. However, in general, Scottish Government consultation exercises aim to provide opportunities for all those who wish to express their opinions on a proposed area of work to do so in ways which will inform and enhance that work. The Scottish Government encourages consultation that is thorough, effective and appropriate to the issue under consideration and the nature of the target audience. Consultation exercises take account of a wide range of factors, and no two exercises are likely to be the same. Typically, Scottish Government consultations involve a written paper inviting answers to specific questions or more general views about the material presented. Written papers are distributed to organisations and individuals with an interest in the issue, and they are also placed on the Scottish Government web site enabling a wider audience to access the paper and submit their responses. Consultation exercises may also involve seeking views in a number of different ways, such as through public meetings, focus groups or questionnaire exercises. Copies of all the written responses received to a consultation exercise (except those where the individual or organisation requested confidentiality) are placed in the Scottish Government library at Saughton House, Edinburgh (K Spur, Saughton House, Broomhouse Drive, Edinburgh, EH11 3XD, telephone ). All Scottish Government consultation papers and related publications (e.g. analysis of response reports) can be accessed at: The views and suggestions detailed in consultation responses are analysed and used as part of the decision making process, along with a range of other available information and evidence. Depending on the nature of the consultation exercise the responses received may: indicate the need for policy development or review inform the development of a particular policy help decisions to be made between alternative policy proposals be used to finalise legislation before it is implemented Final decisions on the issues under consideration will also take account of a range of other factors, including other available information and research evidence. While details of particular circumstances described in a response to a consultation exercise may usefully inform the policy process, consultation exercises cannot address individual concerns and comments, which should be directed to the relevant public body. 19

22 ANNEX B RESPONDING TO THIS CONSULTATION PAPER The Deadline for Responses is 14 December 2009 Your details Name Job title (if applicable) Organisation (if applicable) Address Postcode address For the purposes of analysing responses, it would be helpful if you would also indicate the capacity in which you are completing this questionnaire, please tick as appropriate. Advice Sector Creditor Individual Insolvency Practitioner Legal Body Professional Body Statutory Body Other (Please Specify) 20

23 ANNEX C CONSULTATION QUESTIONNAIRE The Debt Arrangement Scheme Improving Access 1. Access to DAS 1a. Should applications for DPPs only be made by approved money advisers? 1b. Should some form of accreditation be required? 1c. Should DAS training remain an essential element of any accreditation process? 1d. If the approved money adviser route is no longer essential, who should be able to submit applications for DPPs? (tick as many as required) Any money adviser in the free money advice sector Individuals who are certified to deliver the scheme Any organisation certified to deliver DAS Professionals e.g. accountants, Insolvency practitioners and lawyers Other (please tell us who below) 1e. Should debtors be able to apply for a DPP without having obtained advice? 1f. Should debtors be able to make direct applications for a DPP online? 1g. Please make any other comments about access to DAS below. 21

24 CONSULTATION QUESTIONNAIRE The Debt Arrangement Scheme Improving Access 2. Administration 2a. Should the DAS administrator take on more of the administration duties currently carried out by the approved money advisers? 2b. If the DAS administrator takes on more of the administration of DPPs, at what point in the process should the DAS administrator take on this function? The DAS administrator should administer DPPs from the application stage, including the notification to creditors of proposal. The DAS administrator should administer programmes after the DPP has been approved. Other (please specify below) 2c. Should there continue to be annual reviews of DPPs? 2d. If yes, should the DAS administrator take on responsibility for this function? 2e. Please make any other comments about the administration of DPPs below. 22

25 CONSULTATION QUESTIONNAIRE The Debt Arrangement Scheme Improving Access 3. Consent Rules & Fair and Reasonableness 3a. Should the timescale for creditors response be increased from 21 days to 35 days? 3b. Should the DAS administrator be able to consider whether a programme is fair and reasonable where the consent or deemed consent is given by ALL of the creditors? 3c. Should the entry criteria for DAS be defined to enable the DAS administrator to assess whether the proposal is fair and reasonable prior to seeking the consent of creditors? 3d. Where the DAS administrator receives a proposal that is evidently not fair and reasonable, should the debtor be given an opportunity to amend the proposal? 3e. Please make any other comments you may have about consent rules and the fair and reasonable test below. 23

26 CONSULTATION QUESTIONNAIRE The Debt Arrangement Scheme Improving Access 4. Debt Payment Programmes Duration and Payment Amounts 4a. Should there be a limit on the duration of a DPP? 4b. If yes, what do you consider to be a reasonable maximum period for a DPP? 5 years 10 years 15 years Other years 4c. Should the DAS administrator be provided with additional information to explain why a DPP is likely to last for more than 10 years (or some other specified period)? 4d. Should there be a required minimum total payment per month in a DPP? 4e. If yes, what should the minimum total payment per month be? Under Other 4f. Should all payments in DPPs be distributed to creditors on a pro rata basis? 4g. Should there be a prescribed minimum payment per month, per creditor? 4h. If yes, what amount should be required per creditor, per month? Under Other 4i. Should there be both a minimum monthly payment and a maximum period for a DPP to combat low payments in excessively long DPPs? 24

27 CONSULTATION QUESTIONNAIRE The Debt Arrangement Scheme Improving Access 4. Debt Payment Programmes (cont.) Discretionary Conditions 4j. Should the DAS administrator be required to make more use of discretionary conditions? For example, where a debtor has an expected future lump sum or anticipated additional income to put towards their DPP. 4k. Please make any other comments you may have about debt payment programmes below. 5. Joint and Several Liability 5a. Should joint DPPs for debtors with joint obligations for at least one debt be introduced? 5b. Please make any other comments about joint DPPs below. 25

28 CONSULTATION QUESTIONNAIRE The Debt Arrangement Scheme Improving Access 6. Single Debts 6a. Should debtors be able to propose a DPP that includes only one debt? 6b. Please make any other comments you have about single debts below. 7. Payment Distribution 7a. Should the DAS administrator invite applications to tender for this role with a view to achieving best value and improve returns for creditors? 7b. Should the DAS administrator take on the role of payments distributor with a view to achieving best value and improve returns for creditors? 7c. Please make any other comments you have about payment distribution below. 26

29 ANNEX D RESPONDENT INFORMATION FORM Please note that this form MUST be returned with your response to ensure that we handle your response correctly 1. Name/Organisation Title Mr Ms Mrs Miss Dr 2. Postal Address P O S T C O D E Phone 3. Permissions I am responding as Individual (please complete parts (a) and (b) (a) Please tick the box if you do not agree to your response being made available to the public (in the Scottish Government library and / or on the Scottish Government website)? (b) Where confidentiality is not requested, we will make your responses available to the public on the following basis Please tick one of the following boxes, make my response, name and address available, make my response available, but not my name and address, make my response and name available, but not my address or Group / Organisation Please complete part (c) (c) The name and address of your organisation will be made available to the public (in the Scottish Government library and/or on the Scottish government website). Are you content for your response to be made available? Please tick as appropriate (d) We will share your response internally with other Scottish Government policy teams who may be addressing the issues you discuss. They may wish to contact you again in the future, but we require your permission to do so. Are you content for the Scottish Government to contact you again in the future in relation to this consultation response? 27

30 Crown copyright 2009 ISBN: (Web only) This document is also available on the Scottish Government website: RR Donnelley B /09 w w w. s c o t l a n d. g o v. u k