New Initiative Provides Welcome Relief For Consumers

A new initiative to tackle interim periods of consumer insolvency has been announced by the Ministry of Justice that will allow struggling consumers to make minimal token payments until their financial situation has recovered sufficiently to reinstate contracted repayments terms. In return, they will be given breathing space by their creditors, who will agree to freeze interest for the length of the arrangement.


Under the new initiative, the CCCS will introduce a new payment arrangement for consumers with at least two unsecured debts, who are unable to meet their debt repayments, allowing them to make token payments of as little as £1 per debt per month - provided they take responsibility for their debts, engage with their creditors, and pay what they can. The customer can benefit from this scheme for an initial six month period, after which they will hopefully be back on their feet financially and able to resume their debt repayments, or an alternative form of debt remedy may have to be considered.


David Rodger, Managing Director of Debt Advice Foundation comments: “It is well-intentioned and potentially good news for many thousands of people that are genuinely in a short-term blip, as opposed to serious, long-term financial difficulty. However, the industry needs to find a way of establishing which clients are which or the advice could see people in long-term token payment arrangements for an unnecessarily long time.”


“We also have to be careful that this doesn’t creep into the Advisor’s tool kit as a recognised debt solution; it is not a solution, it is an interim device to provide breathing space. The other potential worry is that the wording of the release suggests that this is a voluntary code of practice that creditors are not obligated to adhere to.”


David Rodger, Managing Director – Debt Advice Foundation


Further details about the initiative can be found here.