Is It Time For Some Debt-Free Breathing Space?

Back in October, the Government announced plans for a six-week ‘breathing space’ for those in debt.

This would mean that interest on their debts is paused; charges frozen; and any enforcement action is stopped. It also allows more time for people to seek advice on how best to get out of debt and get their finances in order.

In order to prepare for the implementation of a ‘breathing space’, the Treasury announced a consultation, with a view to introducing meaningful legislation next year. This month, the Treasury consultation has been published – but does it go far enough?

Consumer group Money Saving Experts, in partnership with debt charity Step Change, don’t think so.

They’re calling on the Government to change their plans, so that those looking to clear their debts could do so quickly and hassle-free. The key changes they’re requesting to the scheme include:

The creation of a true ‘breathing space’

If you’re in debt, this would mean that absolutely every additional charge, from accumulated interest to sending the bailiffs around would stop. Immediately. This is often the most difficult first step for anyone seeking to clear what they owe, as no sooner have you paid off a part of the debt, it’s added again in the form of late-payment charges – making all the effort seem worthless in the long-run. The threat of enforcement, too, frequently serves to add additional stress to an already stressful situation.

Extend the ‘breathing space’ period

A six-week moratorium would be incredibly handy for many of us looking to get debt-free – but Martin Lewis of the MSE believes that, in order to be really effective, the grace period should be extended to one year. This would allow those in financial difficulties to make a move to a debt-free life, while also psychologically benefitting them, removing another stressful barrier. As such, they’re calling on the Government to commit to a longer period.

‘Breathing spaces’ should remain on your credit record for just a year

While MSE admit that some form of record-keeping is necessary, they’re mindful that, for some, a breathing space on their credit file could be harmful in the future. Little wonder, then, that they’re advocating for records of any breathing spaces should stay on file for no longer than a year, which is the same amount of time for any credit applications you make.

Expanding the scheme across the United Kingdom

Currently, the Government has only been looking at a ‘breathing space’ period for those in England, while Scotland has its own version, known as the Debt Arrangement Scheme. The MSE would like to see this applied to those also living in Northern Ireland and Wales.

The ‘breathing space’ concept will undoubtedly – particularly at a time when we’re all feeling the pinch, with prices rising faster than our wages can keep up. It’s also likely to benefit younger people, helping them get out of debt addiction quicker.

Recently, the Financial Conduct Authority warned that there was a ‘pronounced’ rise in indebted young people, with the FCA’s Head, Andrew Bailey stating that:

‘There are particular concentrations [of debt] in society, and those concentrations are particularly exposed to some of the forms and practices of high cost debt which we are currently looking at very closely because there are things in there that we don’t like. There has been a clear shift in the generational pattern of wealth and income, and that translates into a greater indebtedness at a younger age. That reflects lower levels of real income, lower levels of asset ownership. There are quite different generational experiences.’

But whether the Treasury listens to the Money Saving Experts and implements stronger protections and assistance for those in debt, remains to be seen.

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