Proposed changes to the Debt Arrangement Scheme in ScotlandPrint publication
Walker Morris partner Louise Power highlights key changes to the Debt Arrangement Scheme in Scotland likely to be brought about by proposed new legislation.
What is the Debt Arrangement Scheme (DAS)?
DAS is a Scottish Government-backed debt management scheme, introduced on 30 November 2004, which allows you to repay your debts through a Debt Payment Programme (DPP).
The programme allows people to pay off their debts over an extended period of time, while giving them protection from the creditors who may be taking action against them to recover the debt.
It can last for any reasonable length of time and, if approved, will freeze all interest, fees and charges on the debt included, resulting in them being waived if the programme is fully completed.
In 2016, Accountant in Bankruptcy (AiB) began a review of previous DAS reforms brought in by amendment regulations in 2013 and 2014, with two consultations taking place. The Response, “Debt Arrangement Scheme (DAS): The Way Forward”, which was published in March this year, recommended a number of improvements which the new regulations hope to implement.
The aim of the proposed Debt Arrangement Scheme (Scotland) Amendment Regulations 2018 (DASSA Regulations 2018) is to introduce improvements to DAS; to increase the accessibility and sustainability of DPPs; and to offer greater flexibility.
In short, if approved, the DASSA Regulations 2018 will amend the Debt Arrangement Scheme (Scotland) Regulations 2011 to:
- remove the requirement for the mandatory inclusion of housing debt in a DAS DPP;
- allow the debtor to have more flexibility when calculating the payment offer they are making towards their DAS DPP;
- standardise the provisions governing when a debtor may obtain further credit while in DAS, in line with other insolvency products available to the people of Scotland;
- promote transparency within money advice organisations working with DAS by specifying that, where appropriate, they have the arrangements in place to ensure compliance with Financial Conduct Authority requirements;
- enhance aspects of Business DAS to allow it to be more sustainable and accessible for Scottish businesses; and
- make provision for the debtor to be able to offer a lump sum payment to their DPP from the proceeds of the future sale or re-mortgage of their dwelling house.
Pending successful completion of the parliamentary process, the DASSA Regulations 2018 will come into force from 29 October. Further regulations are planned for 2019 and the AiB have a working group set up to inform a further consultation exercise. This process will likely commence in September or October of this year.
This legislation aims to make DAS more accessible and more flexible for debtors in Scotland. It is hoped that the changes will provide confidence and predictability for lenders, whilst helping people in severe financial difficulty by giving them a fresh start.
The changes introduced by this legislation are not expected to have any significant financial impact on Scottish businesses and there will be minimal changes needed to the existing DAS case management system ‘DASH’ (Debt Arrangement Scheme Hub).
Walker Morris will monitor and report on any key developments. In the meantime, if you would like any information or advice about debt management in Scotland more generally, please do not hesitate to contact Louise Power.