Foreword
Just over a month after I wrote the foreword to the previous Debt Advice Handbook, the coronavirus pandemic began its devastating impact on our lives. As the UK entered its first lockdown, demand for debt advice dropped significantly, and the focus of work for many debt advisers shifted to supporting clients with welfare benefits claims due to loss of income. Required to work from home, debt advisers responded with their usual adaptability, quickly transforming longstanding working practices and processes to successfully deliver advice to clients remotely. This hasn’t been easy, especially for many advisers with children and other caring responsibilities, or with their own health and income concerns, and advisers should be commended for their achievements.
The reduced demand for debt advice was largely due to the government making its most significant intervention in debt recovery since the second world war, with the suspension of enforcement agent (commonly referred to as ‘bailiff’) visits and home repossessions, and forbearance measures for consumer credit and mortgages introduced by the Financial Conduct Authority. Additionally, the £20 weekly uplift to universal credit (UC) and working tax credit (WTC), the Self-Employment Income Support Scheme and additional council tax support funding helped to ease the financial pressures felt by many people in debt.
Thanks to funding from the Money and Pensions Service, the online version of the Debt Advice Handbook was regularly updated and made available without charge to debt advisers, providing an invaluable resource to advisers trying to keep pace with the plethora of temporary pandemic provisions. As those measures come to an end, the debt advice sector braces itself for an anticipated increase in demand for advice. The withdrawal of the £20 UC and WTC uplift, rising energy costs and an increase in national insurance will inevitably lead to more clients with deficit budgets, a problem I highlighted in my previous foreword that has only worsened. It is estimated that, across the sector, 40 per cent of clients now have insufficient income to pay essential household expenses, making it ever more difficult for debt advisers to achieve successful outcomes for their clients. Therefore, it’s more important than ever for advisers to have the comprehensive and up-to-date information contained in this Handbook.
I’m pleased to see this edition has a dedicated section on the breathing space scheme, which was introduced in 2021 in England and Wales only (with no equivalent yet in Northern Ireland). With more than 5,000 applications during its first six months, advisers again demonstrated their ability to adopt new working practices, familiarising themselves with new guidance, processes and an online portal, while taking on additional administrative work into the bargain. Time will tell how effective breathing space will prove to be and whether a moratorium of up to 60 days is sufficient time in which to do meaningful work with complex cases. However, the scheme is undoubtedly a powerful new tool with which debt advisers are able to suspend recovery action, especially enforcement agent activity and possessions proceedings.
Also reflected in this edition of the Handbook, significant changes to insolvency came into effect during 2021, as debt relief order (DRO) monetary limits were increased (again, in England and Wales only). Many more clients are now eligible for a DRO, including those for whom the £680 fee was previously a barrier to bankruptcy. A new individual voluntary arrangement protocol was implemented in all new arrangements from August 2021, bringing some welcome improvements: greater clarity for home owners about whether equity release will be expected as part of the arrangement, and an end to insolvency practitioners having a claim to payment protection insurance refunds or other redress after completion of the arrangement.
Following the suspension of visits by enforcement agents earlier in the pandemic, enforcement resumed in 2021, but with significant changes. ‘Just’ enforcement agents introduced virtual visits, which were found to be lawful by the High Court, and although take-up has been low to date, it is symptomatic of the way technology is changing the sector. Last year (2021) also saw the establishment of the Enforcement Conduct Authority (ECA), an initiative between the enforcement and debt advice sectors. The ECA aims to raise standards in enforcement and better protect people in debt, and I welcome this historic opportunity to improve outcomes for clients. The Institute of Money Advisers will, of course, continue to represent the interests of debt advisers and their clients through our membership of the Enforcement Law Reform Group and our involvement in the Taking Control campaign.
Other developments on the horizon include a review of the personal insolvency regime by the Insolvency Service. With input from the debt advice sector, creditors, insolvency and academic experts, I hope this review will address gaps in the current range of options, as well as removing some of the barriers to insolvency. Consultation on a new Statutory Debt Repayment Plan is also expected in 2022, and it is important that the views of debt advisers are heard. The pandemic has led to some of the most significant changes ever seen in the world of debt advice, many of which will have an enduring impact. Technology has been essential, enabling remote advice provision at a time when in-person services have not been possible. But the needs of many of the most vulnerable clients were not met, because they were unable to access face-to-face debt advice. Whenever ‘normal service’ resumes, it is essential that the needs of all people in debt are met in a way that is best for them and which will achieve the best outcomes. Whether that channel is online, telephone or face-to-face, the Debt Advice Handbook remains the one constant in this changing world, an essential resource underpinning the successful delivery of high-quality debt advice.
Robert Wilson
Chief Executive, Institute of Money Advisers