Application for a variation
The average length of a DPP is around six years. Within the DPP period, there may be times when the client’s personal circumstances change, meaning the DPP may need to be varied.
DAS legislation allows the client, debt adviser or a creditor to apply to the DAS administrator to vary the DPP.
Variations can result in:
•the amount the client pays in each instalment increasing or decreasing;
•the frequency of the payments changing;
•the length of the DPP increasing or decreasing;
•new conditions being attached to the DPP.
Remember, the client should continue to make their agreed payments even when an application for variation has been submitted, as any missed payments may result in the DPP being revoked.1Reg 36 DAS(S) Regs
Short-term financial crisis payment break
When an immediate (and often temporary) crisis requires immediate action, debt advisers can approve a variation under the short-term financial crisis payment break (STFCPB) criteria. This acknowledges that sometimes people have an immediate crisis which means they cannot make their payment. The definition of ‘crisis’ is at the adviser’s discretion. If unsure whether their client’s circumstances constitute a crisis, seek guidance from the DAS administrator.
Example
Danny needs his car to get to work. It breaks down and needs to be fixed. Instead of incurring debt to pay the repair or making a full variation application, Danny’s adviser believes he has experienced a crisis which justifies not making the DAS payment. The adviser processes a STFCPB immediately on eDEN.
Debt advisers can process a STFCPB via eDEN. Creditors are not required to give prior consent.
Notification of the approval is sent to all creditors, the debt adviser, the payments distributor and the DAS administrator.
A client can have up to two STFCPBs approved in a rolling year.
STFCPBs can be applied retrospectively to a missed payment, but only if the next payment is not yet due.
The reasons for the deferral are shared with the DAS administrator and creditors and adviser should be careful about sharing the client’s personal information.
What if the client is paying by direct debit?
If a client is making payments to their DPP by direct debit, the payment is requested three days before the agreed payment date. This is not an AiB process, but is a direct debit instruction processes. Therefore, if the debt adviser processes a STFCPB on eDEN in the three days prior to a direct debit being due, they must notify the payments distributor separately via eDEN conversations so that the payment can be returned to the client. The adviser should make the client aware of this at the point of agreeing the STFCPB.2Reg 11 DAS(S) Regs
Payment break variation
Where a client cannot make payments due to a change in circumstances which goes beyond a short-term crisis, the debt adviser can establish if the income shock requires a variation application for a longer payment break. A client can apply for up to a six-month payment break if their disposable income has reduced by 50 per cent or more and it is considered the reduction will last for the period of the break. Note: when applying for a payment break variation, the income and expenditure (CFT) fields on eDEN must be completed. Advisers must ensure they have seen evidence of the reduction int the client’s disposable incom has been reduced by 50 per cent or more.3Reg 37(h) DAS(S) Regs The payment break suspends payments and interrupts the DPP period. The DPP will be extended by the corresponding time period.
Creditors should not contact the client or issue demand letters during this period.
After the payment break has finished, the client should recommence payments as agreed in their DPP. During this time, the client may seek debt advice to reconsider their debt management options.
There is no limit to the number of times a client can apply for a payment break variation during the DPP, provided they meet the necessary criteria. Before approving the variation, the DAS administrator considers whether the client has had a previous payment break and takes note of creditor comments.
All other variation types
For variations where there has been a material change in the client’s circumstances, the income and expenditure section of the variation application must be completed in full. eDEN automatically populates the income and expenditure fields using information from the original DPP application, if the case was created after 1 July 2011. For cases created and approved before that date, eDEN does not hold the original information. Ensure the income and expediture information is amended to reflect the client’s current financial circumstances. This may mean looking at the income and expenditure in the most recent variation on the case. For pre-July 2011 cases with no previous variations on eDEN and the information and expenditure has not changed, you must input sufficient information to allow the system to use the existing surplus income.
The adviser must apply for a variation to a DPP to the DAS administrator through eDEN.
When an application for a variation is issued to creditors, or approved automatically, the DAS administrator records it in the DAS Register. It shows in the section for ‘variations’, with the date of application and date of decision (where relevant), and the status of the applications – eg, ‘issued’ or ‘approved’.
Only ‘debt change’ variation applications from debt advisers must be sent to the DAS administrator in the first instance. When the application has been checked, the DAS administrator issues the variation proposal to creditors. All other types of variation application are issued straight to creditors, or approved automatically if the term of the DPP is reduced.
When filling in the ‘reason for variation’ and ‘supporting information’ boxes, ensure that any detailed or personal information is put in the ‘reason for variation’ box as this is only visible to the adviser and the DAS administrator. Information in the ‘supporting information’ box should be general and anonymised, as this is shared with creditors.
The variation notification gives all parties 21 days to submit comments. After 21 days, the DAS administrator makes a decision on the variation application. Creditors who fail to respond during the 21 days are deemed to have consented to the proposed variation. The DAS administrator must agree to a variation where:4Reg 38 DAS(S) Regs •a client agrees with all the creditors that the programme should be varied;
•a client and a creditor agree that the client no longer needs to pay the creditor all or part of what is owed;
•the DPP was approved before 1 July 2007 and the client wishes to apply for the freezing of interest, fees and penalties on their debts;
•the effect of the variation reduces the term of the DPP;
•a liability of the client has been discharged by a creditor applying composition;
•all creditors in the DPP have consented to the variation;
•the variation has the effect of reducing the length of the DPP
The DAS administrator may approve a variation subject to the ‘fair and reasonable’ criteria where:5Reg 38 DAS(S) Regs •there has been a material change of circumstances which may include an increase or decrease in the client’s income;
•a debt due at the approval of the programme was omitted from the DPP or wrongly assessed for the DPP because it was overlooked, or someone made an error or for some other reasonable cause;
•future debt, which was not quantifiable when the DPP was approved, becomes due for payment – eg, if the client has a debt which they do not have to start paying for some months;
•a contingent debt, which was not quantifiable when the DPP was approved, becomes due for payment – eg, if the client has been a guarantor for someone else’s debt and the creditor has called up the guarantee;
•the client has an emergency and needs credit to meet an essential requirement;
•circumstances have reduced the client’s disposable income by 50 per cent or more, and the client wishes to have a payment break of up to six months.
If a creditor is applying for a variation, they must first have attempted to agree to the variation with the client. A debt adviser should try, on the client’s behalf, to agree a variation with the creditors first as the DAS administrator takes their views into account.