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Debt Management Services

Volume 498: debated on Tuesday 27 October 2009

On 18 September the Ministry of Justice published a consultation paper entitled “Debt Management Schemes—delivering effective and balanced solutions for debtors and creditors”. I have today deposited copies of the consultation paper, impact assessment and annexes in the Libraries of both Houses, in the Vote Office, the Printed Paper Office and on the internet at:

This consultation focuses on establishing whether there is a need to develop current debt management schemes (DMS).

The following options are currently available to support people with debt problems:

County Court Administration Orders (for those with unsecured debts below £5,000)bankruptcy, Individual Voluntary Arrangements (IVAs), Time Orders (for debts regulated by the Consumer Credit Act) the Debt Relief Order (for those with unsecured debts below £15,000, disposable income below £50 per month and assets of less than £300) and non-court based debt management/repayment plans operated by both the commercial and not-for-profit sectors.

Additionally other initiatives have been introduced to provide further assistance including:

the new practice direction covering pre-action creditor behaviour (developed by the Civil Justice Council) introduced on 6 April, requires all business creditors to provide consumers with both information about how to contact them to assist direct negotiation, details of free advice providers and a requirement to allow time for advice to be given where this is the chosen course;

the Department of Business, Innovation and Skills (BIS) has reached agreement with the credit card and debt collection sectors that those facing payment problems will be offered a minimum 30-day breathing space to make progress in getting their affairs in order once they have engaged with a debt advice agency.

Officials at the Ministry of Justice have worked closely with officials at the Insolvency Service and the Department for Business Innovation and Skills to ensure that the consultation paper addresses the feedback that has been received from various stakeholders following the publication of the consumer White Paper, and from other Government Departments. The paper puts forward a number of options and explains the advantages and disadvantages to debtors, creditors and debt management scheme providers of each of these options. This will enable stakeholders to make a fully informed decision about which option would deliver both a speedy resolution to a broad range of debt problems experienced by a wide range of people and allow creditors to recover their debts wherever possible.

In considering whether action is required, the Government will be guided by the following objectives:

helping people who could, but are struggling to, repay their debts;

ensuring that fees charged by debt management schemes providers are reasonable and consistent;

ending the practice of some creditors adding interest to debts included in a repayment plan;

preserving the best features of the current debt management industry;

ensuring that needs of debtors, creditors and providers are correctly balanced; and

ensuring that debtors are aware of the range of options available to them and are advised on the most appropriate and sustainable solution(s) for their circumstances.

The intention is to ensure that:


debtors will receive advice about all of the options available to them;

they will know how much needs to be repaid because creditor interest and charges would be stopped;

will know roughly how long this will take—but this may vary due to changes of circumstances;

the Tribunals Courts and Enforcement Act 2007 allows for the possible composition of debts. The consultation paper asks questions about whether this is needed;

will be protected from enforcement—without permission of the court;

will not be forced to realise assets; and

will not be harassed by creditors.


may have their debts paid in full—possibly minus operators’ charges;

will not need to chase debts;

will have information presented to them in a common format; and

will be confident that they are receiving the maximum possible monthly instalment.

If the consultation results in the introduction of a code of best practice or the approved DMS, it could be possible to introduce these as early as 2010, depending on parliamentary time. This would deliver early support for debtors.