(2) what assessment has been made of the potential to use the process for debt relief orders as a model for regulating debt management schemes; and if he will make a statement;
(3) what guidance his Department issues on the use of up-front fees for debt management schemes; and if he will make a statement;
(4) whether his Department has undertaken research into the potential financial effects on the least well-off from the introduction of statutory regulation of debt management schemes; and if he will make a statement.
The current economic downturn is causing real hardship for many hardworking consumers and the Government are determined to do all they can to help those in financial difficulties, while balancing this against creditors' rights to recover their debts wherever possible, both now and in the future.
Currently, it is not possible for the Lord Chancellor to control either advertising or the fees charged by debt management scheme providers. However, the powers contained in chapter 4 of part 5 of the Tribunals, Courts and Enforcement Act 2007 (TCEA) would permit this in respect of approved schemes.
Following concerns about the operation of this sector, the consultation paper ‘Debt Management Schemes—delivering effective and balanced solutions for debtors and creditors’ was published on 18 September and looks at the current operation of the debt management market. It seeks views on whether any changes are needed in this area and, if so, what those changes should be.
It sets out three broad options: continue with the measures currently under way to raise awareness about current schemes and enforce existing rules with operators (Option 1); improve current schemes without regulation, possibly through the introduction of a protocol (Option 2); or implement the Lord Chancellor's powers to approve debt management schemes contained in chapter 4 of part 5 of the TCEA 2007 (Option 3).
The consultation asks specific questions about how debt management schemes should be supervised and, for example, whether any existing scheme could be used or adapted to achieve the aims. This could include using the process for debt relief orders.
It is expected that the results of the consultation will be available in the new year, at which time the Government will announce what action they plan to take in this area. However, advertising generally will be considered during the compliance review currently being carried out by the Office of Fair Trading. Its report will be issued in spring 2010.
Separate to this consultation, the Government intend to issue guidance on what consumers should expect from debt management plan operators shortly. This guidance will explain that operators should advise on all debt assistance options available to those approaching them and give clear information about the fees that they charge. This guidance will supplement the more detailed guidance ‘In Debt? Dealing with your creditors’, published by the Insolvency Service on 2 July 2009.
An initial impact assessment was published alongside the consultation paper which considered the potential effectiveness of all of the options contained in the consultation paper. The impact assessment considers, as far as possible, the potential effects of all of the options on various sectors of society but also requests additional information to assist in the development of this assessment.
The consultation paper and initial impact assessment can be accessed via the Ministry of Justice website at