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Our response to the HM Treasury consultation on Statutory Debt Repayment Plan

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StepChange Debt charity has responded to the HM Treasury consultation on proposed regulations for the Statutory Debt Repayment plan (SDRP) scheme.

Given the importance of DMPs in the debt solutions landscape, StepChange remains strongly supportive of the principles of providing statutory protections for consumers who can repay their debts. The SDRP protections would deliver additional protections for clients, bringing in important priority debts (usually outside of DMPs at present) and giving clients certainty that all plan creditors will be bound by statutory protections. In addition, it will require sectors who have not historically contributed to Fair Share contributions to fund debt advice.

However, our response outlines our significant concerns that a number of features of the current proposed rules look overly complex and poorly aligned with the actual needs and behaviours of DMP clients. For instance:

  • The limited payment flexibilities proposed in the current SDRP Regulations are likely to lead to SDRPs failing that would have succeeded with the greater flexibilities we can use with DMPs. We call on the government to redraft SDRP rules to better align with the needs of actual debt advice clients based on the evidence of what currently works with DMPs.
  • The SDRP rules create a number of new requirements for debt advice providers, some of which appear to be potentially very burdensome and not obviously necessary: We urge the government to quickly and effectively work with debt advice providers and other stakeholders to simplify the administration of the SDRP scheme for the benefit of all where possible. Without such simplification the costs of setting up and administering an SDRP will be needlessly increased in comparison to the cost of servicing a DMP.
  • Administrative simplicity and a smooth client journey will matter a lot to both the administrative cost and client uptake of SDRP. Our experience of DPP in Scotland shows too many clients falling out of the DPP application process and this cannot be replicated in SDRP.

Our response highlights a number of areas where we believe the proposed SDRP regulations should be amended or reworked. In the absence of some key achievable changes we believe the current regulations might be unworkable.

We also highlight the vital importance of ensuring SDRP systems must work well from day one:

  • An effective electronic system is essential to the success of the scheme: Breathing Space was implemented quickly and weaknesses in the Breathing Space portal created huge administrative burdens and resource costs for StepChange. We ask government to learn the lessons from this and deliver an electronic system for SDRP with all the functionality needed to share plan related information between debt advice providers like StepChange and creditors.
  • The electronic system must seamlessly integrate with StepChange’s existing client and payment systems and should be no less efficient as a minimum requirement.
  • The implementation process must be based on sound systems architecture and business requirements that meet the needs of all key stakeholders: Government will need to start work on this quickly and effectively if the implied Summer 2024 implementation target date is to be achieved. The implementation strategy must deliver efficient administrative processes that work well from day one.

This will only be achieved through a clear and collaborative implementation strategy from government that brings debt advice providers and high-volume creditors (such as financial services firms providing consumer credit) together to map a successful client journey to and through the SDRP scheme.

We are also concerned that the proposed SDRP funding rate could be a significant funding cut. We call on government to increase the proposed SDRP funding rate to 13% and to support implementation costs, which our experience of Breathing Space suggests could come to £2.5 million.

You can download our full response here.