The Scottish government is to make further revisions to its debt arrangement scheme (DAS) to make it more flexible, in a bid to encourage wider adoption of the initiative, which is designed to offer a statutory alternative to insolvency or debt consolidation
DAS was launched in 2004 and is administered by Accountant in Bankruptcy (AiB). Reforms in 2011 make it a more attractive option, and it has been used by more than 6,000 people to repay over £200m of debt since then. Following a consultation, the scheme is to be amended further.
Under the proposals, the requirement for all surplus income to be included in a debt payment programme (DPP) will be removed. The compulsory inclusion of mortgage and rent arrears will be dropped and debtors will be able to exclude these debts if they so wish.
The AiB said the legislative changes will primarily look to improve DAS accessibility and the sustainability of DPPs by introducing greater flexibility where possible. In particular, it will remove the requirement to include all debts in a DPP. Debtors will now be able to choose whether or not to include rent and mortgage arrears, after the consultation found this could result in debtors facing difficulties in their housing situations.
It will also end the requirement for the debtor’s monthly contribution to their DPP to be their full surplus income. Debtors will now be able to choose to offer creditors less than their full surplus income, with any rejection of such an offer being subject to a ‘fair and reasonable’ test as with creditor rejections of DPP proposals on other grounds.
Paul Wheelhouse, minister for business, innovation and energy, said: ‘These changes make DAS more flexible, helping encourage more people to consider the scheme as a viable method for bringing their finances back under control and one that creditors can have confidence in.’
AiB’s consultation also identified a need to enhance the scheme administration to remove the cumbersome nature of some elements of the legislative and administrative machinery, and also highlighted a lack of money advisers offering DAS in both the free to client and fee-paid sectors.
For both sectors, the financial imperatives point to other solutions (especially trust deeds), while the current DAS administrative process means that advisers have to commit a significant amount of effort to supporting their DAS clients. AiB says it will consult later in the year on a new process for handling DAS administration and payment of charges.
AiB report DAS the way forward is here.
Report by Pat Sweet
