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Scottish Government: DAS Consultation 2019

Firstly, we note the AiB’s continued efforts to drive more people in problem debt into the Debt Arrangement Scheme. As well as being a better solution for most creditors, feedback from our membership suggests that alternative debt solutions are often being mis-sold and not in the interests those who enter them. As a sector, we are concerned that the continued growth in, for example, Protected Trust Deeds will ultimately drive down access to affordable credit. Increasingly, we find that our members are so concerned about the increase in bad debt in the sector – with the figure having now increased to 3.5% in Scotland – that they are making difficult decisions on whether to restrict lending in order to protect their own financial sustainability. We are aware of some smaller credit unions in Scotland where there is a genuine concern that the level of bad debt is a threat to the continued existence of the credit union.

We have answered the consultations questions in more detail below.

Q1(a):  Should the CMA role be extended to include payments distribution responsibility?


We have no concerns about the CMA role being extended in this manner, and welcome the potential advantages in terms of having one point of contact, more options for the debtor, and a source of income for those not currently able to provide this service.

Q1(b):  Should AiB offer a payments distribution service?

Q1(c):  If you answered ‘yes’ to Question 1(b) above, under which circumstances should AiB offer this service? 


We support the AiB being able to provide this service when required, either as a provider of last resort, or for those organisations that cannot/do not wish to offer a payments distribution service.

Q2(a):  In the event of the CMA role being extended to include payments distribution responsibility, at what level should the statutory administration fee be set? 

We would support an increase up to a maximum of 20%.  

We feel that 23% is a significant leap, which would fundamentally change the Debt Arrangement Scheme. Although we feel that there has been a lack of evidence provided in the consultation on the actual costs of administering a DAS – which are never revealed to creditors -  we accept the recommendation that this move would remove some of the barriers currently in place for providers wishing to offer DAS, and feel that a 10% increase in creditor contributions would be reasonable step to achieving this.  

Q 3(a): Do you agree that automatic approval should be introduced for cases where the debt due to objecting creditors is less than a specified percentage of the total DPP debt?


Q 3(b): If you have answered ‘Yes’ to Q3(a) above, what proportion of total debt owed to non-consenting creditors should trigger the requirement for a fair and reasonable test to be conducted? 


Q 3(c):  Do you agree that deemed creditor consent should be introduced for variations? 


Q 3(d):  Where variation proposals will lead to a reduction in the duration of the DPP, do you agree these should be approved automatically by the DAS Administrator? 


Q 3(e):  Should AiB be able to submit variations on behalf of the debtor in the circumstances outlined above? 


Q 4(a): Should short-term crisis payment breaks be introduced to address periods of crisis? 


Q 4(b): If you have answered “yes” to question 4(a) above, do you agree money advisers should be responsible for authorising the proposed short-term crisis payment breaks without having to consult creditors? 


We feel that, where there is a genuine crisis, any delay could threaten the long term sustainability of the DAS.  

Q 4(c): How many short-term crisis payment breaks should be available per rolling-year?