Government confirms 6 week ‘breathing space’ for people with debt problems
The Government’s recent amendments to the Financial Guidance and Claims Bill are designed to support those with existing debt problems as well as those deemed more vulnerable. Its main principles revolve around offering a 'breathing space' to debtors and fighting pension cold calls. The changes' backers, including Baroness Ros Altmann, hope for them to become law by 2019.
Up to six weeks’ exemption period
The plan's key solutions to problem debt include providing an exemption period from further interest and charges, to give individuals more chance to seek advice and stabilise their situation. It is expected that this timescale would be set at around six weeks.
These changes have been criticised in some quarters. Jane Goodland, Old Mutual Wealth's Responsible Business Director, said, “Whilst breathing space for those struggling with problem debt is welcome, we cannot avoid tackling the fundamental issue of a massive gap in UK financial capability.”
How it would work
The amendments will give the opportunity for debtors to request advice, particularly helping those with ‘unmanageable debts’ to reschedule their payments, speak to lenders or simply consult experts to hear a professional opinion.
Economic Secretary to the Treasury, Stephen Barclay, said: "For many people in the UK, problem debt seems impossible to escape. Its effects can be far-reaching, impacting all aspects of a person's life and leaving them feeling helpless."
"That is why we are working to give people who are overwhelmed by debt more time to seek advice, find a workable solution and help get their lives back on track."
Fighting pension scams
The amendments are also targeting legislation around cold-calling laws. Presently, it is illegal to cold-call somebody to sell them a mortgage but not for a pension. With pensioners being a vulnerable consumer group and with more and more individuals being scammed, Altmann hopes to extend the relevant legislation to ban the practice.
She also called for mandatory advice to be given to pensioners when switching from one plan to another, to ensure that they fully understand the wider situation and context.
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