New proposals by the Scottish Government to introduce changes to the Debt Arrangement Scheme (DAS) are to be welcomed (See Debt Arrangement Scheme: The Way Forward). However, the question is, do they go far enough to save the Scheme, which saw a 49% reduction in take up following the introduction of changes in 2014-15 and remained 46% down in 2015-16, on the number of cases approved in 2014-15?
Debt Laws Too Debtor Friendly
The decline, which partly followed the adoption of a number of legislative changes which were introduced between 2014 and 2015, were underpinned by a belief that debt laws had become too debtor friendly and saw the number of approved programmes fall from 4,161 in 2014-15 to 2,043 in 2015-16, before slightly increasing in 2016/17 to 2,233. It is anticipated the slump in take up of Debt Payment Programmes (DPPs) under the DAS will, however, continue in 2017/18, based on reports from the first three quarters suggesting figures for the full financial year may be as low as 2,443, still representing a 41% reduction on the number of cases approved in 2014/15.
The 2014-15 changes included provisions under the Debt Arrangement Scheme (Scotland) Amendment Regulations 2014, which required consumers entering the Scheme to include all debts in DPPs and culminated in 2015 with the Commencement of the Bankruptcy and Debt Advice (Scotland) Act 2014 and the introduction of a new Common Financial Tool (CFT), which required debtors to contribute all their disposable income to DPPs.
It is now these changes that the Scottish Government is proposing should be reversed to improve access to the Scheme, which represents an acknowledgement that their previous position that DAS was too flexible was wrong.
Funding Cuts to Money Advice
However, since 2014-15, the amount of money being invested by local authorities in free money advice services has now also fallen from £21 million per year to £11.72 million in 2016/17, representing a cut of 44% (not accounting for inflation) and has seen the number of money advisers being employed or funded by local authorities fall from 370 full time positions (or the equivalent) to only 305 in 2016/17.
The decline in the take up of the Debt Arrangement Scheme, however, cannot totally be attributed to funding cuts, as a report produced in 2017 showed that the decline was not just for consumers accessing the Scheme via the free sector, but also via the private sector (DAS: Is It Broken?).
It is highly likely though with more advice agencies now closing down in the next financial year and further funding cuts to free money advice services anticipated, that the current proposed changes by the Scottish Government are too little too late and will do little to revive the fortunes of the Scheme.
The Future
The question now also must be asked, not just what is the future for free money advice services in Scotland and the Debt Arrangement Scheme, but what is the future for other changes that were introduced in 2014-15? This includes the requirement that consumers wishing to enter formal debt solutions, including bankruptcy, first have to seek advice. The simple fact is such policies, which were presented as providing increased consumer protection in 2014-15, now have the effect of being obstacles as free front-line money advice services continue to experience funding cuts and clients struggle to access free front-line money advice services.
It is too late, local government is also expected to do more work for less and the pressure is now on to tackle homelessness and welfare reform. In the last three years our service has had to make a case to remain, we have even got to the point of redundancy interviews. Front line money advice services are under continual pressure with no time to spare inputting a DAS case with formulaic inputting, dependence on creditors providing balances and an uncertain decision making process. Universal credit will pull in every resource that can be found to prevent people being kicked out on the street for non payment of rent. I think changes to DAS have missed the ferry and are stranded on their own isolated island.