Economy, Energy and Fair Work Committee

Meeting date: Tuesday, September 18, 2018

Official Report 787KB pdf

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Subordinate Legislation

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Debt Arrangement Scheme (Scotland) Amendment Regulations 2018 [Draft]

We move on to agenda item 3. I welcome Jamie Hepburn, the Minister for Business, Fair Work and Skills, who is accompanied by Victoria Morton, a lawyer in the constitutional and civil law division of the Scottish Government’s legal directorate, and Richard Dennis, the Accountant in Bankruptcy and agency chief executive.

We are looking at the draft Debt Arrangement Scheme (Scotland) Amendment Regulations 2018. I invite the minister to make an opening statement.

Convener, I begin by thanking you and the committee for taking time to consider the draft regulations. They make a small number of important changes to the debt arrangement scheme, providing greater flexibility and accessibility to the programme.

I believe that we should be proud of the debt arrangement scheme as the first scheme of its type in the UK and a highly successful debt repayment programme. It provides protection to those who wish to repay their debt but need more time to do so. It is an important mechanism in helping those who find themselves in difficulty with debt. Over 6,000 people have used the scheme to pay off their debts, preventing them from having to either become bankrupt or enter a protected trust deed. It has also allowed a substantial return to creditors, with almost £200 million having been repaid since 2011.

The proposed changes reflect feedback that has been received in consultation with stakeholders about how to enable more people to benefit from the scheme. In particular, they reflect a request from the money advice sector to increase the scheme’s flexibility. I share its view that the proposed changes will allow more people to successfully complete repayment programmes.

I will briefly highlight the two most substantial changes. The first is to remove the requirement to contribute the full surplus income that a person has as part of any debt arrangement scheme. That is to allow debtors a better chance to deal with any unexpected events that they may face. Creditors may have to wait longer to be repaid in some cases, but I believe it is in their interests to see debts being repaid in full through a successful debt payment programme, rather than being written off through bankruptcy.

Stakeholder feedback also led to the proposal to allow housing debt to be excluded from proposed debt payment programmes. In the majority of cases, the right choice will still be for all debts to be included, but the scheme can work only where it offers the debtor protection from enforcement action, and I take the view that the mandatory inclusion of housing debt could in some circumstances pose a threat to an individual’s housing status. That is clearly something that we want to avoid. There is also a concern that the possibility may have put some people off signing up for the debt arrangement scheme who could otherwise have benefited from it.

We are also using the opportunity that is provided by the regulations to make a number of other improvements. They are likely to affect only a small number of cases but, given that the regulations give us an opportunity to make such improvements, I believe that we should take the opportunity. For example, regulation 10 modernises the legislative language to reflect changes in the law on same-sex marriage, while regulation 4 extends the powers of a debt arrangement scheme’s administrator to fix accidental errors to reflect experience that has been gained in running the scheme.

Regulation 16 extends the circumstances in which the debtor may apply for a payment break as a result of a fall in income, to include cases where that income comes from benefits. In response to the matter being highlighted during the consultation process, regulation 6 creates a sensitivity clause to afford vulnerable applicants the same level of protection when entering an insolvency solution so that, where appropriate, those who are confirmed as being at risk may have their address details withheld from the debt arrangement scheme register.

The draft regulations provide an opportunity to significantly enhance a highly successful programme and they have received widespread support from across the sector. I hope that I can rely on the committee’s support. I will, of course, be happy to take any questions that you may have, as will Dr Dennis and Ms Morton.

Thank you, minister. Does any member of the committee have any questions?

There being none, we move to agenda item 4 and the formal debate on the motion to approve the affirmative instrument. I invite the minister to move the motion.

Motion moved,

That the Economy, Energy and Fair Work Committee recommends that the Debt Arrangement Scheme (Scotland) Amendment Regulations 2018 [draft] be approved.—[Jamie Hepburn]

As no one wishes to speak on the matter, I will simply put the question. The question is, that motion S5M-13670 be agreed to.

Motion agreed to.

Thank you for coming in.

Thank you, convener.

Is the committee agreed that I, as convener, and the clerk should produce a short factual report on the committee’s decision and arrange for it to be published?

Members indicated agreement.

Thank you.

11:43 Meeting continued in private until 12:10.