16 Aug 2013

DAS Update

DAS Update

Alastair Johnston, Trainee Solicitor, considers the primary effects of the new Debt Arrangement Scheme (Scotland) Amendment Regulations and how these regulations will affect both Lenders and Borrowers.

Alastair Johnston, Trainee Solicitor, considers the primary effects of the new Debt Arrangement Scheme (Scotland) Amendment Regulations and how these regulations will affect both Lenders and Borrowers.

The effect of The Debt Arrangement Scheme (Scotland) Amendment Regulations 2013.

As part of the wider consultation on Bankruptcy Law Reform a significant Consultation was carried out in 2012 to evaluate provisions under the Debt Arrangement Scheme (DAS) and to suggest improvement that could be made. The result of this Consultation was the Debt Arrangement Scheme (Scotland) Amendment Regulations 2013. The main changes flowing from the new Regulations are to freeze interest and charges at an earlier date and also to allow a debtor to apply for a payment break of up to six months where there is evidence that there has been a reduction in income of more than 50%. The Regulations also introduce a new preliminary review process before any Appeal.

The number of people utilising the scheme has consistently increased, with a further rise of 40% of those accessing DAS in 2012-13. This constitutes an overall ten-fold increase over the last six years. In 2012-2013 debtors paid £23.2 million compared to £19 million repaid through Protected Trust Deeds over the same period. It therefore appears that the DAS is beneficial to both creditors and borrowers.

The Accountant in Bankruptcy has summarised the following as the main objectives of the Regulations:

  • To freeze the amount of debt owed on the date at which the debt payment programme (DPP) is applied for by a debtor.
  • To clarify when the DAS Administrator may correct accidental errors.
  • To make it clear that the Money Adviser’s fees for setting up and administering the DPP are excluded from the DPP.
  • To make clear that Payment Distributors provide a service on behalf of the debtor.
  • To clarify that the maximum amount which can be charged by Payment Distributors as an administration fee is inclusive of any VAT incurred.
  • To remove the requirement that the two debtors in a joint DPP have a joint and severally liable debt included in the programme.
  • To make clear that where a creditor has sold on a debt incorporated in the DPP, they must notify the DAS Administrator that they have assigned the rights and provide details of the assignee.
  • To re-introduce an element of composition (i.e. circumstances in which creditors can agree to discharge the debtor in return for part settlement by the debtor) into DAS. Where a debtor has been making payments to their DPP for a period of 12 years (excluding any payment breaks) and has repaid at least 70% of the total debt outstanding when the DPP was approved, they will be eligible.
  • To introduce a review process within AiB which will enable the DAS Administrator to reconsider decisions.
  • To amend the Regulations to allow for a flexible payment break of up to six months rather than a fixed period of six months.
Alistair Johnston, Trainee Solicitor

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