22 Feb 2013

DPP and DAS Update for Secured Lenders

DPP and DAS Update for Secured Lenders

Lender Services Partner Rob Aberdein provides an update for secured lenders with regards to the Accountant in Bankruptcy's Debt Arrangement Scheme.

Lender Services Partner Rob Aberdein provides an update for secured lenders with regards to the Accountant in Bankruptcy's Debt Arrangement Scheme.

We have recently engaged with the Accountant in Bankruptcy in order to assist us with advising clients as to how they should handle the mechanics of Debt Payment Programmes (DPPs) under the Debt Arrangement Scheme (DAS). The Scottish Government has also recently publicly stated that changes to the DAS regime will be forthcoming.

Lenders should therefore be aware of the following (which is 'straight from the horse's mouth' so to speak):

  • Reconfirmation, if you were not aware, that Interest and Charges must be frozen when the DPP is approved. The Scottish Government will however be changing this in early course to the date the DPP application is made. The freeze on interest and charges only applies however on successful completion of the DPP and can therefore be applied as an aggregate 'one time' adjustment.
  • Clarity on how the AiB would wish the monthly payments to be treated. Lenders will receive the monthly contribution over the CMI net of the AiB and Payment Distributor's charges. The gross contribution must be applied (monthly) however to the arrears figure and the charges by the AiB and Payment Distributor are not refundable if the DPP does not complete.
  • The DAS DPP Appeal Process is presently the exclusive jurisdiction of the Sheriff Courts and Sheriffs. The Scottish Government wish to change this to introduce an obligatory review stage that will be handled by AiB as a precursor to recourse to the Sheriff Courts. No guidance has yet been provided on turnaround times.  There will be no fees charged for the AiB review process.
  • The debt advice charity StepChange (previously CCCS) are in the process of increasing their Scottish presence and have signalled their intention to begin offering DAS to their clients, this may lead to increasing prevalence of DPPs in both the secured and unsecured sectors.
  • The AiB has committed to working with Aberdein Considine in order to co-author a 'Secured Creditor's Guide to DAS and DPPs'. The document would provide practical guidance for lenders on how to deal with DPPs with specific reference to the challenges it brings to UK lenders litigating on a volume basis.
  • Reconfirmation that whilst an approved DPP stops Diligence, it does not stop Ejections. Post-Decree DPP approval therefore will not stop ejections proceeding.

Conclusions? Lenders need to be 'tuned into' DAS and DPPs under the current regime; they must ensure that they monitor developments/volumes during 2013 and will require to put appropriate resource and systems in place to deal with those developments/volumes.

For the full Scottish Government Press Release on the impending changes to DAS go to http://www.aib.gov.uk/news/releases/2013/02/press-release-action-help-scots-struggling-their-finances

Rob Aberdein, Partner

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