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New Payment Relief For People In The UK

People worldwide are struggling to cope with their debt levels including those in first world countries such as the UK. Even though their standard of living may be higher, often consumers in these countries have greater access to credit and it is important to remember that people there are also experiencing the effects of the global pandemic and hard lockdowns.

‘those with overwhelming debts can apply for and receive a 60 day payment gap or breathing space’

New provisions have just come into effect in England and Wales which will help ease the pressure for those under severe debt strain.

With the help of certain debt help services, those with overwhelming debts can apply for and receive a 60 day payment gap or breathing space.

Breathing Space

During the 60 days of what is known as “breathing space” people do not have to make payments (but they can if they want) and the credit providers will have to halt all interest and fee calculations on the accounts. 

Though not all types of debt can be included, most types are including council tax arrears and utilities (power and water etc). Another important debt included is rental arrears for those struggling to keep up payments.

‘Troubled debtors will now be able to apply for such relief once every 12 months’

These types of accounts (below) qualify to be included in such an arrangement:

    • mortgage or rent arrears
    • credit/store cards
    • personal loans
    • payday loans
    • overdrafts
    • utility bill arrears
    • council tax arrears

Troubled debtors will now be able to apply for such relief once every 12 months. Those who are receiving mental health treatment are able to apply for such relief even if they had such relief within the last 12 months.

Scotland & Ireland

Scotland has what is called the Debt Arrangement Scheme which provides similar relief through a Debt Advisor whereas Ireland (Northern Ireland) does not yet have any such provision in place.

In Northern Ireland charities who assist consumers who are struggling with debt can approach credit providers and ask them to be kind and help but no official legislation is yet in place to force cooperation. Plans are, however, underway to get such legislation in place in the near future.

Lessons From Abroad

It is interesting to see how countries are taking such big steps to provide consumers with assistance, not to simply provide a short payment holiday to consumers every year but to provide relief to those who genuinely need it. The idea is for consumers to use their funds, during those two months, to make significant adjustments to their living circumstances and sort out emergencies. Once these are taken care of they will no longer place the consumers under stress and they will be able to resume regular payments. 

This was originally one of the ideas put forward for debt review in South Africa (at the start of the debt review process) but this later fell away in the face of demands from credit providers to get payments on accounts as soon as possible and not being willing to halt interest calculations during the start of the process. At present, the National Credit Act simply limits credit providers’ ability to start new legal action against a consumer who is beginning debt review.

It is also good to see how under the new arrangement in the UK, trained professionals at the various debt relief agencies and charities will play an integral part in ensuring that there is no abuse of the system which would otherwise prejudice the credit providers.