The statutory debt repayment plan (SDRP) will be a new statutory debt solution focused on repayment of debt, rather than debt relief, addressing a gap in the market. It will cover a broad range of debts, including debts owed to the government and to creditors outside of financial services and will protect debtors from enforcement action, creditor contact, and interest, fees and charges on their debts while they repay them.
The SDRP is expected to benefit debtors, creditors, debt advisers by providing a solution with higher success and repayment rates than current debt solutions.
It will only be accessible via professional, FCA regulated debt advice, or through a local authority. Repayment terms will be set at 10 years, although users will be able to apply for a repayment suspension for up to one month if their financial situation changes, subject to extension by two months by the professional debt advice provider.
The plan will prevent debts spiralling by stopping the accrual of all types of interest, as well as default fees and charges. It will stop or pause recovery, collections and enforcement action taken against a debtor.
The Insolvency Service will maintain an electronic system that supports the administration of plans. The electronic system will be used by debt advice providers to enter details of plans they administer, to communicate with the Insolvency Service and other creditors about those plans, and to monitor the performance of those plans over time.
The consultation will explore debt advice provider expectations of the proportions of their clients currently offered insolvency solutions, or those entering informal agreements who would instead be recommended a SDRP and this will be reflected in the final stage impact assessment.
It is estimated that creditors will receive an additional £1.8bn from increased recoveries as a result of the SDRP in its first 10 years and debt advisers will gain a total benefit of £66.2m over the first 10 years of the scheme.
There is currently no statutory debt solution focused entirely on repayment in England and Wales. Existing statutory debt solutions for individuals are all forms of insolvency and almost always involve some element of debt relief: bankruptcies, individual voluntary arrangements (IVAs), and debt relief orders (DROs).
This consultation will inform the government’s work to finalise the regulations. The plans is to introduce the regulations by the end of 2022.
The consultation closes for comment on 5 August 2022.
