Government publishes Statutory Debt Repayment Plan consultation

The consultation on the Statutory Debt Repayment Plan (SDRP) was published on 17 May 2022, covering draft regulations, a consultation document with questions and a draft regulation impact assessment¹. The consultation closes on 5 August 2022¹. The SDRP is intended to fill a gap in the debt solution landscape by providing a statutory solution focused on repayment of debts, rather than the debt relief that comes with insolvency options such as bankruptcy, individual voluntary arrangements and debt relief orders¹.

The scheme will be accessible only through professional, FCA regulated debt advice, or through a local authority, for individuals who live in England or Wales¹. Debtors will only be eligible if they have not been subject to another plan within the most recent 12 months, and will not be eligible if they are subject to a debt relief order, interim order, individual voluntary arrangement or are an undischarged bankrupt¹. Debt advice providers will be able to propose plans lasting up to ten years, though the government says it would expect plans of more than seven years only in exceptional circumstances¹. Joint plans will be allowed for two eligible people who share at least one debt¹.

An SDRP will stop the accrual of all types of interest, as well as default fees and charges, and stop or pause recovery, collections and enforcement action¹. Debtors may take out credit while in a plan, but must tell potential creditors they are subject to a plan and must establish that their debt advice provider does not object if the credit would take their total outstanding credit above £500¹. Payment breaks last one month, or one payment, whichever is longer, extendable by the debt adviser to two months or two payments, with debtors limited to one break in any given 12-month rolling period¹. Debt advice providers will be required to complete annual reviews¹.

On payment allocations, 10% of a debtor's repayments would fund activity in the scheme; of the remainder, 30% would be split pro-rata between priority debts based on their size, with the other 70% split pro-rata between all debts, including priority ones¹. Priority debts include rent or mortgage arrears on the primary residence, debt owed to central or local government, gas or electricity supply debt, hire-purchase debt, and internet service provider or mobile phone network debts¹. The Insolvency Service will hold and administer the SDRP register and maintain the SDRP portal¹. The estimated cost of the 10% allocation is £267.90m over the first 10 years of the scheme¹.

The same source notes that, given the complexity of the scheme, the implementation period between the regulations being laid and the scheme starting will now be at least 18 months¹. The SDRP is based on the existing Debt Arrangement Scheme (DAS) offered in Scotland, which provides a statutory debt repayment solution known as a Debt Payment Plan¹. It follows the Breathing Space scheme, which has been in existence for a year¹.

Why it matters for households

For people in England and Wales with problem debt, the SDRP would be a repayment route that sits alongside insolvency options, with protections from creditor contact and enforcement action while payments are made¹. Access would depend on going through FCA regulated debt advice or a local authority, and on not having been in another plan in the previous 12 months¹. The protections would cover interest, default fees and charges, and the plan could run for up to ten years¹. The scheme does not yet exist: the consultation is at draft stage, and the implementation period after the regulations are laid is now put at at least 18 months¹. The government's original timetable of regulations at the end of 2022 and a 2024 launch has therefore shifted, though no revised launch date is given¹.

What happens next

The consultation closes on 5 August 2022¹. The Finance & Leasing Association says it intends to work with members on its response and will discuss the consultation at its Regulatory Reform Working Group on 9 June 2022¹. The Insolvency Service will publish a framework for assessments to guide the fair and reasonable assessment of creditor objections before the scheme launches¹. How new rules are made and how to respond is set out in our guide to consultations and discussion papers.