Consultation Response: [INSERT TITLE OF THE …



Civil Procedure Rule Committee: Pre-Action Protocol for Debt Claims Further consultation

Response from the Money Advice Service

11th January 2016

Bee Thakur

Policy Manager

Bee.Thakur@.uk

.uk

1. About us

1. The Money Advice Service is a UK-wide, independent service set up by government to improve people’s financial well-being. Our free and impartial money advice is available online, and by phone, web-chat or face to face with one of our Money Advisers. We also work with the debt advice sector to improve the quality, consistency and availability of debt advice.

2. Our core statutory objectives are set out in the Financial Services Act 2010. We are paid for by a statutory levy on the financial services industry, raised through the Financial Conduct Authority.

3. From April 2012, MAS has taken on the responsibility for the co-ordination of debt advice in the UK. We are responding to this consultation in light of our statutory role to work with partners to increase the availability, quality and consistency of debt advice, as well as our wider role to ensure that consumers are well informed and empowered to take action across the existing and emerging retail financial services marketplace.

2. Summary of our response

1. MAS supports the two stage approach to information provision, however we want to emphasise this should be supplemented with high quality, clear and concise information for the consumer to get help and act quickly in dealing with their financial matters.

2. MAS believes that consumers should be able to access free debt advice which suits their needs according to choice of provider, channel preference and locality, whilst being reassured that the advice they are accessing is of a high quality. To that end, we would recommend the inclusion of the MAS Debt Locator tool as part of the information which is received by the indebted consumer.

3. MAS would encourage the reply form to be based on the format of the summary Standard Financial Statement (SFS). The changes which need to happen to the current reply form in order to align with the SFS, are not significant and the benefit of this means the reply form is in line with the statements used by the wider sector, thus aiding communications and potentially minimising processing times.

3. Responses to consultation questions

1. Does the two-stage approach to information provision strike the right balance between fairness and proportionality? Should any other information be provided to debtors as of right, in / with the Letter of Claim?

3.1 We support the two stage approach whereby information is broken down and provided in increments allowing the consumer to respond and get debt advice. We also know from our evaluation of our own services[1] as well as reporting from the sector, that specific triggers, indicating crisis communications such as a court summons or contact from bailiffs were the most common prompts for clients to seek advice. We would therefore encourage that the communications, particularly the first stage, look official and convey the appearance of court formalities explicitly.

3.2 These communications however need to be supplemented with sufficient signposting to sources of independent help and support for the consumer. To that end, we would encourage the use of a MAS styled advice leaflet provided alongside the formal communication. We have devised these leaflets for customers in arrears for a major bank, and have used our experience of the principles of behavioural science throughout our communications to prompt actions from consumers. This leaflet is attached in annex 1. We would be happy to work with you to design and make available similar communications aimed specifically at PAP clients.

2. Are any of the provisions of the Debt Protocol irreconcilably inconsistent with creditors’ obligations under other regulatory regimes? If so, please indicate precisely which regulatory obligation and/or statutory provision is referred to and explain the nature of the inconsistency.

3.3 No response.

3. Is the Information Sheet sufficiently clear and comprehensible to debtors, while still providing an accurate description of their rights and obligations? Should any additional information be included?

3.4 It is encouraging to see the signpost to debt advice under ‘What to do next’, however the list of organisations may not meet all of the consumers’ needs for advice provision in terms of geographical coverage, choice of debt advice provider or channel need.

3.5 With the aim in mind that a consumer should be able to access advice which meets their needs and is of a trusted quality, we would encourage the inclusion of a signpost to the MAS debt advice locator tool[2]. The debt advice locator tool allows clients to search for an advice provider that is right for them by channel and geographic location.

The criteria for entry into the tool are that the debt advice provider;

• Holds relevant FCA permissions

• Provides free advice to clients

• Holds a quality standard that has been accredited by the Money Advice Service

3.6 Our analytics show that from February last year until January 2016, the debt locator tool has had 275,000 visits. Furthermore, around 1800 different organisations refer through to our debt Advice locator tool. These organisations are a diverse mix, made up of:

local authorities, housing associations, government departments including DCLG, DWP, HMRC and MOJ, financial service organisations (covering banks, payday lenders, building societies, mortgage administrators and others) and a wealth of debt advice / help and support agencies. In addition many employers refer to the debt advice locator tool via their employee assistance programmes.

3.7 Using the debt advice locator tool to search for debt advice affords several benefits to consumers including;

• The tool lists only those providers that meet our criteria including those which are free to the client and hold MAS recognised Quality standards,

• The tool is developed based on user feedback and is designed to be compatible with various devices,

• Allows people to search interactively (user feedback suggests static lists make it difficult to differentiate between providers),

• The tool lists national and local organisations, both at devolved nation and postcode level, giving clients access to a wider range of providers than a static list could provide,

• The tool is updated by MAS on a quarterly basis thus ensuring only up to date providers are listed,

• The tool has had positive feedback from users and the debt advice providers listed in the tool.

3.8 In addition, we would recommend that the information received by consumers includes wording which reflects that debt advice will be confidential and provided in a non-judgemental manner. This is because we know from our experience within the debt sector, that consumers knowing advice is free is not generally sufficient to promote engagement and they also need further reassurance.

4. Is the Reply Form sufficiently clear? Do the reply boxes follow a logical order? Is the information included in the indicative list in Box J comprehensive? If the answer to any of these questions is “no”, please indicate how the boxes might be amended to improve the Reply Form, included suggested drafting where appropriate.

4.1 MAS would recommend redrafting the reply form to follow the format of the soon to be released Standard Financial Statement (SFS). We note and support point 4.4 of the consultation document which asks the creditor to give regards to the SFS where the consumer is receiving debt advice and makes a proposal to the creditor. It makes sense therefore, to align the format of the reply form with the SFS.

4.2 The Standard Financial Statement (SFS) is a landmark development for debt advice in the UK which delivers for the first time, a universal income and expenditure statement, together with a single set of spending guidelines. Backed and developed in partnership with major advice providers and major creditors (listed in annex 3), the tool brings a greater degree of consistency to debt advice and a smoother transition through the process for consumers, advisers and creditors.

4.3 There are several benefits to using the SFS format as the basis for the reply form including;

• A format based on the SFS is likely to flow better and make more logical sense for consumers filling it out. This is because the SFS has been constructed by combining the expertise of the sector who have been recording income and expenditure of indebted people, as well as developing self-help tools for consumers for many years.

• Upon launch many of the debt advice agencies and major creditors involved have committed to set up their systems to receive the SFS- this means that a SFS format received during PAP processes is likely to be processed more efficiently by creditor systems which are gearing up to receive this standardised format.

• For those consumers who choose to seek debt advice, the transfer of income and expenditure information between the debt advice agency, PAP processes and receiving creditors could be streamlined if there is a single format for capturing this information. This has the potential to significantly reduce timelines for communications and minimise the possibility for errors.

• The SFS format also has the possibility for consumers to save modest amounts whilst in debt. This is a provision, which for the first time, has been agreed to by creditor partners, thus supporting the sustainability of repayment plans.

4. You will note the differences between the reply form and the SFS are mostly in terms of re-ordering the format to flow more logically and to align with the SFS. It is noted that there is more detail listed within the sub-sections of reply form compared to the SFS summary, however this should not be an issue for re-ordering the format and the sections are flexible enough to be expanded as needed.

4. Annexes

Annex 1: Leaflet produced for a major bank in order to prompt customers in debt to take action.

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Annex 2: Standard Financial Statement: summary version

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Annex 3: List of partners involved in the development of the Standard Financial Statement

Advice NI

Advice UK

Accountant in Bankruptcy

Barclays

British Bankers Association

Citizens Advice Scotland

Christians Against Poverty

Citizens Advice

Debt Resolution Forum

Finance & Leasing Association

HSBC

Insolvency Service

Lloyds Banking Group

Money Advice Trust

Nationwide

Ofgem

Payplan

RBS

StepChange

UK Cards

Wessex Water

Published: January 2016

The Money Advice Service

Holborn Centre

120 Holborn

London

EC1N 2TD

Tel: 0207 943 0500

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[1] The Money Advice Service Debt Advice Review, Money Advice Service, 2014

[2] Debt Advice Locator Tool, Money Advice Service Website:

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