Due to launch in early 2021, the scheme will provide two months‘ breathing space’ for people struggling with debt to get their finances under control. During this time they will receive professional debt advice to help them find a long-term solution to their financial problems.
People in mental health treatment will gain the same protection until their treatment is complete, a move the government said acknowledged the serious impact problem debt can have on wellbeing.
The government believes Breathing Space will help over 700,000 people across the UK get professional help in the first year. It is expected this will increase up to 1.2 million after a decade.
Of this, 25,000 to 50,000 people in mental health crisis treatment will be expected to benefit every year.
According to StepChange Debt Charity, two in five of the people who turn to it for advice have an additional vulnerability on top of their debt. For half of these people, this vulnerability is a mental health problem.
Robin Penfold, partner at TLT Solicitors, commented: “With the legislation still to be passed and the implementation window closing by the day, banks and other lenders eagerly await the final legislation so that they can begin to properly prepare.
He acknowledged the financial services industry will support measures that further enhance consumer protection, particularly for those in society burdened with persistent debt.
But he noted: “The industry will no doubt be keen to see if the new set of regulations reflect concerns which echoed around the industry at the consultation stage about compatibility of the new legislation with existing regulatory requirements relating to arrears and forbearance.
“As the impact of these changes is likely to be significant for the financial services industry, it is therefore important that the government and the regulator work together to support firms implement the changes during what will be a short implementation window.
“If introduced in the terms initially proposed the impact on secured and unsecured lenders in the retail financial services sector should not be underestimated. The whole sector will therefore be intently watching the Treasury and regulators in the coming months to see what shape the regulatory framework will likely take.”
