Utility companies will all by now be aware of the Debt Respite Scheme that came into force on 4 May. While you may be aware that its purpose is to give people in debt protection from their creditors, allow them breathing space and time to deal with problem debts, you may be wondering how it will practically impact on your collections processes.
For most of you breathing space will be an extension of your current practice. The vast majority of creditors are familiar with the importance of supporting customers in financial difficulties and vulnerable customers, so this new scheme should just dovetail into your current processes.
Customers with problem debts will be supported by this initiative, and most energy providers have extensive training and specialist teams already in place to support customers with debt and/or mental health issues. We all fully understand the importance of supporting all vulnerable customers.
The main consideration is the 60-day fixed period that will have to be applied to customers’ accounts where they are eligible for a standard breathing space. This will mean that you will not be able to enforce a breathing space debt for 60 days.
However, it should be noted that during the breathing space period, your customers should continue to pay any existing debts and liabilities and that includes honouring any existing direct debits which are in place for example. That could be a direct debit for ongoing energy usage, or a payment plan to cover arrears. You cannot of course apply interest or fees during the breathing space period.
If you are notified that a customer has the protection of a mental health breathing space, in reality it is possible that you could already be aware of an issue with potential vulnerability, and have taken initial steps to work with the customer. As you are aware, there is no limit to how many times a customer can enter a mental health crisis breathing space, but in extreme cases such as these, it is unlikely you would not be aware of an issue.
The key steps to have in place to avoid falling foul of the scheme are likely to involve ensuring that legal action is not commenced or pursued within the breathing space period. If a customer account is outside of the legal process, clearly you cannot instigate proceedings against a customer within this period. You need to ensure that any automatic generation of files to any third-party providers fail to include any cases where breathing space has been applied. Also, your agents need to make sure they have processes in place to halt, and resume action within the timescales.
The courts have steps in place to support this, but you should not expect the courts to manage this process. You have a responsibility to your customers to make sure that your suppliers have the necessary processes and controls in place to avoid any issues.
If you have issued court proceedings against a customer who enters into a breathing space, you cannot take the next step and apply for Judgment within that period. However, if the customer responds to the claim with an admission, you are then able to proceed by way of acceptance of that admission within the breathing space. The key factor is that you cannot instigate the action, but you are able to respond to any offers or responses from the customer at this time. You are not able to apply for a Judgment in default of a response to the claim within this period, or commence enforcement action. Any enforcement action which had been issued, will be paused, and this will include action by a High Court Enforcement Officer.
It should be remembered that the purpose of the breathing space is to offer protection to those with problem debt. You are likely to have processes in place already that recognise the need for this support, as will any reputable supplier of debt recovery and legal services. The aim is to have an outcome that works for the customer and the creditor, and we all know that having a detailed understanding of the customers situation is a key part of this process, and the debt respite scheme will soon become an integral part of this process.