New debt repayment scheme would leave users 'more likely to struggle'

A Holyrood committee has said it is 'unconvinced' by a proposed new system to calculate the financial situation of people in debt or facing bankruptcy.

Following an inquiry, the Economy, Energy and Fair Work Committee has now urged the Scottish Government to delay the system so a further review can be carried out.

The Standard Financial Statement (SFS) would replace the Common Financial Statement (CFS), which helps calculate a payment proposal for those in debt to pay their creditors.

It was due to be replaced in March but the committee has recommended the SFS should be delayed for a year in order for further evaluations to be made.

It is the second time the committee has not endorsed the system, with the Scottish Government previously withdrawing the regulations in November 2018.

During its inquiry, the committee heard evidence from financial advisers that under the Standard Financial Statement (SFS), the 'trigger figures', which set the level of repayments to take account of necessary household spending, are less flexible and require more evidence before being approved.

It was concluded those in debt would therefore be more likely to struggle with repayments and could result in more workload for frontline advisers.

Economy, Energy and Fair Work Committee convener Gordon Lindhurst said: 'Following extensive consideration of the regulations, the Committee is unconvinced of the adoption of the Standard Financial Statement.

'We have significant reservations around the rationale for moving to the SFS and the impact its introduction will have on the living standards of those who are paying back debt.

'While a reason for introducing the SFS was for a consistent approach across the UK, the Committee recommends a delay until a more in-depth review by the Scottish Government is carried out.'

The committee recommended use of the CFS continues for one more year while a review of the options takes place.

It was indicated the review should include consideration of a minimum income standard for debtors, reducing the administrative burden on money advisers, providing more scope for the exercise of professional judgement, and take evidence from debtors with lived experience of the current income assessment processes.