The monthly round-up of news, guidance, legislation, and case law from Shelter's Specialist Debt Advice Service.
News and legal updates
This month's legal round-up includes a 12 month grace period for mortgage repossessions, updated breathing space guidance, credit report guidance following a revoked DRO, and an update from the FCA.
Government charter for mortgage borrowers
HM Treasury has published a new Mortgage Charter, which sets out standards for lenders to help support residential mortgage borrowers worried about higher interest rates. Thirty one lenders have signed up to the charter, which represents over 85 percent of the mortgage market. Measures include lenders agreeing that from 26 June 2023:
borrowers will not be forced to leave their homes within 12 months of the first missed payment
up-to-date customers can switch to a new mortgage deal at the end of their existing fixed rate deal without another affordability check
customers can switch to an interest-only mortgage for six months
The charter states that the 12 month grace period also applies where a possession order has been granted. Where possession action has started, the courts might not be willing to delay a possession order or the execution of a warrant based on a voluntary charter. Borrowers whose lender starts a claim or applies for a warrant in breach of its agreement with HM Treasury can request an adjournment and complain to the Financial Ombudsman Service.
Updated mental health crisis moratorium guidance following Kaye v Lees
On 9 June 2023, HM Treasury published updated breathing space guidance for money advisers, approved mental health professionals (AMHPs) and medical professionals. HM Treasury has also published a separate statement discussing the implications for debt advice providers following the Kaye v Lees judgments.
In summary, the government’s position is that debt advice providers are not required to assess the debtor’s health for themselves or to second-guess medical evidence. Therefore, the debt advice provider can continue to rely on the evidence of the mental health crisis treatment form.
HM Treasury states that the debt advice provider should be satisfied that the crisis treatment evidence supplied by the AMHP/nominated point of contact is ‘cogent’ (see the Treasury statement). The Insolvency Service states that in certain situations, debt advisers should consider taking additional steps to confirm eligibility where there is ‘cause to question’ or ‘cause to doubt’ the crisis treatment evidence provided (see the money adviser guidance).
References in the updated guidance for seeking further clarification include:
if there is ‘cause to doubt’ the debtor’s eligibility for a mental health crisis moratorium (para 4.8 guidance for money advisers)
if there is ‘cause to question’ the AMHP’s crisis treatment evidence or the debtor’s continuing eligibility for a mental health crisis moratorium (para 7.22 guidance for money advisers)
if the debt adviser has a ‘legitimate and material reason to suspect’ that the debtor may not be receiving crisis treatment as defined in regulation 28(2) of the Debt Respite Scheme Regulations 2020 (Treasury statement); and
upon receipt of a creditor’s request for a review with evidence demonstrating that the debtor is not receiving mental health crisis treatment as defined in regulation 28(2) (para 7.19 guidance for money advisers)
The AMHP is then expected to ‘properly engage’ with the specific issue that has caused the debt adviser to doubt the debtor’s eligibility for a mental health crisis moratorium (para 5.10 of the guidance for AMHPs and medical professionals).
The updated guidance also reiterates the court’s view that an AMHP should be satisfied that the debtor’s crisis treatment under regulation 28(2)(e) is of a ‘comparable severity’ to disorders requiring the debtor’s detention under regulation 28(2)(a) to (d).
Shelter is in the process of drafting correspondence to HM Treasury to raise concerns about the effect of the judgment on the future of the mental health crisis moratorium. The updated guidance does not, in our view, address these problems.
Debt respite scheme (breathing space): Guidance on mental health crisis breathing space
Mental Health Crisis Breathing Space Guidance Changes Following 2023 High Court Judgments
Debt Respite Scheme (Breathing Space) guidance for money advisers
Funder suspends mental health crisis moratorium procurement process
The Money and Pensions Service (MaPS) has suspended its mental health crisis moratorium (MHCM) procurement process following recent High Court judgments in Kaye v Lees. MaPS is to undertake a ‘full analysis of the options for supporting clients eligible’ to access the MHCM. MaPS is seeking views from those interested in going through those options.
Mental Health Crisis Moratorium - options analysis
Revoked DROs and the Experian credit report
An approved debt relief order (DRO) stays on the debtor's credit report for six years. A DRO that has been revoked should be treated as if it had never been made, as stated by the County Court in Thomas Curr v The Insolvency Service.
What does this mean in practice for a client’s credit report following a revoked DRO? We approached Experian about this, and they confirmed the following:
The credit report should be updated automatically.
Where the DRO is still showing, Experian need documentation confirming it has been revoked.
When Experian receives proof of the revoked DRO, it will check this against the Individual Insolvency Register (IIR). If that confirms the DRO is revoked, Experian can remove the entry from the credit report.
If it is not showing as revoked on the IIR, then Experian would raise a query with the Insolvency Service on the client’s behalf.
Experian suggests that the client checks their credit report after around six weeks to see if it has been updated. They can use the Experian contact us page to submit their query online or look up the postal address.
Experian can provide free group credit report training, which usually lasts around one hour. Topics covered include credit reports & scores, lending decisions, credit myth-busting, and how to get help. If you would like more information, please email John.Webb@experian.com.
FCA warning on Promethean Finance Limited
The FCA has removed various trading names from the financial services register listed under Promethean Finance Limited. The trading names were not owned or controlled by Promethean. The third-party firms that owned them were not authorised to carry out regulated activities.
The FCA has warned that consumers who have used these third-party websites are unlikely to have recourse to the Financial Ombudsman Service.
Consumer warning on Promethean Finance Limited
Referral fees for debt packagers banned
From 2 October 2023, referral fees for debt packager firms will be banned. A debt packager is a firm that receives referral fees for referring individuals to ‘solution providers' such as an IVA firm.
The FCA states that it has seen evidence of debt packagers appearing to manipulate customers’ details in order to meet criteria for an IVA.
FCA bans referral fees for debt packagers
New ‘intermediate track’ for court claims
The Civil Procedure Rules are to be updated to add an intermediate track for claims above £25,000, but not more than £100,000. The intermediate track will come into force on 1 October 2023.
The Civil Procedure (Amendment No. 2) Rules 2023
156TH UPDATE – PRACTICE DIRECTION AMENDMENTS
New Online Procedure Rule Committee
The Ministry of Justice launched a new Online Procedure Rule Committee (OPRC) on 12 June 2023. The OPRC aims to help guide judges, legal representatives and litigants through online court procedures in the Civil and Family Courts.
Licence condition proposed for water companies
Ofwat is consulting on a new licence condition for water companies on how customers should be treated, including customers in vulnerable circumstances.
Water licence condition consultation
Money and Pensions Service Standards and Future Debt Commissioning Strategy
MaPS is running two webinars:
MaPS Standards – a session on its approach to quality assurance (Wednesday 12 July, 11.00 – 12.30)
Future Debt Commissioning Strategy – an update on how this is progressing (Wednesday 19 July, 14.30 – 16.00)
Debts incurred through fraud
Fraud happens when someone deliberately uses misrepresentation, deception, or dishonesty to gain something for themselves or to deprive someone else of something. It can be a criminal offence. That means it can lead to prosecution.
Fraud is also a civil wrong. In contract law, a finding of fraud means a contract can be set aside by the courts. It is usually called fraudulent misrepresentation when it occurs under a contract.
Our new page for Shelter Legal explains what fraud is and how debts incurred through fraud are viewed in a DRO, bankruptcy, and in breathing space.
Read more about debts incurred through fraud on Shelter Legal
Breathing space and disputed debts
Clients who dispute their liability for a debt might not want it to be included in a breathing space application.
In this case study, Specialist Debt Advice answer a question from an adviser whose client disputes liability for a utility bill, explaining how the debt respite scheme regulations and guidance apply to this situation.
Read our consultancy case study on disputed debts and breathing space applications.
Case law
There are no new case summaries this month.
Find debt case law summaries by topic on Shelter Legal.