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 changes to the DRO qualifying criteria, IVA statistics for 2023, the government Debt Fairness Charter and the UK Regulators Network letter on debt collection.
Changes to DRO qualifying criteria
The government announced in the Spring Budget 2024 that the £90 DRO fee will be removed from 6 April 2024. There will also be two changes to DRO qualifying criteria, effective from 28 June 2024:
the DRO debt limit will increase from £30,000 to £50,000
the value of an exempt motor vehicle will increase from £2,000 to £4,000
Applications submitted before 28 June 2024 will be subject to the current DRO eligibility limits. Any application submitted on or after 28 June 2024 will be subject to the new DRO eligibility limits.
Clients might therefore want to wait until the new criteria come into force. Clients who have already paid the DRO fee but want to wait until after 6 April 2024 to submit their application can request a refund. Refunds will not be made automatically.
We have received additional guidance from the DRO Team:
The HP guidance will be updated in line with the new vehicle disregard limit of £4,000. Approved intermediaries will be notified closer to 28 June.
Where a DRO is made before 28 June 2024, and the client acquires a car with a value of £2,000 (£4,000 on or after 28 June) the DRO won’t be revoked, as it’s all based on the £4,000 value. This applies to DRO’s approved prior to this date.
Any change in circumstances during the DRO moratorium must still be reported to the DRO Team. Approved intermediaries should understand how the client has managed to acquire a new vehicle (of greater value than previous vehicle/new vehicle - given the DRO asset, disposable income, and credit limits) and this must be made clear to clients.
Debt Relief Order qualifying criteria
Insolvency Service publishes IVA outcomes and providers for 2023
The Insolvency Service has published its Individual Voluntary Arrangements (IVA) outcomes and providers for 2023.
The Insolvency Service found that, in England and Wales, one in 18 IVAs (5.6%) registered with the Insolvency Service in 2022 terminated within one year of being approved. This was higher than the record-low one-year termination rate in 2020, which coincided with temporary support measures in response to the coronavirus pandemic.
The data further shows that the two-year termination rate for IVAs registered in 2021 was 14.4%, which was higher than for IVAs registered in the two preceding years.
Other key statistics include:
64,050 IVAs were registered in England and Wales, lower than the record high number of 87,865 seen in 2022
termination rates over the lifetime of an IVA increased from approximately one in four (25%) for IVAs registered between 2013 and 2014 to one in three (33%) for IVAs registered between 2016 and 2018
IVA outcomes and providers for 2023
Debt Fairness Charter
The government has published the first Debt Fairness Charter.
The Charter sets out principles for how people who owe personal debt to central government should be treated. These include working with debtors to understand their personal situation and actively working with third parties, such as debt advisers, who are authorised to act on debtors’ behalf.
The charter will be reviewed annually.
UK Regulators Network letter on debt collection
The UK Regulators Network has published a joint letter from OFCOM, OFGEM, OFWAT and the FCA. The letter sets out the consumer outcomes that the four regulators expect to see firms delivering, in response to identified consumer harms.
Each regulator has each set out best practice relevant to delivering these outcomes, including:
encouraging the use of ‘warm’ handovers to debt advice organisations to help customers receive timely debt advice or money guidance (FCA)
tailoring debt recovery strategies and reviewing them for suitability, fairness and empathy (OFWAT)
prioritising enquiries from consumers or consumer representatives in vulnerable situations (for instance, debt advisers) (OFGEM)
making it as easy as possible for free debt advice organisations, subject to any reasonable verification and consent procedures, to represent their clients, for example by providing a direct way to contact the provider (OFCOM)
UK Regulators Network Joint letter on Debt Collection
Financial Ombudsman Service award limits increased from 1 April 2024
The Financial Conduct Authority (FCA) has confirmed an increase to their award limits from 1 April 2024. The award limits will go up to:
£430,000 for complaints referred to the FCA on or after 1 April 2024 about acts or omissions by firms on or after 1 April 2019
£195,000 for complaints referred to the FCA on or after 1 April 2024 about acts or omissions by firms before 1 April 2019
Different limits apply depending on when the complaint was brought to FOS. These are listed on the FOS page Understanding compensation.
FCA to investigate personal guarantees in small business lending following super-complaint
The Financial Conduct Authority (FCA) has announced that it is to investigate the use of personal guarantees by lenders to support loans to certain small businesses following a super-complaint from the Federation of Small Businesses (FSB).
The FCA’s remit does not include lending to limited companies, but the regulator says it is committed to ‘do what it can to support small businesses within its defined remit’.
FCA investigation into use of personal guarantees in small business lending
Case law
Find debt case law summaries by topic on Shelter Legal.
Court power to stay proceedings
A court can stay proceedings and order parties to take part in alternative dispute resolution (ADR).
Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416
Consultancy case study
Specialist Debt Advice answers a query from an adviser whose client is being chased for council tax arrears from ten years ago, explaining when and how a client can challenge or complain about enforcement of historic council tax debts.