BSA response to HM Treasury breathing space scheme: consultation on a policy proposal.

These proposals present significant complexities to mortgage lenders and would mean significant disruption to existing systems and processes which work well for the benefit of customers.

The implementation of breathing space and a statutory debt repayment plan was a 2017 manifesto commitment. Breathing space would give someone in problem debt the right to legal protections from creditor action while they receive debt advice and enter an appropriate debt solution.

Key proposals:-

  • Breathing Space has been extended from 6 weeks to 60 Days.
  • Mortgage payments both the principle & interest would be excluded from any Breathing Space agreement.
  • Mortgage lenders would not be able to charge interest, fees and charges relating to arrears as these would be included in breathing space.
  • Mortgage or rent arrears could be “excludable” from the Debt Management Plan (DMP) allowing a debtor to pay these debts off more quickly as part of their monthly budget.
  • Mortgage Arrears would be treated as a priority debt in the DMP.
  • The consultation proposes that the protections of breathing space apply to business debts for sole traders who do not meet the threshold for VAT registration.

Mortgage arrears form part of the mortgage balance and many lenders calculate interest daily on the overall balance.  These proposals would mean lenders would have to strip out the arrears and separately calculate the interest payable, this would present great complexity in terms of mortgage systems, significant investment and resource would be required to implement this remedy.

We strongly believe mortgages should be excluded on the basis of existing strong regulation and FCA oversight. 

Click here to read our full response.