The Credit Services Association (CSA) is urging policy-makers to take extra care before prescribing detailed forbearance schemes that could make a customer’s debt problems “worse, not better”.
It believes that constraining the flexibility that exists in the current regulatory framework, and which enables customers and their creditors to agree solutions based on an individual’s circumstances, could have unintended consequences to the customer’s detriment.
In a new policy report, the CSA urges caution from ministers and regulators when designing new top-down initiatives that may adversely impact the consumers.
CSA chief executive Chris Leslie said: “The best solutions to problem debt are those tailored to fit the customer’s individual needs following a proper assessment of income and expenditure and dialogue with the customer. Unfortunately, we are now seeing a risk that well-meaning but rigid regulations may unwittingly make these solutions harder to achieve.”
Report author Daniel Spenceley, CSA compliance manager, said the breathing space debt respite scheme is an example of a policy created with good intentions but could lead to unintended consequences for customers.
He said: “There have been reports of breathing space being obtained through an automated process where the customer has not necessarily received full advice on its suitability. With restrictions on how often breathing space can be used, this approach could impact the customer’s ability to access the scheme at a later date, when it may be far more necessary”.
Leslie added: “The existing framework may not hit the headlines every day, but policy-makers should take care when tempted to generate short-term responses under pressure, because a tailored approach to forbearance works best.”