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CSA concerned over new debt guidelines

New guidelines for debt advisors could push debtors into “unnecessary and potentially damaging insolvency”, according to the Credit Services Association (CSA).

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The CSA is concerned that these guidelines could keep customers in debt for longer by failing to reflect their true financial position.


The association believes that the revised guidelines, presented earlier this year by the Money Advice Service (MAS) for use with the Standard Financial Statement (SFS), require further consideration.


The SFS is a tool primarily used by debt advisors to summarise a person’s income and outgoings, along with any debts they owe.


Peter Wallwork, chief executive of the CSA, said that while the thinking behind the recent changes to the SFS are laudable, the outcomes could be disastrous for some consumers.


He said: “The issue centres around the so-called trigger figures and whether the increased figures now being proposed accurately reflect the customer’s true financial position.”


The trigger figures represent pre-agreed levels for certain areas of discretionary household expenditure. They also help to identify levels of monthly expenditure deemed reasonable when completing the SFS.


The CSA said that in a recent meeting of the SFS Governance Group, which includes the association, members were presented with a set of revised trigger figures that in some cases were 30 percent or more greater than those published last year.


Wallwork said: “The challenge to the MAS is that if these new figures turn out to be wrong, advisors and creditors alike will quickly lose confidence in the system and stop using it. The challenge, also, is to ensure consistency amongst advisors and stop anyone from using the guidance as an allowance, in which case the customer’s true financial position becomes distorted.


“At best, this will reduce the volume and value of arrangements and offers from customers to repay their debts and keep them in debt for longer. In the worst case, however, the figures may suggest that a customer is better to go bankrupt when they don’t need to.


“This is unlikely to be in their best interests – it will all but destroy their chances of ever being granted credit again – and is definitely not in the interests of the creditor. There is even a question mark as regards whether keeping a customer in debt for longer by inaccurately assessing their financial position satisfies the principles of a fair outcome.”


Wallwork said the MAS has sought to reassure creditors that the revised figures are simply a guide and should not form the starting point for any assessment of expenditure.


However, the CSA has called for an early review on how the guidelines are being used, and the new trigger levels that have been set.


Wallwork said: “Everyone wants to work from an agreed set of numbers that are fair and appropriate and the CSA calls upon all advisors to use the SFS in the spirit it was intended; any new figures must be given as a guide, and not an allowance.”

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