HM Treasury Announces Breathing Space From Creditors For Thousands Of Britons
06 Feb 2020
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- The breathing space would stop creditors from enforcing action and/or interest against borrowers with problem debt, or those facing mental health issues, for a period of 60 days each year.
- Implementation of this announced breathing space is expected in early 2021.
- Breathing space also includes increased access to financial advice to make people more financially resilient.
According to an announcement made by the HM Treasury, the government will be providing help to millions of UK citizens who are facing problems with debt, including those suffering from mental health issues.
A so-called breathing space has been announced, spanning over 60 days, whereby creditors would be stopped from enforcing any action and also placing any interest charges on people who have problematic outstanding debt balances. Within these 60 days, all such borrowers would receive debt advice from professionals provided by the government to figure out a long-term fix for their financial issues.
Also, those Britishers who are currently receiving treatment for their mental health challenges would also be protected in the same manner until the completion of their treatment. The announcement has said that this move has been taken as part of the acknowledgment by the government of the negative impact that debt-related issues have on the mental well-being of the people.
According to the impact assessment of this move, more than 700,000 Britons will be benefitting from this program by receiving professional advice, while this number would increase to 1.2 million per year by the end of this decade. Out of this figure, an approximately 25,000-50,000 Britons receiving treatment for their mental health would find their financial condition improve as part of this yearly breathing period.
The Treasury’s economic secretary, John Glen, has highlighted that the consistent enforcement by creditors of interest and other debt-related actions can create a very stressful environment for millions of Britons, resulting in thousands ending up with severe mental health issues.
The proposed move would be implemented by the start of next year, and the expected impact is an alleviation of perpetual debt problems being faced by many Britons. The breathing space would apply to many different forms of debt, including that accumulated through credit cards, loans, and some forms of government debt.
The move is not anti-creditors, as there is an inherent benefit for them due to the resumption of timely payments by thousands of borrowers thanks to their improved financial condition. Creditors are estimated to receive additional repayment of more than £400 million in only the first year after the breathing space is implemented.
This is not the first time the government has tackled the persistent debt crises. In the past, regulatory reforms impacting the way consumers deal with credit and increasing support for affordable financial advisory have all contributed towards making the average Briton more financially resilient.
According to Phil Andrew, who is the CEO of StepChange, a debt charity, approximately 40% of all people who turn to StepChange for help are facing mental health issues in combination with a crippling debt problem. However, many have reported improvement in their overall well-being after receiving helpful financial advice from professionals, as it has effectively reduced their stress.