The Breathing Space Regulations – or to give them their full name, the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (the Regulations) – have now been published together with the guidance for creditors. The FCA’s feedback from its consultation on changes to its Handbook is due to be published shortly.
The Regulations come into force on 4 May 2021 and give eligible people in problem debt - who receive professional debt advice -access to a 60 day period in which most enforcement action and contact from creditors is paused and most interest and charges on debts are frozen. For individuals receiving mental health crisis treatment, the Regulations establish an alternate route to access the protections of a moratorium for the duration of the person’s mental health crisis treatment, plus 30 days.
We have set out below six key questions for secured lenders to consider in implementing the Regulations.
The definition of “qualifying debt” is the starting point (and the Regulations extend to buy-to-let as well as regulated mortgages), but other aspects of the application criteria of the Regulations (for example, based on the location of the debt/ordinary residence of the eligible person) can be more complex.
When you receive a notification, as well as searching your records for details of the debt you’ve been notified about, you must also search for any additional debts owed to you by the debtor.
In particular, the impact on any suspended possession order payments, where the customer’s payment includes a sum towards arrears.
For example, will you continue to progress existing possession proceedings through to obtaining a possession order for customers in breathing space or will you take a more restrictive approach than the Regulations permit?
For example, will your approach to customer contact be the same where the “qualifying debt” is a regulated mortgage contract or an unregulated buy-to-let loan?
For example, once qualifying debts have been identified, how will you record this on the relevant accounts, who do you need to notify, how will you make the changes to the accounts to ensure that the customer does not pay the fees, charges and interest that are frozen?
Our specialist mortgage sector team (comprising specialists in mortgage law and regulation, mortgage enforcement and lender sales) can support you with implementation of the Regulations. Our specialist team has followed development of the Regulations since inception and is well placed to support your implementation programme.
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