Scotland’s statutory debt solutions and diligence: policy review response

As part of the wider review into Scotland’s statutory debt solutions, we asked a range of stakeholders with extensive experience in diligence and the statutory debt solutions to examine the existing debt solutions and determine where improvements could be made. This culminated in the stakeholders involved presenting a report of recommendations to the Scottish Government for consideration.

On 12 August 2022 the Scottish Government published a consultation in response to the working group’s recommendations setting out proposals for future action. The consultation asked for feedback on the Scottish Government proposals before they were progressed further either through legislation, guidance or working with stakeholders.  The consultation ran for 8 weeks and closed on 7 October 2022.

In total, 46 responses to the consultation were received. These included responses from 33 organisations and 13 individuals.  Respondents included local authorities,  creditors, money advice organisations, third sector organisations and other professional bodies, in addition to individuals.  The majority of the proposals in the consultation received overwhelming support of 70% and more.

In January 2023 the Scottish Government published a summary of the responses to the consultation. Those responses have been fully analysed. We have reviewed what proposals received clear support and could be progressed without requiring further consideration. Of those proposals, some required legislative changes while others could be accomplished through guidance. Some of the legislative changes can be achieved through secondary legislation and we are taking steps to progress those.

The introduction of a mental health moratorium was the key proposal which required primary legislation. This has been included in the Bankruptcy and Diligence (Scotland) Bill which was introduced in Parliament on 27 April 2023. The provision within the Bill is an enabling power with the detail of the moratorium to be introduced through secondary legislation. Currently, a working group of stakeholders with expertise in the mental health and debt sectors is considering each aspect of the moratorium and how it will work in practice. The group will provide recommendations to the Scottish Government which will be considered as the Bill progresses through Parliament and before the required secondary legislation is drafted and introduced to Parliament.

Proposals on diligence measures to modernise existing debt recovery mechanisms and allow for more streamlined and improved processes are also included in the Bill.  So too are some minor or technical reforms to bankruptcy legislation that serve to provide clarity and improve the operation of bankruptcy processes.

Proposals that will not require legislative changes will be progressed by the office of the Accountant in Bankruptcy.  This will include the development of a new information leaflet for those considering a trust deed, simplifying language and terminology across websites and publications, streamlining the Debt Advice and Information Package and clarifying guidance on how vehicles are treated in bankruptcy.