Notes for Guidance - Money adviser - Debt Arrangement Scheme

You can approve a variation under the short term financial crisis payment break criteria if you believe the client has experienced a crisis which justifies not making the DAS payment.

Creditors are not required to give prior consent and the definition of crisis is at your discretion. An example may be if a person’s car broke down, as opposed to either incurring debt to pay the repair or making a full variation application.   

A client can have up to two months’ worth of crisis break variation approved in a rolling year. It can be applied retrospectively to a missed payment, but only if the next payment is not yet due.

You must approve the variation on eDEN making a detailed note of the crisis and why the payment is being deferred. The reasons for the deferral will be shared with the DAS Administrator and the creditors and if you require to share personal details you must obtain the consent of your client under GDPR requirements.

If a client is making payments by Direct Debit, the payment will be requested three days prior to the agreed payment date as per the Direct Debit instruction process. If you approve a variation in the three days prior to a Direct Debit being due you must notify the Payments Distributor separately using eDEN to arrange for it to be returned to the client.

It is also prudent for the adviser to make their client aware of this at the point of agreeing the variation.

Notification of the approval should be sent to the client, creditors (either via eDEN or by post), the payments distributor (if not already notified), and the DAS Administrator.

Where a client cannot make payments due to a change in circumstances, which go beyond a short term crisis you should establish if the income shock requires a variation application for a longer payment break.

A client can apply for up to a six month ‘payment break’ if their disposable income has reduced by 50% and it is considered the reduction will last for the period of the break.

There is no limit to the number of times they can apply for this provided they meet the necessary criteria. 

The payment break suspends payments and interrupts the period of the DPP and it will be extended by the corresponding time period. After the payment break has finished, the client should recommence payments as agreed.

During this time the client may seek advice from you to reconsider their debt management options.

You must submit the application on eDEN. It will automatically populate the income and expenditure fields using the information contained in the original application.  If there has been a previous payment break or variation you may have to look at the income and expenditure held there. You will require to amend the figures to reflect the client’s current financial circumstances.

If the case was created before 1 July 2011 and has not been varied you will require to add the current information in full.

You must ensure you have seen evidence the client’s disposable income has been reduced by 50% or more and add a note to eDEN to this effect. 

You will issue the payment break proposal directly to the creditors.

Where there has been a material change in the circumstances you can submit an application for variation on eDEN.

It will automatically populate the income and expenditure fields using the information contained in the original application which you must amend to reflect the client’s current financial circumstances.

If the case was created before 1 July 2011 you will require to add the current information in full.

A creditor can apply to adjust any debt balance due to them which is incorrect. The creditor must apply to make the change no later than 120 days from the date of approval.

Applications can be made after 120 days but the creditor must show good cause as to why the application could not have been made earlier.

A creditor can also apply for a variation if they consider the circumstances are appropriate. They must first have attempted to agree the variation with the client.

You should try, on behalf of the client, to agree a variation with the creditors first as the DAS Administrator will take their views into account. 

The DAS Administrator may propose a variation in exceptional circumstances, with the consent of the debtor.

Such cases are rare and include such cases where creditors write off debt or refuse to accept funds but will not apply to remove the debts. 

This is purely an administrative function and can only be done if the effect of the variation will be to reduce the term of the DPP.

In these cases, the DAS Administrator will write to the client advising of the intention to propose a variation, inviting them to contact us or you if they have any questions. 

The variation notification gives all parties 21 days to submit comments.

Creditors who fail to respond during the 21 days will be deemed to have consented. 

The DAS Administrator must agree to a variation in the following circumstances:

• where a client agrees with all the creditors the programme should be varied
• where a client and a creditor agree the client no longer needs to pay the creditor all or part of what is owed
• where the DPP was approved prior to 1 July 2007 and the client wishes to apply for the freezing of interest, fees and penalties on their debts where the effect of the variation will be to reduce the term of the DPP

The DAS Administrator may approve a variation subject to the fair and reasonable criteria in the following circumstances:

• where there has been a material change of circumstances which may include an increase or decrease in the client’s income
• when a debt due at the approval date was omitted or wrongly assessed for because it was overlooked, or someone made an error or for some other reasonable cause
• where a future debt, which was not quantifiable at the approval date, becomes due for payment. For example, if the client has a debt which they do not have to start paying for some months
• where a contingent debt, which was not quantifiable at the approval date becomes due for payment. For example, if the client has been a guarantor for someone else’s debt and the creditor has called up the guarantee
• if the client has an emergency and needs credit to meet an essential requirement
• where a client wishes to defer payments for a period of up to six months, as there has been a reduction in their disposable income of 50% or more and it is considered the reduction will last for the period of the break

An application for a variation must be made in relation to a joint debt payment programme by both clients. 

When determining whether a variation is fair and reasonable the DAS Administrator will take into consideration:

• the fair and reasonable criteria (Regulation 25(2)
• the views of the client
• the views of the other client in the case of a joint DPP
• the views of a creditor taking part in the programme and of any creditor making the application
• the views of any money adviser who has provided advice to the client
• whether any expenditure of the client declared in assessing disposable income appears to be necessarily incurred by the client
• any payment break variation previously approved and
• may have regard to any other factor the DAS Administrator considers appropriate
• approval of a variation may be made subject to a discretionary condition under Regulation 28

You and all eDEN users will be notified of the decision through the system. 

The DAS Administrator or continuing money adviser must send the client and any creditors who have not signed up to eDEN the decision by post or any other means. Any non-eDEN notifications should be sent the next working day from when the decision was made. 

The notification will inform all parties of the approval or rejection of the variation, including the reasons for the decision.  Any party who disagrees with the decision has 14 days from the date of notification to ask for a review.

Creditors will be sent:

• the client’s details (name, address, postcode and date of birth)
• details of the joint client, if applicable
• the client’s financial statement
• how much of the client’s surplus income will be offered as a contribution to the DPP (where the grounds for the variation are that the client has had a change of circumstances, and the client does not wish to use the full surplus income)
• the total amount the client owes the creditor
• the amount of the total debt owed that will be repaid after the fees have been deducted (net amount of debt)
• sort codes, account numbers and reference numbers (if known)
• the amount the creditor will receive to be paid in each instalment
• the frequency of the payments
• the new length of the DPP
• any lump sum payments or realisation of assets 
• the revised end date of the DPP

The payments distributor will arrange to make the agreed changes. 

If the client is paying their instalment through their wages, the client will have to provide an updated payment mandate using Form 3 (payment instruction to an employer) to the employer.  A copy of the form can be obtained from the DAS Team.

Unless a payment break variation has been approved or there has been a change to the frequency of the payments, the client should arrange to make the varied payment at the next regular scheduled payment and within one month of the variation being approved.

Creditors will continue to receive payments as agreed in the original DPP or any previously approved variations.