Stage Three Review – Final Report

Core recommendation 2.1

Stronger links should be built between debt advice and other key support services that people in debt may often use. These include welfare benefit services, employment support, housing support, health services, addiction support and other key public services.

Core recommendation 2.2

Whilst not an exhaustive list of how this should be achieved, as a minimum it should include the build of seamless referrals between relevant services, including the ability for a client’s data to be transferred (with client consent), and the sharing of broader good practice between services. This, in effect, should deliver a ‘no wrong door’ approach between key support services in Scotland.

Core recommendation 2.3

Aligned to this, the Scottish Government should commission a feasibility study into the design, engagement approach, technological requirements, legal structure and implementation strategy for a ‘tell us once’ initiative. This would allow consumers to share their support needs with multiple organisations in a simple, standardised way.

Rationale

There is significant evidence that people in debt commonly also experience other issues impacting their lifestyle, wellbeing and finances. However, many support services currently work in silo from each other, missing an opportunity to help people holistically.

Additionally, the proportion of people experiencing a deficit budget (i.e. having income insufficient to meet essential expenditure) has grown markedly in the past ten years, with several advice agencies stating 30 - 50% of their clients have a deficit budget. For many people in debt therefore, insolvency solutions can have limited value in isolation, and dealing with their debts alone may only have partial and short-term benefit. To maximise long term positive outcomes for people, a mixture of support is needed. Delivering that in a way which people find accessible, and that they have the bandwidth to complete, means making it as easy and joined up as possible.

We recognise better joining-up of services is not simple but it is central to ensuring the insolvency regime, and the connected eco-system, is fit for the modern economy. We note there are smaller scale examples of ‘no wrong door’ and ‘tell us once’ initiatives already operating in Scotland (and elsewhere in the UK), from which lessons can be taken for versions at scale.

Core recommendation 2.4

A Memorandum of Understanding (MOU) should be established between AiB and the FCA to ensure closer operational alignment and to be better joined up in tackling poor creditor practice. It may also be appropriate for AiB to enter into further MOUs with other regulators in due course. More broadly, closer working relations should be built between AiB, the FCA, Scottish Government and the Insolvency Service. As a first priority, this closer working should focus on developing more progressive and representative reporting of debt solutions by Credit Reference Agencies onto people’s credit files.  

Rationale

Key regulators and policy makers are not currently working as closely together as they should, meaning poor practice is being allowed, mixed messages are received by stakeholders and opportunities for complementary work is being missed. Furthermore, the combined insight and influence of AiB, the FCA, Scottish Government and the Insolvency Service can promote positive change for the insolvency system at large. 

Credit Reference Agency reporting should be an early priority as fears of impacting a credit score is one of the key barriers to people seeking help and solutions, and more pointedly, current reporting approaches do not accurately reflect the actual likely credit risk of those complying with a statutory debt solution.

Core recommendation 2.5

AiB should change rules and systems to make it easier for people to transfer between insolvency solutions. Detailed proposals to deliver this are contained in the Feedback and Recommendations document.

Rationale

The current system is not always nimble enough to address changes in people’s circumstances.