Mental Health Moratorium: consultation

Consultation

Eligibility criteria

1. The Mental Health Moratorium Working Group has suggested there should be two aspects to the eligibility criteria for entering a Mental Health Moratorium - the mental health requirement and the debt level requirement. In addition, and for certainty, the Scottish Government proposes that eligibility would be limited to individuals with a habitual residence in Scotland, and who are not currently in another statutory debt solution (other than the standard moratorium).

2. Representatives from all stakeholder sectors have raised concerns about the potential consequences of the mental health requirement being too open with a high level of protection, such as freezing the interest and charges of the individual’s debts (see Annex A – interpretation of debt for more detail). This could have an undue impact on creditors. As a result, defining the eligibility criteria for entry into a Mental Health Moratorium is a fine balance.

Mental health criteria

3. The Mental Health Moratorium Working Group recommends using existing mental health legislation as the most appropriate parameter for setting the eligibility criteria in a Mental Health Moratorium.

4. The Scottish Government is minded to accept the Mental Health Moratorium Working Group’s advice on the principles of eligibility criteria. That is, to be eligible for a Mental Health Moratorium, an individual must be receiving treatment, with an element of compulsion, under one of the following provisions from the Mental Health (Care and Treatment) (Scotland) Act 2003 (the “2003 Act”) and the Criminal Procedure (Scotland) Act 1995 (the “1995 Act”), or similar:

• Part 6 of the 2003 Act – Short-term detention
• Part 7 of the 2003 Act – an interim Compulsory Treatment Order and a Compulsory Treatment Order
• Section 136 of the 2003 Act – Transfer of prisoners for treatment for mental disorder
• Section 52D of the 1995 Act – Assessment Order
• Section 52M of the 1995 Act – Treatment Order
• Section 53 of the 1995 Act – Interim Compulsion Order
• Section 57A of the 1995 Act – Compulsion Order
• Section 59A of the 1995 Act – Hospital direction

5. For more detail on each of the provisions listed above, see Annex A – summary of treatments.

6. The Scottish Government accepts that this means eligibility will at least initially be very limited. This has several advantages. It allows the scheme to start small, and ensure it is on a sound footing before considering whether it might then be expanded. There is also a very clear line between those who are and are not eligible. This brings clarity for mental health professionals, the debt advice community, creditors and the Accountant in Bankruptcy (AiB) as scheme administrator.

7. Another advantage of the narrow eligibility criteria suggested by the Mental Health Moratorium Working Group is that every individual falling within these criteria will have a support team of mental health professionals around them. It is likely to be the Mental Health Officer who first becomes aware that the individual’s financial circumstances are either a contributory factor to the individual’s poor mental health or is hindering their recovery.

Question 1. Do you agree with the proposed initial mental health eligibility criteria?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

Question 1a. If you believe the proposed mental health criteria are too narrow, please suggest an alternative that could be measured fairly and easily implemented.

Please comment in the box below:

Debt criteria

8. To ensure the Mental Health Moratorium application process is efficient and streamlined, the Mental Health Moratorium Working Group believe a minimum debt level should not be set in order for an individual to be eligible for a Mental Health Moratorium. The Scottish Government intend to accept this recommendation.

9. As they considered it would be most appropriate for a debt adviser to submit the Mental Health Moratorium application, the Mental Health Moratorium Working Group have recommended it is necessary for the adviser to confirm ‘the applicant is unable, or is unlikely to be able, to repay some or all of their debt as it falls due.’ The Mental Health Moratorium Working Group considered that a statement like this, signed by the adviser on the application, should be sufficient to meet the debt criteria for the individual’s eligibility.

10. The Scottish Government do not intend to accept this recommendation in full. It believes that the risk of abuse is small given the tight mental health eligibility criteria set out above. It also considers that the debt adviser could not put themselves in a position to make such a statement without at least some time with the individual, seeking to understand their finances and make an assessment. This may not be appropriate whilst the individual is undergoing mental health crisis care and has limited time or ability to focus on their debt issues.

11. At this stage, the Scottish Government is minded to propose a simple statement from the Mental Health Professional to confirm that debt problems are impacting negatively on the client’s mental health, together with a commitment from a debt adviser to provide support in due course, would be a better approach. See Annex A for the definition of a debt adviser.

Question 2. Do you agree that no minimum debt level should be set for the eligibility criteria?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

Question 3. Do you agree that there is no need to establish the individual’s financial position at the application stage?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

The application process

12. To certify eligibility, applications will need to be accompanied by a signed statement from a Mental Health Professional. The Scottish Government is minded to accept the Mental Health Moratorium Working Group’s advice on which Mental Health Professional would be competent to sign the form. As recommended, the form could be signed by a Mental Health Officer, Responsible Medical Officer or Community Psychiatric Nurse. In addition, to future proof this list of job titles as far as possible, the form could be signed by a Mental Health Professional of equivalent standing and professional qualification.

13. The application form would be submitted electronically and automatically sent to an approved debt adviser. It would contain no more than sufficient information to identify the following:

• the individual on whose behalf an application is being made
• the individual signing the form
• a tick box to show which eligibility criteria is met

14. It is not reasonable to expect the Mental Health Professional to be able to assess, or the individual to be able to provide, a full financial picture of their income and expenditure. And though it is possible an individual may already have had contact with a debt adviser, it is unlikely that they will be able to focus on dealing with their debts during treatment for a mental health crisis. Experience from the scheme in England and Wales is that debt counselling can only really begin once the individual has started to recover.

15. At the application stage, it will not be clear what support the individual requires beyond an intervention to prevent escalation of their mental health issues associated with financial worries. The policy goal is both to deliver this and to stop the individual’s financial position getting worse before it can be addressed.

Question 4. Do you think the proposed role of the Mental Health Professional at the application stage is appropriate?

Yes

No

Don’t know

Please add any further comments on this proposal in the box below:

Question 4a. Do you think the proposed role of the Mental Health Professional at the application stage is practical?

Yes

No

Don’t know

Please add any further comments on this proposal in the box below:

The individual’s agreement

16. The Mental Health Moratorium Working Group recommend that the individual, or someone with power of attorney or a guardianship acting on the individual’s behalf, should be required to provide signed agreement to an application for a Mental Health Moratorium. The Scottish Government envisage that this would be provided by an approved debt adviser who would be required to confirm three things:

• that they have clearly explained the Mental Health Moratorium to the individual or their representative (power of attorney or guardianship),
• that the individual or their representative wish to proceed; and
• that they will provide debt advice to the individual at a suitable point in the process.

Question 5. Do you think the proposed role of the debt adviser at the application stage is appropriate?

Yes

No

Don’t know

Please add any further comments on this proposal in the box below:

Question 5a. Do you think the proposed role of the debt adviser at the application stage is practical?

Yes

No

Don’t know

Please add any further comments on this proposal in the box below:

Connecting the Mental Health Professional to the debt adviser

17. The Scottish Government would welcome views on one of two possible options for connecting the Mental Health Professional to the debt adviser.

18. The policy goal here is to ensure that the individual is connected to a debt adviser who can provide advice in a channel, location, pace and time appropriate to the individual. Experience from the scheme in England and Wales suggests this will be a longer process than usual. Initial views from the debt advice sector indicate that most advisers want to be involved in this work when appropriate.

19. The two options to consider are either:

• AiB will act as “the link” between Mental Health Professionals and debt advisers who are willing to provide this service. This might be through no more than a contact list maintained on AiB’s website; or
• The AiB commissions one of the debt advice organisations or a third party to undertake this role and/or to provide specialist support to frontline debt advisers as required.

20. In either case, the Scottish Government would welcome views on whether specialist expertise is necessary for delivering advice to this client group. Given the small number of annual cases initially expected, the number of advisers able to develop and maintain such expertise is likely to be very limited.

21. Once the debt adviser has been contacted, they would hold some initial conversations with the individual or their representative. This would allow them to make the declaration of the three statements as outlined in the individual’s agreement section. The debt adviser would then make that declaration electronically to AiB via a webform along with the Mental Health Professional declaration. AiB would marry up the two forms to produce a completed application. In all circumstances where both forms have been submitted, a Mental Health Moratorium will be put in place from the end of the following working day.

Question 6. Connecting the Mental Health Professional to the debt adviser - which option would you choose?

AiB acts as a link

Debt advice organisation or third party commissioned

Neither option

Please explain the reason for your answer in the box below:

Question 7. Do you believe that specialist debt advice and support is required for frontline debt advisers for their involvement with the Mental Health Moratorium process?

Yes

No

Don’t know

Please explain the reason for your answer in the box below:

When the individual does not have capacity

22. The Mental Health Moratorium Working Group considered carefully whether a Mental Health Moratorium should be available to an individual assessed as not having the capacity to consent to an application, and where no power of attorney or guardianship is in place.

23. The Mental Health Moratorium Working Group felt that an individual subject to compulsory treatment should not be made to endure further compulsion over their financial affairs. The Mental Health Moratorium Working Group therefore recommended that a Mental Health Moratorium should only be available to those with the capacity to consent (which could be through a legal representative) which would be determined by the Mental Health Professional.

24. In the interests of starting small and certain, the Scottish Government is minded to accept this recommendation, but would welcome your views.

Question 8. Do you agree that a Mental Health Moratorium application should only be consented to by the individual, a power of attorney or guardianship?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

Question 8a. If you disagree, we would be grateful for your views on how a Mental Health Moratorium application is made available to those who do not have the capacity to consent.

Please comment in the box below:

Notifying creditors

25. Delivering the aims of the Mental Health Moratorium requires a process of creditor notification. In this particular context, it does not seem appropriate to ask the individual to provide a full list of their creditors, account details, etc. There are also understandable concerns about making details of an individual’s mental health too freely available.

26. The proposal is that AiB would run a credit check on the individual – as it currently does for those applying for some other statutory debt products. This would identify the bulk of private sector creditors but is unlikely to reveal details of debts owed to the public sector such as HMRC, housing bodies or DWP. AiB will look to identify mechanisms for dealing directly with these creditors using the individual’s address and other details.

27. AiB will then notify all identified creditors that the individual has been granted a Mental Health Moratorium, and of the duties they must follow in respect of the individual. See the section ‘Duties on creditors during a Mental Health Moratorium’ for more information.

Flowchart of process

• Mental Health Professional confirms individual meets mental health criteria for the Mental Health Moratorium
• Mental Health Professional and individual sign form
• Signed Mental Health Professional form sent to debt adviser
• Debt adviser confirms they will provide advice at a suitable time
• Debt adviser submits Mental Health Moratorium application to AiB
• AiB confirms detail of both forms and grants Mental Health Moratorium
• AiB runs a credit check on the individual
• AiB sends notification to creditors advising them of their duties

The cost of an application

28. The Scottish Government does not believe it would be appropriate for any fees to be paid by the individual for either the work of the Mental Health Professional, the debt adviser or AiB.

Question 9. Do you have any other comments on the proposed application process?

Please provide them in the box below:

Period of protection

29. The Mental Health Moratorium Working Group recommend the duration of a Mental Health Moratorium should be the period for which the individual has a compulsory aspect to their mental health treatment, followed by a further period (called the ‘recovery period’) during which the individual should focus more on their financial position. The Scottish Government is minded to accept this recommendation in full.

30. It is possible that (in a small number of cases) an individual could be subject to compulsory mental health treatment indefinitely and a Mental Health Moratorium could therefore also continue indefinitely. Whilst this represents a burden for those creditors affected (although it seems likely few creditors would take enforcement action against individuals in this position even without the Mental Health Moratorium), it is considered this is justified given the wider policy aims to protect individuals who are going through a serious mental health crisis.

31. The Scottish Government proposes that the recovery protection period should initially be set at six months. This will be reviewed in light of experience, to see if it should be reduced to the same length as the standard moratorium. Although the standard moratorium is currently set at six months, it may be reduced when the cost crisis is past. Given the earliest possible date when the Mental Health Moratorium will be available is April 2025, the standard moratorium length may already have been reduced by this point.

32. Although the Mental Health Moratorium Working Group recommended aligning the recovery period with the standard moratorium, the Scottish Government proposes that six months would (at least initially) be more appropriate, for two reasons. First, experience from England and Wales is that the process of advising individuals in these circumstances takes significantly longer than other clients. Second, a standard moratorium will often start the day after an individual has agreed with a debt adviser that a moratorium is appropriate for them (so their debt advice journey has started). For clients in a Mental Health Moratorium, the six months recovery period will start the day their compulsory treatment ends. This means their debt advice journey may not start for a number of weeks, depending on debt adviser availability.

33. As recommended by the Mental Health Moratorium Working Group, the start of the recovery period would be triggered by the Mental Health Officer’s notification to AiB that the individual has completed the compulsory part of their treatment. AiB would then notify the debt adviser and all known creditors of the likely end date for the recovery period.

Question 10. Do you agree with the proposed period of protection?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

Obligations on the creditor and the individual

Qualifying debts

34. A Mental Health Moratorium would only provide protections for debts which were incurred prior to the Mental Health Moratorium application date. They would match the list of debts which can be included in the Debt Arrangement Scheme. See Annex A – interpretation of debt for more details.

35. It is worth pointing out that continuing liabilities, such as mortgage, rent payments and student loan repayments, would not be caught by the Mental Health Moratorium and should continue to be paid. Interest on overdue payments (arrears) due at the date of application would be frozen.

36. Business debts would be excluded where the business is a separate entity from the individual (that is, not for sole traders). The parallel scheme in England and Wales excludes a large number of debts, including court fines, child support maintenance, any obligation arising under Confiscation Orders, benefit overpayments and negligence claims.

37. The Scottish Government does not at this stage intend to make further exclusions, on the grounds that the Mental Health Moratorium merely postpones the right to collect these debts.

Question 11. Do you agree with the proposed approach to the qualifying debts?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

Duties on creditors during a Mental Health Moratorium / Effect of the Mental Health Moratorium

38. The policy goals of the Mental Health Moratorium are:

i) to provide the individual time to address their severe mental health issues without additional pressures from their financial problems; and

ii) to prevent their financial position from getting worse before they are able to take advice and deal with their debts.

To achieve this, creditors:

• must not chase individuals for payment of qualifying debts
• must not take enforcement action for payment of qualifying debts
• must not increase debts owed by adding interest or charges, fees or penalties which have accrued on qualifying debts during the moratorium period

39. If a creditor wishes to contact the individual – for example, to meet their legal obligations under the Consumer Credit Act 1974 or the Financial Services and Markets Act 2000 – this should be done through the debt adviser or individual’s representative rather than to the individual themselves.

40. The actions listed above sets out the ideal, which would achieve the policy goal in full. It is worth however saying again that the number of individuals likely to benefit will be small. Imposing significant additional costs on creditors or AiB may not be proportionate if the majority of those benefits could be obtained in a more efficient manner. It is also a noteworthy departure from the standard moratorium – which involves no pro-active notification of creditors and bites only when a creditor tries to take enforcement action.

41. The standard moratorium also has no impact on creditors’ rights to continue to add interest and charges to the level of debt. This is appropriate as there is no “qualifying gateway” for the standard moratorium - it is available to all those who wish to access it. The Mental Health Moratorium is different, with strict entry criteria.

42. The Mental Health Moratorium Working Group felt strongly that to give an individual security that their debt situation would not get worse whilst they underwent treatment, interest and charges would require to be frozen. This would inevitably bring with it greater complexity for creditors. Their systems not only need to be able to “pause” automatic adjustments for interest and charges on debts existing at the point a Mental Health Moratorium is awarded (whilst new debts would attract interest and charges), but they also need certainty as to the exact period of the Mental Health Moratorium. We believe creditors would approach such cases with compassion but are not in a position to assess the likely costs such an approach would involve. We would particularly welcome feedback on this point.

43. Minimising costs to creditors and AiB could involve adapting an already working system, which potentially would not require further system development by either party. There is one scheme that delivers most of these benefits – the Debt Arrangement Scheme. This will be returned to later in the consultation.

44. The Scottish Government’s intention is that creditors would be bound on the day following which electronic notification of the start of the Mental Health Moratorium is issued. Where creditors cannot receive notification electronically, written communication will include the date from which the creditor is bound (which may then be in the past). The current intention is to explore whether the existence of a moratorium can be notified via a public register (if possible to do so without stigmatising the individual).

45. If the debt has been passed or sold on, it is the duty of the existing creditor to notify the new creditor of the Mental Health Moratorium. They should also notify AiB that the debt has been passed/sold and provide them with details of the new creditor.

Question 12. Do you agree that interest and charges should not be added to the individual’s debt during the full period of their Mental Health Moratorium, i.e. frozen?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

Question 12a. We would be grateful for your views on the possible costs to creditors by the freezing of interest and charges on debts during the Mental Health Moratorium period.

Please provide comments in the box below:

Question 13. We would be grateful for your views on the possible practicalities of limiting creditors from contacting the individual during the Mental Health Moratorium period.

Please provide comments in the box below:

Protections against diligence

46. The Scottish Government is minded to provide that the protections against diligence would match those in a standard moratorium. Full details of those protections can be found on the legislation.gov.uk website.

47. The Mental Health Moratorium Working Group propose two potential additions to this list:

i) that it should not be possible to evict an individual who has been granted a Mental Health Moratorium during the period of their moratorium; and

ii) that where joint and severally liable debts are included in a Mental Health Moratorium, the diligence protections should extend to all those jointly and severally liable for those debts.

48. The Scottish Government has considerable sympathy for the intent of the first of these in light of our general policy that eviction for rent arrears should be a last resort. However, it is not persuaded that this approach is appropriate given the potential consequences for small-scale landlords and creditors in particular. There are wider strong eviction protections already in place in Scotland for tenants in rent arrears such as:

• pre-action protocols for private rented sector tenants
• pre-action requirements for social rented sector tenants
• the statutory requirement for the Tribunal and the Court to consider the reasonableness of granting an eviction order/decree in all arrears cases

49. In addition, other eviction protections for social and private sector tenants, where the circumstances warrant this, are currently being considered as part of future rented sector reform following our ‘New Deal for Tenants consultation’.

50. At this stage, the Scottish Government is also not persuaded that the second of the additional protections is appropriate. If other holders of a joint and several liable debt are unable to meet the payments, they can access the range of options open to those in financial difficulties.

Question 14. Do you agree with the proposed approach to the protections against diligence?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

Consequences for creditors not adhering to the Mental Health Moratorium

51. The Mental Health Moratorium Working Group recommend that the notification issued to creditors, subsequent to the granting of the Mental Health Moratorium, should include reference to the obligations of the creditor as stipulated in legislation. Guidance should also be published on the Mental Health Moratorium which states:

‘If the individual or anyone else believes that a creditor is not applying the protections, the debt adviser can be notified directly. They will take action to remind the creditor of their obligations during a Mental Health Moratorium and, where appropriate, may inform AiB or other relevant authorities or regulatory bodies about the creditor’s conduct.’

52. The Scottish Government is minded to accept this recommendation in full, but will keep this under review. Creditor representatives have made clear that creditors will want to play their part in fully supporting customers in these circumstances. Key to this is a system for ensuring creditors are notified efficiently and effectively – and that the introduction of the Mental Health Moratorium is properly publicised when coming into force.

Question 15. Do you agree with the proposed position on creditor consequences for not adhering to a Mental Health Moratorium?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

Creditors’ right to challenge a Mental Health Moratorium

53. The Scottish Government is proposing not to include a right to challenge the granting of a Mental Health Moratorium when the scheme is first established. This is on the basis that the eligibility criteria, in terms of the mental health requirement, are narrow and may be sufficient to ensure adequate safeguards are in place to confirm the identity and appropriate level of the Mental Health Professional verifying that the necessary criteria have been met.

Question 16. Do you agree with the proposed position on the creditor’s right to challenge the granting of a Mental Health Moratorium?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

Question 16a. Do you think creditors should be able to request the cancellation of an approved Mental Health Moratorium?

Yes

No

Don’t know

Please explain the reason for your answer in the box below:

Question 16b. If you answered yes to question 16a, in what circumstances could the creditor request a cancellation?

Please provide your comments in the box below:

Question 16c. Further to question 16b, we would be grateful for your views on how a cancellation process could work.

Please provide comments in the box below:

Obligations on the individual during a Mental Health Moratorium

54. The proposal requires creditors to take significant steps to help support individuals undergoing a mental health crisis. It is only right that creditors should not be unduly disadvantaged by doing so. The individual should therefore be under obligations not to take actions that would reduce their ability to repay their creditors in the longer term, such as disposing of assets or incurring significant new borrowing. Such actions might be seen as more culpable during the recovery period of the moratorium when the individual is beginning to focus on addressing their debt.

55. The strict eligibility criteria however acts as a strong barrier to anyone seeking to manipulate the scheme for avoidance purposes. Therefore, the Scottish Government proposes not to establish specific obligations on individuals beyond:

i) giving creditors the ability to take interim diligence to protect their position if they feel that is necessary; and

ii) making the individual’s identity known to potential future creditors via a public register if this can be done in a way that does not unduly stigmatise the individual.

56. The Scottish Government has considered the argument that a public register is not necessary, as the individual’s credit file is likely to show defaults against any debts where payments have been paused. This could be considered sufficient warning for creditors. It is worth noting that non-payment as default has a specific meaning in Credit Reference Agency reporting. However, this argument applies across the whole range of statutory debt products, and the Scottish Government is not currently persuaded that it is necessary or appropriate to take a different approach here.

57. There is no intention to put in place a regime – for example, similar to the bankruptcy restriction order process - that might result in penalties being applied to individuals considered to have acted against the rules of the Mental Health Moratorium.

Question 17. Do you agree with the proposed approach to the obligations on the individual?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

Question 18. Do you believe penalties should be applied to the individual for not following the rules of the Mental Health Moratorium?

Yes

No

Don’t know

Please add any further comments in the box below:

Question 18a. If you answered yes, we would be grateful for your views on what kind of penalty would be appropriate?

Please comment in the box below:

Accessing credit

58. The Scottish Government has considered carefully the Mental Health Moratorium Working Group’s recommendation that limits should be placed on an individual’s ability to access additional credit during a Mental Health Moratorium. At this stage, the Scottish Government is not persuaded that this is necessary. There is no such limit in a standard moratorium and is concerned that a requirement on the individual to declare they are in a Mental Health Moratorium might be unduly stigmatising.

59. Most credit providers will have access both to the public register (if it is possible without stigmatising the individual), and to the individual’s credit report, before making lending decisions. This should provide an adequate safeguard but will be kept under review.

Question 19. Do you agree there is insufficient justification to place restrictions on the individual’s access to credit?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

Ongoing liabilities

60. Nothing in the Mental Health Moratorium proposal removes the individual’s responsibility for meeting their ongoing liabilities. The Mental Health Moratorium will only capture those debts that arise before the date of application.

61. It might be considered unreasonable to expect all individuals who qualify, particularly for the first period of the Mental Health Moratorium, to be fully on top of meeting ongoing liabilities. It is hard to see a way round this. Initial discussions with creditor representatives suggest many creditors will extend forbearance to individuals once they are made aware that the individual might not have the mental capacity to make relevant financial decisions. This may be sufficient to deal with concerns in this area. Again, an issue that will be kept under review.

Question 20. Do you believe other obligations should be placed on an individual in a Mental Health Moratorium?

Yes

No

Don’t know

Please explain the reason for your response in the box below:

The delivery mechanism – using the Debt Arrangement Scheme

62. The Debt Arrangement Scheme (details of which can be found on the Accountant in Bankruptcy website) provides:

• electronic communication with debt advisers and creditors
• a public register of those on the scheme
• freezing of interest and charges whilst the Debt Payment Programme is maintained, with interest and charges written off on successful completion of the Debt Payment Programme
• limits on creditor communications with individuals during their Debt Payment Programme
• prevents enforcement action whilst the Debt Payment Programme is maintained

63. This is very much what the Mental Health Moratorium is looking to offer. Although the Mental Health Moratorium Working Group made no recommendations on the appropriate delivery route, the similarities here create two possible ways in which the scheme could be delivered on which the Scottish Government would welcome your views.

64. The first option is to effectively create a “clone” of the underlying IT system used for Debt Arrangement Scheme to administer a Mental Health Moratorium.

65. The second, more radical option would be that – on the award of a Mental Health Moratorium – AiB would automatically enrol the individual in a Debt Payment Programme under the Debt Arrangement Scheme, but with no payments due until three months after the individual’s compulsory treatment came to an end. This would effectively deliver the Mental Health Moratorium as a special kind of Debt Payment Programme within the Debt Arrangement Scheme.

66. Three months has been suggested as a way of effectively delivering the client full protection for the six month recovery period. This is because AiB will not start action to revoke a Debt Payment Programme under Debt Arrangement Scheme until three payments have been missed. Although creditors could technically ask for revocation after one missed payment, this would not pass the fair and reasonable test.

67. This would leave the individual with the choice either to let the plan fail – the AiB might for example automatically revoke the Debt Payment Programme if no payment was made on the fourth month in which a payment was due – or to continue the plan as the most effective way of addressing their qualifying debts. The debt adviser would have the six month recovery period to ensure the details and coverage of the Debt Payment Programme was correct, and to work with the individual to propose a suitable monthly payment going forward.

68. The main advantages of this approach, beyond delivering most of the aims of the Mental Health Moratorium, are that the necessary systems for AiB, debt advisers and creditors are almost fully in place. The Debt Arrangement Scheme is well understood in both debt advice and creditor communities, and this would minimise the upfront cost. It could also be delivered more quickly than if we were establishing new processes from scratch.

69. The main drawback is that it might be seen as prejudging the individual’s rights to make their own choice of how best to proceed. As has been said above, when an application for a Mental Health Moratorium is received, it may not be clear whether the individual needs statutory debt relief – but there will doubtless be individuals for whom expecting full repayment, even over time, is inappropriate.

70. There are also potential concerns about whether, if an alternative route is chosen, the fact that the Debt Payment Programme has “failed” might impact on the individual’s mental health. In these circumstances, it would simply be wrong to talk of “failure” of a Debt Payment Programme, and this can be addressed by careful consideration of correspondence and guidance.

71. It is not considered this option would have any more significant impact on an individual’s credit rating compared to any other approach to implementation. It is default on payments due (whether in a moratorium or any other debt product) which will impact on an individual’s credit score.

Question 21. Which of the following options would you choose as the delivery mechanism for the Mental Health Moratorium?

Option 1 - Clone the underlying IT system in place for the Debt Arrangement Scheme to administer the Mental Health Moratorium

Option 2 - Enrol the individual into a Debt Payment Programme under the Debt Arrangement Scheme with no payments due

Neither option

Please provide the reason(s) for your response in the box below:

Question 21a. If you selected neither option, we would be grateful for your views on a workable alternative which would meet the Mental Health Moratorium requirements.

Please provide comments and reasoning in the box below:

Interaction with a standard moratorium

72. Should a standard moratorium be in place when a Mental Health Moratorium is awarded, the standard moratorium will immediately come to an end. There will also need to be a period of at least six months between the end of a Mental Health Moratorium before the individual could apply for a standard moratorium. However, there is no limit to the number of applications an individual can make for a Mental Health Moratorium, should their circumstances require it and provided they meet the eligibility criteria.

Question 22. Do you agree with the proposed position on how the Mental Health Moratorium will interact with a standard moratorium?

Agree

Disagree

Neither agree nor disagree

Please add any further comments on this proposal in the box below:

Additional questions

73. To enable all those who might benefit from the Mental Health Moratorium, it will be important that all Mental Health Professionals and debt advisers are aware of, and understand, the scheme. The Scottish Government will be considering how to achieve that separately, but your input would be helpful.

Question 23. We would be grateful for your views on how best to promote the Mental Health Moratorium.

Please provide your views in the box below:

Question 24. We would be grateful for any further comments you have about the Mental Health Moratorium which has not been raised in this consultation.

Please provide comments in the box below:

Question 24a. Would you be happy for officials to contact you to discuss your response if we want to explore your comments in more detail?

Yes

No

The Scottish Government is grateful for the time and effort you have put into reading and replying to this consultation paper. The next stage, once all the replies have been analysed and assessed, will be the preparation of draft regulations.