Common Financial Statement: One standard for all

The Bankruptcy Law Reform consultation proposed a single financial tool to ensure consistency in assessment of debtors’ income and expenditure. Creating a common standard of financial assessment for advisers in the private, public and third sectors to use throughout Scotland is contained within the Bankruptcy and Debt Advice Act 2014 – the bill received Royal Ascent on 29th April 2014.

There are two main tools currently operating: the Common Financial Statement (CFS) and the StepChange tool.

The Common Financial Tool Working Group (CFTWG) was set up to consider the two existing tools, and they were also asked to explore if there was any merit and particular advantages in developing a Scottish-specific tool. The CFTWG was made up of bankers, insolvency practioners, lawyers and unions, as well as the AiB and Money Advice agencies.

The potential solutions were analysed using a sample of 50 current cases. For each case, the funds ingathered over a 48 month repayment period were assessed. The findings highlighted only marginal differences in realisation between the tools and the practical pros and cons of each tool were also scrutinised. It was concluded that developing a Scottish specific tool would offer no real advantages over the two existing solutions which were already available.

The CFTWG’s final recommendation was for CFS to become the single assessment tool in Scotland.

What is the Common Financial Statement?

The Common Financial Statement (CFS) was first published by the British Bankers’ Association (BBA) and the Money Advice Trust (MAT) in 2002. It continues to be managed by the Money Advice Trust (MAT). It is a standard budget format which helps creditors, advisers, and people with debt get a clearer picture of an individual’s or household’s financial situation.

The main purpose of the CFS is to facilitate a discussion between the adviser and the debtor in order to develop a sustainable repayment plan which not only gets the best return for creditors but also provides the debtor with the best opportunity for financial (and in number of cases lifestyle) rehabilitation – and to break the cycle of debt once and for all.

Contained within the CFS are 4 categories of trigger figures for: Telecomms, Travel, Housekeeping and Other e.g. household repairs and maintenance. Trigger figures represent levels of expenditure among households in the bottom quintile of the income distribution in the UK and are calculated based on research from the UK Government’s Living Costs and Food Survey.

Fixed expenditure categories such as rent and mortgage payments do not have a trigger figure as spending on these items varies widely from household to household.

The CFS trigger figures are reviewed annually and published in April. Interim changes to the figures may be made if there is a significant increase within any expenditure category. Trigger figures should not be disclosed to anyone without a CFS licence, nor should they be disclosed to the general public, or used as financial or debt repayment targets. If trigger figures are exceeded by debtors reasons have to be provided.

A CFS licence must be obtained by all those who provide money advice to debtors before they can use the CFS tool. The licence is available free of charge from the Money Advice Trust.

Why was the CFS selected?

During the analysis, it was found that trigger figures were breached more by those using the StepChange budget guidelines than those debtors who engaged with the CFS tool. Other reasons included:

  • Financial rehabilitation – the CFS tool allows debtors to set money aside for unexpected events.
  • Clarity for creditors – the British Banker’s Association (BBA), Finance and Leasing Association (FLA) and major utility companies already recognise this tool as industry standard.
  • It’s fairer to debtors – the CFS is overseen by a sub-group consisting of representatives from the BBA, FLA, Building Society Association, Advice UK and Citizen’s Advice.  Any changes to the CFS trigger figures are approved by the sub-group. (AiB is now a member).
  • The CFS structure and uniformity encourages a consistent response from creditors, and reduces queries.
  • The majority of money advice services currently using the CFS, and therefore are already familiar with the rules and the software.
  • During the consultation we received 25 responses in support of the CFS, and only 4 in support of the StepChange model.

What next?

The Bankruptcy and Debt Advice (Scotland) Act 2014 gives Scottish Ministers power to specify a common financial tool and the secondary legislation which is currently being drafted will provide the detail of the CFS tool and how it will operate.

Money advisers will be required to use the CFS with clients to assess surplus income and verify income and expenditure prior to entry into a statutory debt solution.

The AiB are currently considering how a provision for savings can be included in the regulations and we will also develop guidance in addition to the Money Advice Trust CFS guidance, which will be specific to Scottish statutory debt solution (DAS). The trigger figures will be built in to the new AiB case management system.

The Common Financial Tool Regulations will be introduced to Scottish Parliament later this year and will be commenced by April 2015. The AiB has a representation on CFS Client Support Steering Group (CSSG) which will enable us to monitor progress on the current discussions which are taking place at a UK level on a single income and expenditure statement (based on CFS format, principles and trigger figures). The new ‘CFS-Plus’ will improve the CFS including revising categories and allowing for savings provision.

Bankruptcy and Debt Advice fit for the 21st Century

What changes and improvements can we expect from the new Bankruptcy and Debt Advice (Scotland) Bill which is currently passing through the Scottish Parliament? Claire Orr, from the Accountant-in-Bankruptcy joined us at our recent Local Authority Forum to provide an overview of the new powers which are likely to come into force in spring 2015. The following provides an overview of the key points and impacts addressed by Claire.

When we set out to bring Scotland’s bankruptcy and debt advice legislation into the 21st century our primary aim was to ensure access to fair and just processes of debt relief and debt management for all, better balancing the interests of all parties and ensuring that those who can pay their debts do pay.

The current bankruptcy legislation did not provide all of the tools needed to address the challenges we now face. With the changes in society and the radical advances in technology, communications and financial services since 1985; not to mention the changes in public attitudes to credit and debt, the availability of credit, the increase in debt management solutions and the spectrum of debt advice which was being made available in the public, third and private sectors, it became clear that we needed a range of new solutions and tools for debt relief and debt management.

The consultation we issued in early 2012 was well received by stakeholders with a good response rate. Proposals have been modified based on the feedback we received during the consultation.

We also wanted to ensure that those debtors who can pay their debts should pay, creditors got the best return possible and we wanted to try to break the debt-cycle for individuals through improved rehabilitation from debt problems, education for both those experiencing debt problems and by developing early intervention education strategies to improve people’s financial awareness and confidence when dealing with financial matters.

Overview of the Bill

The Bankruptcy and Debt Advice (Scotland) Bill contains a range of powers – you can view the full bill on the Scottish Parliament website in the parliamentary business/current bills area of the site. You can also follow the current status and stages of the bill as it passes through the Parliament on this page. The Bill will complete its first stage of three in December 2013.

  • Advice and Education
  • Payments by debtor following sequestration
  • Minimal Asset Process
  • Moratorium on Diligence
  • Application Process
  • Administration of estate
  • Discharge
  • Records
  • Functions of Sheriff and AiB
  • Review of decisions by AiB

So what can we expect to see change around April 2015 when the updated Act is likely to come into force? 

One of the most important changes will be that individuals will no longer be able to make themselves bankrupt without having first taken advice from an approved money adviser.  Advice will ensure that people are aware of the range of solutions open to them and that they choose the solution most appropriate to their needs.

We want to ensure that bankruptcy becomes a last and final resort. Financial Education will be compulsory for some debtors who have been identified as vulnerable to recurring debts.

A common financial tool will be introduced as a mandatory part of the advice process. By ensuring that all money advisers use the same tool to assess income, expenditure and identify the surplus income available for a contributing towards debts we will improve consistency and transparency. The Common Financial Statement has been chosen as the common tool. This tool has the support of the money advice sector generally and it is accepted as a fair tool for the calculation of surplus income.

The debtor will be required to undertake to pay the contribution determined by the common financial tool for a minimum of 48 months, which is 12 months more than current sequestration.

Although this a longer period, evidence has shown that the Common Financial Statement makes a fair assessment of the amount of money individuals and families need and therefore the level of contributions set through this tool are sustainable. The longer payment period reflects the desire to increase returns to creditors. A new ‘debtor contribution order’ replaces the Income Payment Order and debtors will also be able to apply for a payment break of up to six months, but they will still have to make a minimum of 48 monthly payments. The debtor will be required to sign a new statement of undertaking and if they don’t sign it or comply with is conditions, including paying the determined contribution, it could lead to a delay in discharge. The aim is to encourage more co-operation from the debtor and more dialogue between debtor and their trustee.

A new moratorium is to be introduced across all statutory debt solutions which means if an individual gives notice that they want to apply for a statutory debt solution they will be given a six week period of protection from action against them by their creditors. This period of 6 weeks provides some breathing space and allows people to have the benefit of money advice. During this period no arrestment, money attachment, interim attachment or attachment of estate can have effect. Individuals who give notice will have their details entered by AiB on RoI and DAS register for the duration of the 6 week period.

There will no automatic discharge, except in MAP cases, and the trustee will have to apply to AiB for discharge at the end of the sequestration. If the trustee does not intend to apply for a discharge he/she must explain their reasons to the debtor. The debtor will be free to appeal to the Sheriff if they do not agree with the trustee. Furthermore, if someone has been discharged and subsequently inherits assets or assets are discovered that would have been vested in the trustee there will be a process for re-opening the case contained in the new Act.

To minimise the impact on the Sheriff Courts and to ensure that decisions are taken at the most appropriate level a number of administrative procedures will pass to the AiB, including application by a trustee for direction, recall of sequestration where debts can be paid in full and appointing a replacement trustee.

New Financial Health Service launched

A new Financial Health Service offering a one-stop-shop for money advice services was launched by Business Minister Fergus Ewing on December 3rd.

Scotland’s Financial Health Service website provides links to a range of organisations offering information and advice on debt, managing money, housing, homelessness and ethical lending.

A key part of the new website is a Financial Education module which aims to help people to manage their money to stop any future problems. The website also allows users to search for their local credit unions and find out about the products offered by them, and to search for approved money advisers.

There are also advice areas covering the debt arrangement scheme (DAS), trust deeds, bankruptcy and debt management plans, as well as useful links to budgeting and saving tools, benefits calculators and other advisory agencies such as Age Scotland, Citizens Advice and the National Debt Line.

Fergus Ewing commented at the launch, “It is important that we take action to help those people in Scotland who are struggling under the burden of debt. We have developed Scotland’s Financial Health Service because we must ensure that people who need to access debt and budgeting advice, do so easily with credible sources”.

Local Authority Forum October 2014

What’s been the impact of Welfare Reform in Scotland and what effects have we still to see?

How can Local Authorities use improved management information, customer profiling data and collection performance intelligence to improve recoveries?

What are the current trends in commercial insolvencies, forthcoming changes in the law – Bankruptcy and Debt Advice Bill (Scotland) – and the recent judgements that local authorities should be aware of?

These are among the questions and issues that delegates at Walker Love’s Local Authority Forum will debate at the Hilton Hotel Dunblane Hydro on 29th October 2014.

The speakers will include:

  • David Walker, Managing Partner, Walker Love
  • Peter Meehan, Local Authority Benefit and Taxation Consultant
  • John McNeill, Director Business Restructure, BDO
  • Chris Bell, Walker Love
  • Andy Fraser, Walker Love

With further roundtable discussion sessions chaired by Dorothy Lowe and James Walker of Walker Love, the Forum provides Local Authority revenues and collections teams from across Scotland’s 32 LAs an opportunity to discuss the current issues they are facing. To hear from other authorities on how they are tackling the challenges of Welfare Reform and a reducing local budget and to share opinions and best practice on developing future strategies to improve collections performance.

If you would like more information or if you would like to attend, please get in touch with Chris Bell or Dorothy Lowe, Walker Love in the first instance.


Local Authority Forum 2014

What can we expect from the new Bankruptcy Bill, how will the common financial assessment tool work in practice and what strategies are being employed across Scotland to encourage citizens and businesses to pay what they owe in terms of Council Tax and Non-Domestic Rates?

These are just some of the issues and discussion points which were debated by Scottish Local Authorities, Walker Love and Claire Orr from the Accountant in Bankruptcy at Walker Love’s Local Authority Forum at the end of 2013.

The next Forum is scheduled to take place in May 2014. The agenda and guest speakers will be published on these pages shortly. To attend, send an email to Chris Bell.

If you would like to receive a copy of our Forum briefing which contains features on the new Bankruptcy and Debt Advice (Scotland) Bill, the new protected trust deed regulations, money attachments: when to use and not to use and a special focus piece on the methods, approaches and joint working arrangements that have been put in place at a Scottish Local Authority, please send Chris Bell and email and he will send a copy of the Briefing to you.

The collection strategies and tactics developed by local authorities across Scotland do differ due to their own diverse demographic and geographic differences, however there is one constant which runs through all – the key to improving collection receipts and performance is largely due to improving debtor profiling, systematic targeting and sharing intelligence with other authorities and debt recovery partners. Find out how one Local Authority has improved monies collected significantly over the last couple of years by requesting a copy of Walker Love’s Local Authority Briefing.

For further information on the Bankruptcy and Debt Advice (Scotland) Bill, which is due to come into force in April 2015 >click here.




Walker Love at the CSA DBSG Annual Conference 2013

The Credit Services Association (CSA) is the National Association in the UK for companies active in relation to unpaid credit accounts, debt recovery agencies, tracing and allied professional services, and the Debt Buyers and Sellers Group (DBSG), held their annual conference and exhibition on September 18th at the Crowne Plaza Hotel next to Heythrop Park in Oxford.

This year’s conference themes included regulation and compliance, commercial collections and debt sale and purchase. Delegates discussed issues such as fraud prevention, funding for debt purchase, treating customers fairly and online communications.

David Walker, Managing Partner, Walker Love gave delegates an overview of the changes and developments in the Scottish courts, litigation and enforcement, as well as the facts on the ground when it comes to deciding on the best recovery approach and collecting debts in Scotland.

The conference was also be addressed by Yvonne Fovargue MP, Gillian Guy CEO CAB and Simon Jack, Business & Economics editor, BBC Radio 4.

For more information visit the CSA’s website.

Argyll & Oban Faculty of Solicitors CPD: Civil Enforcement In Scotland

Walker Love were delighted to support the local Argyll and Oban Faculty CPD event: Civil Enforcement In Scotland, which took place on Tuesday 23rd April 2013.

Delivering a comprehensive “civil enforcement” seminar covering all aspects of Sheriff Officer enforcement in Scotland, the event offered an ideal opportunity for local practitioners to engage and discuss the operational, technical and practical challenges of civil enforcement in Scotland with Walker Love Sheriff Officers.

Scottish Paralegal Association Conference 2013

Scottish Paralegal Association – Celebrating 20 years of promoting the profession.

Due to popular demand the Scottish Paralegal Association annual conference this year was held for the first time on a week day at the Grand Central Hotel in Glasgow on 18th April 2013.

Celebrating 20 years of promoting the paralegal profession they were delighted to have 100 delegates attend. Education and learning from best practice was the key objective of the day, with seminars offering talks on Risk Management, Conveyancing, Conflict of Interest and skills learning for achieving a good work-life balance.

Walker Love were delighted to be primary exhibitors at the event and very proud to support another highly successful Scottish Paralegal Association conference.

For more information on the Scottish Paralegal Association click here.


Welfare Reform: Are the benefits universal?

Money advisers from across Scotland gathered at the Crowne Plaza Hotel in Glasgow on the 3rd and 4th June to discuss the key issues arising from welfare, bankruptcy and financial services regulatory reform at the annual Money Advice Scotland conference, sponsored by Walker Love.

With key note addresses from Margaret Curran, MP and Robert Skinner from the Lending Standards Board and a series of workshop discussions on bankruptcy, from a lenders, collectors and consumers perspective, welfare reform and regulation, the conference provides an opportunity for those in credit and debt advisory industry to come together to tackle the reform challenges and share best practice.

Walker Love is delighted to continue to support the 2013 MAS Annual Conference. As one of the largest firms of Messengers-at-Arms and Sheriff Officers, providing Collection and Enforcement services to a number of Local Authorities and Court users across the whole of Scotland.

In support of the Scottish Government’s objective to have a common financial tool and standard financial health check regulations across the money and consumer advice sector, Walker Love is currently working on a number of projects in this area. MAS has also been working with Walker Love to provide training and guidance sessions to our telephone and field force agents on dealing with financial hardship, vulnerable individuals and money advice services.

For more information on Money Advice Scotland >click here


Allpay Mobile Payment app

Walker Love launches the Allpay mobile payment app to its customers. Find out how you can get it.

 The Allpay mobile payment app. The app which helps you to manage your debts > Download the app now

More than 14,000 people have downloaded allpay’s Payment App in the last 12 months and are using it to regularly pay bills such as rent and council tax, new figures show.

Walker Love’s customers can download it for free allowing you to pay their bills anytime, anywhere and you to receive the payment data the next working day. >Visit the Allpay website

More than 300 organisations, the majority of which are housing associations and local authorities, are now regularly receiving payments in this way. However, its uses don’t stop there. allpay Cashless customers are using it to top up their accounts, while others are using it to pay fines and manage debts.

The allpay App is a mobile application (App) available to download from the Apple App store or Google Play >more information

Allpay has also recently launched a new version of the Payment App which includes a barcode reader and the ability for residents to make one-time payments where they don’t need to store an allpay Payment Reference Number (PRN) or bank card.

For more information on the Allpay App and to download >click here