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Is It Time the Debt Arrangement Scheme Is Expanded Into England and Wales?

26/01/2016 09:41 GMT | Updated 25/01/2017 10:12 GMT

Research released earlier this week by BBC News that personal debt in the United Kingdom has topped £180bn certainly won't make easy reading for the government. November last year saw the biggest monthly increase in personal debt since the financial crisis. To put that into some perspective, the total personal debt in the UK is now a larger figure than the annual budget for the NHS.

Taking a look at the figures more closely, the top 5 "UK debt hotspots" are, in descending order; Manchester, Sandwell, Hull, Barking & Dagenham and Newham. There's a familiar trend amongst all of those hotspots and that's the fact that they're all in England. You'll also notice that Scotland doesn't contribute so greatly towards the UK's personal debt. So why is this? Well, it might be something to do with the DAS, or Debt Arrangement Scheme.

To give you a bit of background into the Debt Arrangement Scheme, it's basically a debt repayment scheme introduced by the Scottish government. DAS is open to all Scottish residents who are struggling with debt. One of the best things about DAS is the fact that when a person enters the scheme, their interest and charges will be frozen and creditors will be unable to add fees on top of what is already owed. This essentially gives the lender some time to pay off their debts without having to worry about further debts building up.

Those using the DAS are then able to discuss with money advisors their financial situation and choose an affordable monthly amount to be paid back. Sounds pretty simple, right? Well, it is. The Debt Arrangement Scheme has truly gone a good way to improve the personal borrowing situation in Scotland and has proven that sometimes the simplest solution is the most effective.

With the above taken into consideration, it likely comes as no surprise to see that Downing Street is facing increasing calls for the scheme to be expanded across the country, into England and Wales. I can't help but think that the scheme would be incredibly beneficial in the rest of the country, where debt is becoming more and more of an issue and drastically reducing quality of life for the hardest hit.

That being said, it's pretty clear why David Cameron might be reluctant to roll a similar scheme out across England and Wales. It goes without saying that lending companies are undeniably hit the hardest by the Debt Arrangement Scheme. Because the scheme places a freeze on debts and also protects the assets of borrowers, lenders are unable to squeeze that extra bit out of cash out of their customers when they're unable to pay back. For some lenders, like Wonga for example, high late repayment fees are at the core of their business model and the government's ability to freeze those fees is one that is going to hit their business hard. With that in mind, it's no surprise to see that Wonga are truly getting their game together.

In all though, any scheme that goes some way to improve the operations of payday loan companies can't be a bad thing, can it?

In conclusion, despite the implications for lenders, there's no denying that the Debt Arrangement Scheme is a simple and effective way to deal with the country's personal debt problem and also drastically improve the quality of life for those suffering with debt issues at the same time. However, whether we'll see the government decide to expand the scheme out of Scotland and into England and Wales still remains to be seen.