Charity to launch debt payment plan to help those affected by Covid
Those who have accumulated debts as a result of the health crisis will be able to register with StepChange to access a short-term payment plan due to launch mid-November.
The Covid Payment Plan (CVPP) is aimed at those who need more time and forbearance to get back on track with full payments on their debts which have built up during the pandemic.
StepChange confirmed there’s no maximum debt value that it will consider. Eligibility is based upon an applicant’s ability to pay a reasonable percentage of their contractual minimum payment over a 12-month term.
The charity will take one single payment from applicants and distribute it among creditors named in the plan, meaning people won’t need to deal with multiple creditors.
When it comes to interest charged on the CVPP, StepChange said this is at the discretion of each creditor but added that they should freeze interest and charges with the majority of creditors proposing to do so, though there’s no guarantee.
In order to be eligible, you need to meet a number of criteria, including a reduction in household income because of coronavirus, you believe there’s a reasonable chance your income will recover within the next 12 months and you have not failed a debt solution in the last 12 months.
StepChange said its CVPP has been developed in consultation with HM Treasury and is supported by the Money and Pensions Service. It comes as estimates suggest nearly two million people who have seen their finances affected by the pandemic weren’t in difficulty previously.
By providing a year-long window for people to make reduced payments, it will allow them a “gradual transition to resuming full payments, or if circumstances change for the worse, allow them an easier transition into a longer-term debt solution”.
However, StepChange added that the CVPP is specifically aimed at those expecting to face only short-term difficulty and so other debt solutions may be more appropriate for those facing greater challenges.
‘Help tackle short, sharp, temporary debt shock’
StepChange CEO, Phil Andrew, said: “What’s driven our approach is the recognition that, within our own toolbox, most of the existing solutions that we could provide are long-term strategies to enable people to tackle entrenched problem debt – they were not designed to cope with the short, sharp, temporary debt shock that so many people have uniquely experienced due to the pandemic.
“As firms now begin to draw back from the blanket emergency support that got us through the past few months, new strategies are needed. We hope that the CVPP will make a valuable contribution to the transition to recovery, both for households and for the wider economy.”
Economic Secretary to the Treasury, John Glen MP, said: “Reducing the long-term impact of coronavirus on people’s finances is crucial – that’s why we’ve delivered unprecedented support to protect jobs and livelihoods, most recently through our Winter Economy Plan. It’s important that people who are struggling with a temporary hit to their finances can access tailored support and so I welcome StepChange’s Covid Payment Plan, which will help people get back on to a stable financial footing in a shorter time frame.”