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|CSA welcomes new Standard Financial Statement but urges a designated savings account|
|Friday, 29 July 2016|
The Credit Services Association (CSA), the voice of the UK debt collection and purchase industries, has broadly welcomed the launch of the new Standard Financial Statement to help create a clearer picture of an individual’s financial position and enable a fairer, faster resolution for resolving customer debts.
It has also given a cautionary welcome to a new mechanism that allows customers to save a proportion of their monthly disposable income and effectively ‘ring-fence’ up to £20 per month to save for emergencies.
But in welcoming the launch, it has also warned against the additional costs to the industry in accommodating such a change, and proposed that customers should open a designated savings account as evidence they are actually saving the surplus.
Leigh Berkley, President of the CSA, says that previously it has been up to individual firms to determine how much of a customer’s disposable income it is fair and reasonable to collect: “This new mechanism will help remove some ambiguity, and allow a more consistent and transparent approach across the industry,” he says. “Personally, I would also like every single creditor, including Local Authorities and Government departments, to use SFS.
“From discussions with CSA members this year, it is clear that all of the firms I spoke to already take a responsible approach, and do not ask for anywhere near 100% of disposable income when a customer has a surplus on their I&E.
“To implement SFS, our members will be obliged to change their manual and automated processes to accommodate the changes from CFS (Common Financial Statement), all of which adds to their costs. Despite the best intentions of the new statement, our industry and the economy could end up with the worst of both worlds: greater cost and longer periods before consumers get back to financial health.”
The statement, which replaces the Common Financial Statement, comes into effect in March 2017. The new savings element was approved by the Debt Advice Steering Group of the Money Advice Service (MAS).
The concept, Mr Berkley argues, is a good one: “Enabling customers to protect a percentage of their disposable income to save for a rainy day is sensible, logical, and should be applauded,” he says. “It is designed to prevent customers from getting into further debt (or stop repaying what they already owe) when there is an unexpected emergency.
“The challenge, however, is in proving that the money is indeed being set aside for such a purpose, and to prevent further detriment. Insisting on a designated savings account would help allay our industry’s concerns and prevent the good intentions of MAS from being exploited.”
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