On 1st March 2017 the first Standard Financial Statement (SFS) will go live. This is a new initiative that aims to provide a single, universal format to indicate an individual’s income and expenditure information as well as any debts they owe. From March this year both creditors and debt advice providers will move to using the same new format which will streamline processes that are carried out by both parties.
According to a release by the Money Advice Service: “This will be the first time that all major debt advice providers, creditors, and other debt bodies will use the same format to assess income and expenditure for over-indebted people, bringing greater consistency to the way finances are considered in debt advice”.
The SFS will provide a single set of income and expenditure categories with spending guidelines which will be used across the sector, in a single format. A savings category will also be included to help people build financial resilience while repaying their debts. This important addition is intended to help people in debt to withstand unexpected costs and give them a solid financial footing once they are debt free.
The increased consistency provided by the SFS will help debt advisers and creditors in a number of ways. Currently, there are different formats and spending guidelines in use. The SFS will bring greater consistency in the way affordability assessments are recorded and measured when considering repayments. Debt advisers and creditors will also be able to pass people’s details more smoothly between different agencies, reducing the number of times affordability assessments are completed and making the journey through debt advice more straightforward”.
In response Leigh Berkley, President of the Credit Services Association broadly welcomed the launch but also warned against the additional costs to the industry in accommodating the change and proposed that customers should open a designated savings account as evidence they are actually saving the surplus. “Enabling customers to protect a percentage of their disposable income to save for a rainy day is sensible, logical, and should be applauded,” he said “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 the Money Advice Service from being exploited.”