The Debt Respite Scheme regulation is a fast evolving eco-system. Banks and building societies must quickly develop an integrated enterprise-wide vulnerability management program.


The Debt Respite Scheme provides for two moratoria: Breathing Space and Mental Health Crisis. The regulation provides timely support to over-indebted individuals as well as those suffering from a severe mental health crisis. Its key features of its moratoria include:

  • Temporarily Pausing Creditor Enforcement Actions: Freezes interest, fees, penalties, and charges
  • Duration: 60 days for Breathing Space & for duration of treatment plus an additional 30 days for those seeking Mental Health Crisis treatment
  • Qualifying Debt: With certain exceptions, almost all personal financial services debt, court judgements, and arrears owed to local or central government are eligible under the scheme. Sole traders with a turnover below VAT threshold can also avail themselves of the scheme.
  • Professional Debt Advice: Debtors can access debt advice services to help them gain better control of their financial situation during moratoria
  • Capping Access: Individuals can access the Breathing Space scheme once every 12 months. There are no time restrictions the Mental Health Crisis scheme.

Key Participants

  • Debtor: This regulation applies to debtors who do not have sufficient means to pay-off the debt in its current obligation structure, as well as those who are receiving crisis treatment from a specialist mental health service provider. Debtors gain an opportunity to engage with professional debt advisor to seek sustainable debt solution. This also puts limits on the amount of new debt debtors can take on during the moratorium.
  • Debt Advisor: These individuals serve as a mediator between the debtor and creditor, as well as financial advisors. Specifically, they provide free debt advice, assess debtor eligibility for different moratorium, periodically review and notify the Insolvency Service of the debtor’s entry and exit from moratorium.
  • Insolvency Service: The Insolvency Service operates an online central portal where advisors and banks can input and retrieve debtor information on the moratorium program. The Insolvency Service maintains a private register of individuals in moratoria, with creditors only able to access the details of their specific debtors.
  • Creditor: Creditors pause enforcement actions and freeze the accumulation of interest, fees, and other charges after being notified that a debtor has entered moratoria. Creditors must systematically invest in information gathering, analytics, digitization, and training to successfully manage the program.

Focus Areas for Lenders

Banks and building societies must see this regulation as part of a bigger focus on customer vulnerability. This will require investments in different areas:

  • Information flow and technological readiness to ensure real-time alignment between the central portal, internal teams, and third-party collection agencies
  • Customer communication and employee training to ensure a responsive, empathetic contact strategy
  • Data-driven payment plan offers that suggest appropriate forbearance or payment options, as well as analytics driven vulnerability prediction
  • Realigning credit loss estimate processes for vulnerable customers and increase provisioning
  • Align a bank’s product development and sales engine to deliver suitable product propositions
  • Strategies for legal, fraud, and compliance alignment in case a bank challenges the assessment of a debt advisor or finds customers gaining additional debt
  • End-to-end program tracking and management information system (MIS) for customer coverage, fees, recovery impacts, and misses

Exl’s Solution Framework

Helping Banks And Building Societies Prepare For Breathing Space Regulations

Using analytics, technology, and digital enablers, EXL can help creditors address the current demands of the regulation, as well as proactively understand customer vulnerabilities and actions. This is accomplished over six steps:

Breathing space regulation

Get in touch with our experts:

Manish Dureja, Subject Matter Expert (Credit Risk, Collections and Vulnerability) |

To read more on this topic, access EXL’s whitepaper, “Managing Customer Debt Vulnerability in UK”

Written by EXL BFSI Analytics Team:

Jyoti Sinha
Project Manager

Rashmirekha Basu
Senior Consultant

Manish Dureja
Senior Engagement Manager



Priya Pahuja


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