Breathing Space is a debt respite scheme launched in the UK on 4 May 2021. As the name suggests, it gives those struggling with debt a 60-day pause on interest, charges and enforcement, with extended protection for those in mental health crisis treatment.
The scheme is designed to support those struggling with debt by giving them the space to work out a repayment plan.
It may also promote better long-term repayment outcomes.
But it also poses new challenges for debt recovery teams. To comply, they need to refrain from contacting the customer, charging interest or penalties, and applying pressure in general while the customer is protected.
To coordinate this requires collections teams to adapt – making sure they can seamlessly comply with the regulations as part of their existing workflow.
In this article, we explore what the regulations involve, what they mean for lenders, the challenges they pose, and how software can help lenders stay compliant while improving recovery outcomes.
The UK Breathing Space (Debt Respite Scheme) gives eligible applicants a 60-day protection window in which most collection activities are paused. This includes a temporary halt on interest, fees and enforcement. It provides individuals struggling with debt a chance to seek professional advice and create a plan for paying off balances.
If an applicant is accepted onto the Breathing Space Scheme, lenders will be obliged to:
Customers are only eligible for one Breathing Space in any 12-month period and they must continue paying if they are able to and keep their documentation and account information accurate and up to date. Mental Health Crisis Breathing Space lasts for the duration of treatment for a crisis, plus 30 days.
In short, it’s a legally defined pause in recovery processes for lenders, allowing customers some room to seek help, assess their situation and make a repayment plan.
During this time, lenders will need to adapt their workflows to ensure no automated messages or fees slip through, and that no agent accidentally contacts the customer.
While Breathing Space removes pressure from customers temporarily, it increases pressure on lenders, requiring tighter control over processes, communication and system behaviour. Teams need to stop contact, freeze charges and pause enforcement, paying careful attention to automated processes that can accidentally break the rules. Breaches can happen easily if careful measures aren’t taken.
During the protected period, instead of outreach, tracking and coordination become the most important activities for lenders. Agents need to monitor accounts closely, update systems and manage timelines to ensure full compliance. They should also focus on adjusting prioritisation based on changing risk, keeping data clean and preparing for re-engagement once Breathing Space ends.
Supporting customers so that they don’t find themselves in a position where they might need to enter Breathing Space should be a priority for lenders. And this all comes down to the customer experience. There are a number of strategies lenders can employ to reduce the likelihood of customers needing formal protection:
The sooner a lender spots signs of financial trouble, the easier it is to intervene before customers become overwhelmed.
This means reaching out early with clear messages offering solutions instead of applying pressure. The early phases of delinquency are about problem-solving, and helping the customer to feel supported.
Tone is critical here – empathetic messaging is much more effective at managing resistance – which often leads to better outcomes.
Using data to segment customers based on risk factors helps lenders create more accurate, personalised strategies. Teams can quickly spot who needs help, who can self-cure and who needs proactive intervention.
This means collections teams can direct their resources accordingly, while deploying highly personalised messages, offering high-risk accounts managed repayment plans and sending reminders and nudges to lower-priority cases. This ultimately means fewer customers slip into financial distress unnoticed.
Google’s Zero Moment of Truth research showed 70% of customer journeys happen before they step foot in a store or talk to a representative. This reflects modern customer expectations - people prefer to manage their own interactions with companies.
This carries into debt resolution too. EXUS clients have seen a 110% increase in kept Promise-to-Pay ratios and a 40% rise in new promises obtained after introducing self-service options. Giving customers more freedom and control encourages earlier engagement and better outcomes, reducing the pressure to seek formal help.
Breathing Space regulations certainly have the potential to financially impact lenders. The 60-day pause in recovery activity means lenders can’t charge interest, send reminders or pursue enforcement, which naturally impacts cash flow and short-term recovery volumes. Other risks include:
Then there is the harder to quantify loss of momentum that happens when accounts enter Breathing Space. Teams need to carefully track these accounts and prepare for re-engagement to prevent delinquency from worsening and recovery probability falling.
Adapting to these risks and maintaining recovery performance is challenging. But, with the right tools it is achievable.
By far the most effective way to stay competitive is to use recovery software like EFS. The platform eliminates much of the manual tasks that lead to breaches, replacing them with data-driven automation. Here’s how EFS protects your organisation and improves recovery performance:
EFS can improve and automate the strategies outlined for helping customers avoid situations where they might need Breathing Space. Dynamic, data-driven segmentation helps teams prioritise accounts and engage early with empathetic, personalised solutions. Self-service tools give customers more control, improving experiences and increasing the likelihood of repayment.
While Breathing Space is active, EFS locks protected accounts into compliant workflows automatically. It prevents prohibited contact or charges, while still letting teams manage internal activity, like updating documentation and planning next steps.
After protection, EXUS makes re-engagement fast and smart, helping lenders regain any lost momentum. Pre-scheduled workflows trigger personalised communication plans based on updated affordability data, helping collections teams restart contact with sensitivity and accuracy. With all information organised and readily available, teams can switch from compliance mode back to resolution mode effortlessly.
While Breathing Space poses a challenge to many lenders, for some it represents an opportunity to make recovery processes smarter, while improving relationships with customers. Using the right tools, lenders can not only stay compliant, but improve performance and customer experience.
Talk to a member of the team to see how EXUS can help your organisation adapt to breathing space while strengthening recoveries, and turning regulatory pressure to your advantage.