The Money Advice Service: has it over-reached itself in Scotland?

The UK Money Advice Service (MAS) has released a new report, Debt Solutions in the UK: Recommendations for Change.

Now as a Scot, I am instinctively suspicious of such reports. It is not the role of the Money Advice Service to make policy recommendations for formal debt solutions in Scotland.

These are devolved matters, exclusively for the Scottish Parliament to consider and are devolved under the Scotland Act 1998.

Policy Over-Reach?

The question needs to be asked, is this policy over-reach by the Money Advice Service?

We arguably have seen this before, with the Standard Financial Statement and the efforts to get it adopted as a UK wide tool (Is it Time to Call in the Common Financial Tool).

If it is, we need to be cautious. It would be the ultimate irony if, at this point in Scottish legal history, the independence of our debt laws were now eroded.

Scotland’s debt law have always been distinct, they even pre-date the Union. The Diligence Act of 1469 remains on the statute books, as does the 1661 Act of the same name, alongside the Adjudication Act of 1672.

This is legislation that existed not just prior to the modern day Scottish Parliament, but before the Act of Union and was made by the Parliament that sat in the current home of Scotland’s Court of Session, half a mile down the road from its successor. These laws survived 300 years of being in the custody of Westminister.

Even prior to devolution and the Accountant in Bankruptcy taking over as the policy lead in this area, this area of law has always been developed in Scotland, even if it was not made here. There are no shortage of historic Scottish Law Commision reports, concerning all areas of law in Scotland, relating to debt.

You could say we are not lacking in expertise.

There is certainly, however, a risk of erosion as the information revolution continues apace, and banks retreat from the High Street. With money now flowing seamlessly across borders and lenders increasingly lending on a volume basis, using algorithms to decide who to lend to, Scotland’s unique debts laws will increasingly feel like an inconvenience to them.

However, a country’s debt laws are a personal statement: how a society treats it’s debtors says something about that society.

This is what devolution was all about surely? About making these decisions ourselves. About steering our own path as the different parts of the UK continue to diverge.

However, I don’t believe this means we cannot learn from each other and even co-ordinate our direction of travel.

We have seen this before when England and Wales got one year bankruptcies with the Enterprise Act in 2003; followed by Scotland in 2008. Or that England and Wales followed the Scottish example of Low Income, Low Asset Bankruptcies with the adoption of Debt Relief Orders in 2009.

This legal dialogue has not just been restricted to the legal borders of the UK, however, but extended to the Republic of Ireland in 2012 with their Personal Insolvency Act and the creation of Debt Relief Notices and Debt Settlement Arrangements.

Maybe their Personal Insolvency Arrangements, which are used for mortgage debts, will find their way to our shores one day.

Another example of this exchanging of ideas and lessons can also be found in the Money Advice Service’s new report, with proposals for the introduction into England, Wales and Northern Ireland, of a form of the Scottish Debt Arrangement Scheme.

The report also makes other recommendations, such as a review in England, Wales and Northern Ireland of debtor fees in Bankruptcy, including the reintroduction of fee remissions when people cannot afford them.

This echoes a call that was made by Govan Law Centre after the UK Supreme Court decision on Employment Tribunal Fees (see here), which I supported.

The Accountant in Bankruptcy is currently consulting on their fees and how they are funded, and I largely support their policy objectives, as outlined in their consultation document.

However, I would urge them to now extend their consultation to accept the MAS recommendation for a debtor application fee review.

The Scottish Government cannot come to Money Advisers and ask them to accept Money Advice Service initiatives, such as the Standard Financial Statement, when, as it stands, it is likely to make our clients situation worse, and then ignore other recommendations, which may benefit them.

Likewise, the Money Advice Service need to be aware of the risks of policy over reach. They cannot produce financial tools that are detrimental to consumers, and which contain financial trigger figures that have to be kept a secret from consumers and then expect them to be rubber stamped through the Scottish Parliament.

As has always been the case and is a major feature of the UK: for the Union to succeed, there must be mutual respect between the different legal systems and traditions.

It has been that respect that has ensured there are still laws that predate Mary Queen of Scots on the statute books (although we do want to get around to repealing them).

Harmonisation of debt laws across the UK may not be possible, but to borrow a phrase from Brexit, broad regulatory alignment probably is and may even be desirable.

The Money Advice Service Report, Debt Solutions in the UK, can be downloaded here.