Can the Scottish Parliament stop UK Wage Arrestments?

Can the Scottish Parliament stop UK Wage Arrestments?

As we enter a cost-of-living crisis and more and more families begin to struggle with paying for day-to-day essentials, there is one thing the Scottish Parliament could and should do and that is stop the use of Direct Earning Arrestments (DEA) from being used to recover DWP debts in Scotland. DEAs are a brutal form of debt recovery that was introduced in 2012 by the UK Government as part of its programme of welfare reform.

They are also unique as since the creation of the Scottish Parliament, debt recovery has been a devolved area of law.

Direct Earning Arrestments (DEA), however, are UK wide debt recovery tool (but don’t apply in Northern Ireland and the Channel Isles) and are specifically used by the DWP to recover debts owed to them from wages (local authorities can also use them to recover housing benefit overpayments). At their worst they can take up to 40% of someone’s net wages each month.

How do they work in Scotland?

In a Scotland, they can be even more harsh, as although they can arrest up to 40% of someone’s wages, such levels of arrestment are only likely in the most extreme cases, where fraud is involved. However, in Scotland they can also be executed in addition to a Scottish Earning Arrestment that can be used to recover other debts, such as council tax. This means even when a lower level of arrestment is used for a DEA (not 40%), when a Scottish Earning Arrestment is in place, people get hit with a double whammy.

Why this is unusual, is because under Scot Law, when more than one creditor wants to arrest someone’s wages, Scots Law provides a solution known as a Conjoined Earning Arrestment. This means two or more creditors can share the amount arrested, but the person in debt does not pay more, as Earning Arrestments are designed to ensure they are not unduly harsh in how they operate.

Direct Earning Arrestments, however, by being allowed to operate in addition to an Earning Arrestments, can cause real hardship and are a UK cuckoo in the nest of Scotland’s home-grown debt recovery tools available to creditors.

What is the logic of Direct Earning Arrestments?

The logic behind Direct Earning Arrestments in a Scottish context is the Department of Works and Pension don’t need to use Scotland’s traditional law of Diligence to recover debts and can get a larger amount than they may receive if they use Scotland’s more progressive Earning Arrestment.  They can also get a higher priority over other creditors who may be owed more but must use an Earning Arrestment.  

The justification for this is not readily apparent either. Its true benefit overpayments are public funds, so you could argue, those types of debts should be given priority over other debts; but there are lots of public debts, such as tax debts owed to HMRC, or arrears owed for council tax. However, those debts still must be recovered using Scots Law. Some may say it’s because benefit overpayments arise from benefit fraud, but this is not true. Most arise from people not understanding the UK’s complex benefit system or having to apply for advances on their Universal Credit, or because the DWP make official errors and miscalculations. Most benefit overpayments do not arise from fraud and most people who have them, are those on the lowest incomes, so its ironic they are the ones subject to the most brutal forms of debt recovery.

How were the UK Government able to make these Law?

How the UK Government were able to legislate in 2012 to introduce Direct Earning Arrestments into Scotland is questionable. As already noted, since the inception of the Scottish Parliament, debt recovery law has been devolved to the Scottish Parliament.

The way devolution operates is under the Scotland Act 1998 (which has now been amended by the Scotland Act 2016) the general principle is an area of law is not devolved to the Scottish Parliament if it is specified as being reserved to the UK Parliament under Schedule 5 of the 1998 Act. If it is reserved, the Scottish Parliament cannot legislate in that area.

Under Head F of Schedule 5 of the Scotland Act 1998, however, Social Security Law is reserved (although because of the Scotland Act 2016, many areas of Social Security Law are now also devolved to the Scottish Parliament).

So, are Direct Earning Arrestments made under an area of law that is reserved exclusively to the UK Parliament? Well back in 2012, Social Security was fully reserved to the UK Parliament and what Section F1 of Schedule 5 stated was reserved was:

Schemes supported from central or local funds which provide assistance for social security purposes to or in respect of individuals by way of benefits.

Requiring persons to—

(a) establish and administer schemes providing assistance for social security purposes to or in respect of individuals, or

(b) make payments to or in respect of such schemes,

and to keep records and supply information in connection with such schemes.

The circumstances in which a person is liable to maintain himself or another for the purposes of the enactments relating to social security and the Child Support Acts 1991 and 1995.

The subject-matter of the Vaccine Damage Payment Scheme.

Importantly none of which relates to the recovery of debts, even DWP debts. However, under Head F there are further provision which illustrate the type of powers that are reserved in relation to Social Security Law, which includes:

“…recovery of benefits for accident, injury or disease from persons paying damages; deductions from benefits for the purpose of meeting an individual’s debts…”

Interestingly, however, the illustrations only refer to the recovery of debts from benefits, not earnings.  Now it could be argued this list is only illustrative and not exhaustive, so it could be argued it does include the power to recover benefits from earnings. However, it could also be argued, it’s a deliberate omission.  At this point, when the Scotland Act was made in 1998, it was well established that recovery of debts in Scotland were done using Scots Law of Diligence and had been done that way for centuries. In fact, even after devolution, DWP debts were recovered from earnings exclusively using the Law of Diligence up until Direct Earning Arrestments were introduced in 2012.

That would be a more plausible reason why the illustration only refers to deductions from benefits rather than earnings, as it was always anticipated that debt recovery from earnings in Scotland would be carried out using the law of Diligence. So, one view could be the introduction of DEAs by the UK Government was a bit of a power grab.

In terms of DWP debts being recovered from benefits being a reserved matter, this makes sense, as strictly speaking benefit deductions are not really debt recovery in a traditional sense. They are more the right by the DWP to offset debts owed to them against money it is due to pay someone. As DWP benefits are a reserved matter and the DWP are a UK agency, it makes sense the power to make deductions from benefits should also be reserved. Deductions from earnings, however, are less likely to be an obvious area to be reserved to the UK, as Scotland already had a system of laws that govern recovery of debts from earnings and other assets that a debtor may have.

Describing Direct Earning Arrestments as cuckoos in the nest of Scotland’s debt recovery laws is apt, as they effectively crash a wrecking ball into that framework and allow the DWP to carry out its own arrestments, regardless of any other claims by other creditors, even public sector ones.

Can the Scottish Parliament legislate in relation to Direct Earning Arrestments?

The Scottish Parliament can legislate to amend or repeal a law that is passed by the UK Parliament.

The Scottish Parliament can amend or repeal UK laws, providing it is not an area of law that is reserved; nor can it make changes that would affect the law of any other legal system or country. So, it could not amend or repeal Direct Earning Arrestments in a way that would affect their application in England or Wales (they don’t apply in Northern Ireland or the Channel Islands).

So, are Direct Earnings Arrestment an area of law that is reserved? They were introduced by legislation of the UK Government. If it is not an area of law that was reserved, then the UK Government should not have extended them to Scotland, but the UK Parliament is a sovereign parliament, so effectively it can legislate in any area it wants, regardless of what the Scotland Act says.

However, The Welfare Reform Act 2012 did not amend or restrict the powers of the Scottish Parliament, so even if the UK Parliament did legislate in a devolved area, this does not mean the Scottish Parliament cannot legislate to amend the law in relation to the application of DEAs in Scotland.

Another argument that supports the view that how DWP benefits are recovered in Scotland is not a reserved area (except in relation to when it’s done by making deductions from benefits) is the Scottish Parliament can currently legislate in relation to how DWP benefit overpayments are recovered just now. Under the law of bankruptcy, for example the Scottish Parliament can decide what types of debts are included in bankruptcy and what are not; it can decide what types of debts are written off in bankruptcy. It can also create different classes of debts, which include benefit overpayments and decide how they rank against each other and how they get paid.

The simple fact is under Scots Law, the rules that govern how debts are recovered were always governed by the Law of Diligence (with one notable exception), so it seems unlikely when the Scotland Act was drafted in 1998 it was ever intended that the UK Government would reserve the right to create a new system of debt recovery laws that previously had never existed. I would, therefore, take the view the Scottish Parliament can competently legislate in relation to Direct Earning Arrestments and how they operate in Scotland.

I would also take the view that it would be perfectly competent for the Scottish Parliament to amend S149 (3) of the Welfare Reform Act 2012 which states: “Sections 128 and 129 extend to England and Wales only”. If the Scottish Parliament were to include S106 into that Clause (which relates to Direct Earning Arrestments), it would effectively repeal their use in Scotland, without having any impact or effect on any of the other UK legal Systems.

Rising Living Costs: could the Debt Arrangement Scheme help?

Rising Living Costs: could the Debt Arrangement Scheme help?

As Scotland emerges from Covid, hopes we would be entering a better future appear to be getting dashed quite quickly.

The truth is we are now facing another crisis, in the form of the rising living costs, which over the next year is likely to see gas and electricity prices soar, accompanied by food and fuel prices.

At present inflation is averaging around 5%, but in all likelihood, it could rise to 7%: a level not seen in decades.

However, for most families the real level of inflation is likely to be more, as the truth is lower- and middle-income families tend to spend a higher proportion of their income on those items that are seeing the highest levels of inflation, such as gas, electricity, and petrol.

Also, as more and more businesses begin to return to the workplace, ending working at home, this will place increased travelling costs on many families and, therefore, additional pressure on budgets.

What can be done if your household finances are under pressure?

The problem for many households is that as the cost-of-living increases, it’s not easy to budget. Many of our household essentials are fixed. Mortgage, rent, council tax etc. Some expenditure we might be able to reduce by switching suppliers, such as insurances and broadband providers, but most of these savings will be marginal in what are already highly competitive markets.

However, if people are struggling with their household budgets against a backdrop of rising costs, then they should look at all their household expenditure to see where savings can be made.

So, if our fuel bills are increasing, even if we can’t make savings in relation to them, we should look at where else we can make savings.

But making Savings isn’t as easy as many suggest

The problem is inflation is affecting many of our essential expenditure, so reducing costs is not easy. How do you cut your expenditure on food, when prices are rising and you are already receiving less for your money? The same applies for other items and with the domestic energy markets effectively dysfunctional, with over 30 companies believed to have collapsed in the last year, switching providers will not bring the benefits it once did.

The truth is for many, once they have looked at their budget, the only place they will be able to make savings will be in relation to debt payments, such as credit cards and loans. These costs, however, are also often fixed, and require a minimum payment each month.

Could the Scottish Debt Arrangement Scheme work?

It may be, however,  for some Scottish consumers, the Debt Arrangement Scheme may provide some form of solution. Not only because it may allow people to make reduced payments to their debts, whilst also freezing interest and charges, but because unlike other formal debt solutions in Scotland, there is no requirement under the law that when you make a proposal under the Scheme, that you have to offer your creditors all your disposable income.

This little known feature of the Debt Arrangement Scheme may become a game changer in the coming period, when many are looking for help with their debts. 

It means, that even if you are in debt and need a solution for repaying those debts, you can set up a plan that still has a cushion built into it that will allow you to make a proposal to your creditors that doesn’t mean you have to give them all your disposable income each month.

The benefit of this, is that cushion may still allow you to absorb any further cost of living increases over the coming months and years, without having to miss any payments to your  Scheme.

What is the Debt Arrangement Scheme?

The Scottish Debt Arrangement Scheme is a Scottish Government Scheme, that is not a type of insolvency and allows you to repay your debts over a reasonable period.

It does not need to affect your car, even if you have it on finance, or your home, providing you make your payments as normal. 

It also protects you from Sheriff Officers and all you pay each month, is one payment, which is distributed to all your creditors by a Payment Distributor.

The Debt Arrangement Scheme is also free, so every penny you pay, goes to reducing your debts. If you want to see if the Debt Arrangement Scheme is suitable for you, use our tool below, or speak to us on Messenger. 

Scottish Debt Solution League Tables

Scottish Debt Solution League Tables

Information from the Scottish Government, covering the period from the 20th December 2020 and the 30th of September 2021, shows which organisations provided debt solutions to people struggling with problem debt over that period.

The Scottish Debt Arrangement Scheme

The Scottish Debt Arrangement Scheme is a formal debt repayment plan that allows people to repay their debts. Under the Scheme, those struggling with problem debt can propose to repay their debts to their creditors, using just one payment per month, through a Payment Distributor. Importantly, the Scheme is free to those in debts, although creditors who have their debts included in a Scheme have to pay 22% towards the cost of setting up and administering the Scheme.

The Scottish Government only report organisations that have done more than 25 DPPs. The rest are included in other.

Money Advice Organisation Number of Approved DPPs.
Carrington Dean Group2,035
Harper McDermott592
J3 Debt Solutions241
Interpath Advisory88
Wilson Andrews67
Begbie Traynors61
Citizen Advice Fife37
Wylie & Bisset30

Local Authorities and Citizen Advice Bureaux

Local Authority and Citizen Advice Bureaux, not for profit, local advice organisations also provide Debt Payment Programmes. In the list above (organisations that have done more than 25) only one of these types of organisations appeared, and that was Citizen Advice Rights Fife. Of those “Other” Organisations, 165 DPPs were carried out by Local Authorities and Citizen Advice Bureaux.

Organisation TypeNumber of DPPS Approved
Local Authorities69
Citizen Advice Bureaux96

Bankruptcy: Certificate of Sequestration

For people in Scotland to apply for their own Bankruptcy (also known as Sequestration), they first need to have a Certificate of Sequestration signed.  Between the 1st December 2020 and the 30th September 2021, the following organisations signed Certificates of Sequestration. 

There are two processes that can be used when someone is going Bankrupt in Scotland, one is Full Administration Bankruptcy and the other is using the Minimum Asset Procedure. The figures for Certificates of Sequestration are broken down into the two procedures used.

Money Advice OrganisationNumber of Certificate of Sequestrations (MAP)
Citizen Advice Rights Fife115
Christian Against Poverty44
South Lanarkshire Council – Money Matters39
West Lothian Council37
Inverness, Badenoch and Strathspey CAB30
Aberdeen Council28
North Lanarkshire Council27
Moray Council27
Haddington CAB25
Scottish Government only report organisations doing more than 25 Certificates of Sequestration
Money Advice OrganisationNumber of Certificate of Sequestrations (FAB)
Wylie and Bisset36
The Scottish Government only report Organisations that have done more than 25 COS

Protected Trust Deeds

Protected Trust Deeds are a type of personal insolvency in Scotland and must be administered by private insolvency practitioners.

Trustee OrganisationNumber of Protected Trust Deeds
Carrington Dean1,549
Harper McDermot1,349
J3 Debt Solutions473
Wilson Andrews249
Interpath Advisory197
Wylie and Bisset146
YEG Insolvency (formally AGT Insolvency)95
Begbie Traynors36
Hanover Insolvency34
Parker Phillips Insolvency26
Provident and Satsuma Loans Announce Debt Write Off

Provident and Satsuma Loans Announce Debt Write Off

Provident, the high cost lender, and their sister Company, Satsuma Loans, have given thousands of customers an early Christmas present and announced on the 31st December 2021, they will clear off all existing Loans ( see here for Provident; and here for Satsuma)
This will include both loans that are in arrears and those that are not.
The reason why the Firms have made this decision is because they have also decided to cease trading on that date.

Why are they writing off Debts?

The reason why both firms have made this announcement is also related to the fact both Firms recently have been experiencing difficulties, as increasingly they were being challenged by customers who believed that Loans they had been given were unaffordable.

Seventy-five per cent of these loans were found to be unaffordable when complaints were made to the Financial Ombudsman Service, leaving both Firms with debts of millions owed to their customers.

So, facing bankruptcy themselves, Provident applied for a Court Order for something called a Scheme of Arrangement and this was granted in June 2021, allowing them to limit how long people had to complain and also reduce the level of compensation that both Firms owed customers.

This meant going forward customers would only have a short window of opportunity to make a complaint that their loan had been unaffordable (until the end of February 2022) and after that they couldn’t make any further claims.

It also meant both Firms could limit how,  much compensation they would pay to people to £50 million, meaning people who claimed were only likely to receive 5-10% of the compensation they were entitled do.

So now what happens is both Firms have said all balances owed to them will be cleared at the end of the year.

So Now what Happens?

Where you have never went into arrears and have maintained your balance, both have said you credit report will be updated to show your account has been settled.

Where you have gone into arrears, credit reports will be shown as partially settled and your balance reset to £0.

If you are still making payments to these Firms, both have said they will stop taking payments after the 31st December 2021.

Where any payments are made after these dates, they have said they will refund them.

What if your Debt has been Sold?

If you have an old debt that has been owed to Provident or Satsuma that has been sold onto a debt purchaser (Firms that buy debt), you will still owe the debt. Debt Purchasers are different from Debt Collectors. They own the debt, whereas Debt Collectors just collect it. So, if it is being collected by a Debt Collector it will be written off.

The problem is it is not always clear whether a debt has been sold or not, as some Firms both collect and buy debt, so you need to clarify with them in what capacity they are acting.

Where a debt has been bought, and, therefore, is still owed, it is important you claim under the Scheme of Arrangement (you have to the end if February 2022), as you may be entitled to compensation.

What Happens to the Scheme of Arrangement and any Claim you have?

For anyone who has not made a claim to the Scheme of Arrangement, you still can until the end of February. Equally anyone who has made a Claim, it will still be processed.

However, where a claim is successful, it will be offset again any debt that was still outstanding and has been written off.

This means if you owed £800 and this is written off on the 31st December 2021, if you subsequently are found to be owed £1,000 in compensation, then under the Scheme of Arrangement you would only be owed £50-100.
This would be offset against the debt  you have had written off, so you won’t receive anything.

Where you loan has been paid off you will receive the full compensation you are allowed under the Scheme; or if the level of compensation is more than the debt that is being written off, you will receive the difference between the two.

If people still want to make a claim to the Scheme of Arrangement for Satsuma or Provident Loans, they have until the end of February 2022 to do so. The Scheme also covers Glo and Greenword Personal Loan customers.

Scottish Child Disability Payment

Scottish Child Disability Payment

From the 22nd November 2021, Scottish Child Disability Payments (CDP) is replacing Child Disability Payments (Child DLA), for any child under the age of 18 who is resident in Scotland.

The new benefit is the latest that will be rolled out by the Scottish Social Security Agency (SSSA) and can be applied for any child who is under the age 16 years old and has either a physical or mental disability or is terminally ill.

Although the benefit can only be applied for a Child who is under the age of 16 years old, it can be paid to a child up to the age of 18.

For those Children already in receipt of the UK’s Child Disability Payment, they do not need to do anything as gradually over the next year, all existing recipients of Child DLA will be migrated over onto Child Disability Payments by the Scottish Social Security Agency. The process of migrating the first tranche of children over will begin from the 22nd November and will include those children who are 15 years and 6 months old and those who are terminally ill. This will ensure those children will not have to apply for Personal Independence Payments when they turn 16 years old, unless they wish to (although Personal Independence Payments will be replaced next year by Adult Disability Payments by the Scottish Social Security Agency).

What is the Child Disability Payments?

CDP will be a new benefit, modelled largely on the UK’s Child Disability Living Allowance, but it will be administered by the Scottish Social Security Agency rather than the Department of Works and Pensions.

It is a benefit that will be available for the parents or guardians of children with disabilities to apply for. These disabilities can be physical or mental and don’t necessarily have had to have been diagnosed yet. The application process for the benefit will not just look at the illness the child suffers from, but also the symptoms and how those symptoms impact of the child’s life. They will look at not just the physical effects of the disability, but also the emotional and psychological effects.

There will be two components to the new benefit. One of which will be for the care needs and the other will be for the mobility needs (although mobility will only be available for children over the age of 3).

Care Components

There will be three levels that the Care Component can be awarded at. These will be

  • Low (£23.70 per week)
  • Middle (£60 per week); and
  • High (£89.60 per week).

Low-Rate Care

Low-rate Care is for any child who need attention from someone for a significant part of the day, in connection with their bodily functions, due to either a physical of mental illness; or

If they are 16 years or older, due to a physical or mental illness, needs help with preparing a cooked meal for themselves (although you can only apply for Child CDP when you are under 16 years old, it can be paid until your 18 years old, unlike the UK’s Child Disability Living Allowance, that is only payable until the Child is 16 years old).

Middle-Rate Care

Middle-rate care is payable when a child needs:

Frequent attention from someone during the day, or prolonged or repeated attention at night in connection with their bodily functions due to a physical or mental disability; or

Continual supervision during the day, or another person to be awake for a prolonged period or at frequent intervals to avoid substantial danger to themselves or others; or

They are receiving renal dialysis treatment during the day or night at least twice a week.

High-Rate Care

High-rate care is payable when a child needs:

  • Frequent attention from someone during the day and prolonged or repeated attention at night in connection with their bodily functions due to a physical or mental disability; or
  • Continual supervision during the day and another person to be awake for a prolonged period or at frequent intervals to avoid substantial danger to themselves or others; or
  • They are receiving renal dialysis treatment during the day or night at least twice a week; or
  • They are terminally ill.

Mobility Payments

There are two levels of mobility Payments that can be applied for any child over the age of 3. These are:

  • Low-Rate Mobility (£23.70 per week); and
  • High-Rate Mobility (£62.55 per week).

Low-Rate Mobility

This rate of the mobility component is paid if the child is 5 years or older and can walk without equipment, but most of the time need guidance or supervision from someone to move around outdoors.

High-Rate Mobility

This rate of mobility is for children over 3 years old, if the child:

  • Cannot walk or is virtually unable to move around outdoors due to their disability; or
  • Has a severe visual disability or is blind and deaf; or
  • Has a severe mental health disability; or
  • Has severe behavioural disabilities, due to a severe mental health disability, and needs supervision during the day and at night to avoid substantial danger to themselves or others; or
  • Would suffer a serious deterioration in their health due to the exertion of walking; or
  • Is terminally ill.

If a child qualifies for the High-rate mobility component you can apply to the Mobility Scheme for an accessible vehicle.

How do you Apply?

You can apply by visiting the Scottish Social Security Agency website, but evidence shows Children and their families will have a greater chance of being successful if they seek independent advice and assistance in making the application. This can be obtained for free advice agencies across Scotland.

Post Office Accounts are Closing: Basic Bank Accounts

Post Office Accounts are Closing: Basic Bank Accounts

The decision by the Post Office to close its bank accounts has now been delayed until November 2022.

The reason for the delay is to allow people who currently get benefits paid into Post Office accounts, time to transfer to another. If people don’t own another account, and with over 1 million people in the UK not having bank accounts this could mean quite a few people, they will be moved onto the Payment Exception Service.  

Payment Exception Service

The Payment Exception Service will allow people to get their benefits paid from any Paypoint Outlet by using a digital voucher, which they can receive by

  • Email
  • Text Message
  • A Unique Barcode displayed on a mobile phone.  

They will also be provided with a reusable magnetic strip card that they can use.

What if you don’t own an account?

If you don’t own a bank account, most people in the UK are entitled to own one.  Our guide below explains your rights to have a basic bank account and how to open one.

Your Rights to a Basic Bank Account

Under the Payment Account Regulations 2015, there are nine British banks that are required by law to provide you with a basic bank account, providing you meet certain criteria.

These banks are:

  • Barclays,
  • Clydesdale and Yorkshire Bank,
  • Co-operative Bank,
  • HSBC,
  • Lloyds Banking Group (including Halifax and Bank of Scotland brands),
  • Nationwide,
  • Royal Bank of Scotland (including NatWest and Ulster Bank brands),
  • Santander; and
  • TSB

When does a Bank have to provide you with a Basic Bank Account?

For one of these banks to be required by law to provide you with a bank account, you must:

  • Be legally resident within the UK;
  • Not hold another bank account with another institution;
  • Not be eligible for any other account with the institution that is not a basic bank account;
  • Where you have another account with another bank, you should not be treated as having an account with another credit institution, if you have been told to close that account.

What must a Basic Bank Account allow you to do?

A basic bank account should have several features. These are:

  • They should allow you to deposit and withdraw money at their branch;
  • They should be free;
  • They should allow you online banking facilities;
  • They should allow you to withdraw money from an ATM machine;
  • They should allow you to set up direct debits, standing orders and to make electronic transfers;
  • ·It should not allow you to run up an overdraft.

When can a Bank refuse to allow you to open a Basic Account?

Banks can refuse to open a basic bank account if it would be unlawful for them to do so, or it would be contrary to:

  • The Fraud Act 2006;
  • The Money Laundering Act 2007;
  • Contrary to Section 40(d) of the Immigration Act 2014; or
  • ·Under Part 4A (f) of the Financial Services and Market Act 2000, the Bank is limited from taking on new business.

A Bank may also refuse to open an account if it believes the conduct of the customer may constitute and offence to one of its staff.

Someone being bankrupt or having a poor credit rating is not grounds for refusing to provide someone with a Basic Bank Account.

When can a Bank close a Basic Bank Account?

A Bank can only terminate a Basic Bank Account if one of the following conditions are met:

  • The consumer has knowingly used the account for illegal purposes;
  • There has been no transaction on the account for 24 months or more;
  • The consumer provided incorrect information when opening the account and had the correct information been provided, the application would have been refused;
  • The consumer is no longer legally resident in the EU;
  • The consumer has access to another bank account with the features of a basic account and this was opened after the account with them was opened;
  • The Bank considers the conduct of the Consumer constitutes an offence to one of their staff;

How quickly can a Bank close a Basic Bank Account?

A bank can close an account immediately if the consumer has used it for illegal purposes, or provided incorrect information when opening the account; or their conduct constitutes an offence against Bank staff.

If none of these conditions are met the Bank must give two months written notice of their intention to close the account and specify their reasons for doing so.

What can you do if you disagree with your Basic Bank Account being closed?

If you disagree with a Bank’s decision to close your account, you can make a complaint to the Bank.

Equally, if a Bank refuses to allow you to open a Basic Bank Account, you can make a complaint.

When closing your account, your Bank should advise you that you can make a complaint.

They should also advise you that if you are not happy with their proposed resolution of your complaint, you can make a complaint to the Financial Ombudsman Service.


Is a “Fraud” Alert Preventing you getting Credit?

Is a “Fraud” Alert Preventing you getting Credit?

If you are finding it difficult to obtain credit or to open a new bank account, there may be various reasons for this.

It may be that you have a poor credit history, or little or no credit history. However, it may also be that you are suspected of, or have been the victim of identify theft or have been suspected of, or involved in committing fraud.

In the UK, there are three firms who are involved in preventing fraud and receive information from their members, who are normally finance firms or banks. They then share this information with them to help protect them and their customers from further fraud.

These firms are:

If any of these firms hold information about you on their databases, this may be affecting your ability to obtain credit. You may not even know about it, until you apply for a credit card, loan or bank account and are either refused credit or the firm your applying to requests further information from you.

In some situations, information about you that is held by these organisations, may even be shared on your credit reference file.

Although this article primarily focuses on CIFAS, which is the largest of the three organisations, it also covers how you can find out more about what information the other two firms hold on you.

Subject Access Requests

Where you suspect one of these firms may be holding and sharing information on you, because you have been refused credit or a new bank account or a firm has requested further information from you, you can find out more by making a Subject Access Request under the Data Protection Act 2018.

To do this, visit the different Company’s webpages below. Subject Access Requests are normally free to make and they have 40 days to comply with your Request

Who are CIFAS and what are their Markers?

CIFAS is the UK’s leading, not for profit, anti-fraud organisation. Their membership like National Hunter and National Sira also consists of UK banks and finance organisation, who share information with them.

What Types of CIFAS Markers are there?

There are a range of CIFAS Markers that can shared with CIFAS members about you. These are:

0             Protective Registration — Recorded at the request of the person named.
1             False Identity Fraud — Use of a false name with an address.
2             Victim of Impersonation — Use, by another person, of this name and/or address.
3             Application Fraud (Facility Granted) — Use of name reasonably believed to be genuine, but with one or more material falsehoods in personal details or other relevant information; the facility was granted.
4             Application Fraud (Facility Refused) — Use of a name reasonably believed to be genuine, but with one or more material falsehoods in personal details or other relevant information; the facility was refused.
5             Conversion — Conversion (disposal or sale) of goods (to which the hirer/buyer does not have title) under a hire purchase, conditional sale, contract hire, leasing or rental agreement.
6             First Party Fraud — Opening an account or other facility for a fraudulent purpose, or the fraudulent misuse of an account or facility.
7             Aiding & Abetting — Aiding, abetting or assisting, or conspiring with, another or others to fraudulently procure credit, or other facilities, or hire products or services.
8             Insurance Claims Fraud — The making of a claim(s) under one or more insurance policy (ies) with one or more material falsehoods or by presenting a false or forged document.

CIFAS Markers that appear on Credit Refence

Only “Victim” Markers should be registered on your Credit Reference File. These are the ones where you are believed to be the person who is at risk of fraud, rather than the others, where you are suspected as having been involved in perpetrating it. Victim Markers means the ones which you have registered yourself (Protective Registration) or where you are at risk of impersonation.

This is so when a firm or a bank carries out a credit check on a customer and discover a CIFAS alert has been added to their credit reference file, they should exercise caution, as this may be a consumer who could be at risk of identity or data theft.

A CIFAS Victim Marker, however, should be just that, an alert that the customer could be a Victim and not an assumption that they are involved in fraudulent activity. The firm should then take further steps or request further information, such as additional proof of identity, before they make a final decision. If they are satisfied you are who you say you are, then a Victim Marker should not result in you being refused credit or being denied the right to open a bank account. This is especially true when it comes to a basic bank account, as many people legally may have the right to open one.

However, if you ever apply for Credit or to open a new bank account and are refused and there is not a CIFAS Marker on your credit reference file, you should ask the firm why they are refusing you, as if it’s because they suspect you of fraud, it may be a CIFAS Marker has been shared with them or another database, such a those operated by National Hunter or National Sira hold information on you. You may not even know that this has occurred.

How do you find out if a CIFAS Marker has been Shared about you?  

However, if nothing is appearing on their credit reference file and a finance firm has refused an application based on concerns about fraud, you can also make a Subject Access Request (SAR) to CIFAS, National Hunter or National Sira for free and request they share all the information they have on you. 

Once you receive that information, if you want to dispute the accuracy of it, you can then make a complaint against the Organisation that has shared the information with CIFAS, National Hunter or National Sira.

If you are still not happy with the final decision of that firm or bank, then you can complain to the Financial Ombudsman Service or if you prefer, use the fraud prevention firm’s own internal dispute resolution process (this does not prevent consumers still taking their complaint to the Financial Ombudsman if they remain unhappy at the end of the process or to the Information Commissioners Office).


Can you Register your own CIFAS Protective Alert?

CIFAS alerts, however, are not just registered because of information that is provided by creditors or banks, they can also be registered because of information you have provided CIFAS, because you believe you are at risk of fraud.

This is called Protective Registration and can be applied for here. The process is not free (it costs £25) and the alert remains on CIFAS’s database for two years. After then the alert should lapse or you can renew it through CIFAS.

Protective Registrations should not affect your credit rating or ability to obtain credit but may result in banks and finance firms exercising further caution to ensure the person applying for credit in your name, is in fact, you.

Protective Registration should also not impact on any current accounts you are operating and banks and finance firms, should not stop you getting further accounts where you have a protective registration, but they may request further information from you first.

If you are applying for a basic bank account and are refused because of a CIFAS Marker, you may have stronger grounds for complaining, as under UK regulations, the Payment Account Regulations 2015, entitled many people to have a basic bank account. See here

Can other CIFAS Alerts affect your Credit Rating?

Other protective registrations of CIFAS markers may affect your credit rating, as this information is shared with credit reference firms.

How long does CIFAS store Markers on you?

How long CIFAS stores its Markers on you varies and depends on the type of Marker it is.

Protective Registrations, the type you apply for yourself, remain on the CIFAS databases for 2 years.

Victim Markers that warn you are at risk of impersonation are kept for 13 months.

Other Markers can be kept for up to six years.

Family and Friend Debt: What you should consider before you lend or borrow

Family and Friend Debt: What you should consider before you lend or borrow

The Bank of Mum and Dad on the Rise

An annual survey carried out by the Financial Conduct Authority, known as the Financial Lives Survey, has this year looked at the impact of the Coronavirus on consumer spending and borrowing, and has found that by October 2020, approximately 5.9 million people across the UK borrowed from family and friends.

Although borrowing from family and friends can be an easy way for many, especially the young, to make ends meet, it is also a practice that can be fraught with dangers.

The most obvious of these is if the money is not repaid, this often leads to broken relationships.

So, what is the Legal Position?

In Scotland the legal position is family and friend loans are legally recoverable, like any other loan. In fact, the law presumes when you give someone money, even an adult child, that money is a loan and not a gift. This is because under Scots Law there is a presumption against gift.

That means that in the absence of any evidence to the contrary, if you can prove you provided someone with money, then the assumption is it was a loan and not a gift.

It is, therefore, safer where someone is giving you money as a gift, that you ask they confirm that in writing.

Insincere Giver

The problem is not that someone who gives you money may be insincere and later request the money back, the problem is people may have a different understanding of the basis on which the money was being provided, so it is important to be clear at the outset.

Also, you need to also remember that it may not always be the “giver” of the money who later comes back looking for it to be repaid. Where the amount is significant, there are circumstances when someone else may treat the gift as a loan.

This may happen if the person who gave the money passes away. One of the roles of an Executor of a deceased person’s estate is to recover any debts owed to the deceased person. So, if they see a large sum of money being given to someone, unless there is proof that money was a gift, legally they may have to assume it was a loan and demand repayment. Likewise, this can also happen if the person that you loaned the money to is later made bankrupt, as their Trustee will have a similar role to an Executor in a deceased person’s estate and must recover all debts.

This can also happen where a parent may help a child by giving them a large sum as a deposit towards their first home. This may reduce any possible inheritance for other siblings, who when the parent passes away, may assume it was always to be repaid, or at least should be offset against any bequests left for the child that was given the money.

Friendship Destroyers

However, the other big problem with family and friend debts, is they are often loaned because someone is in financial distress. The borrower often will turn to family and friends specifically because they are experiencing financial difficulties and cannot borrow from elsewhere.

Unsurprisingly, therefore, it’s normal someone may struggle to repay the debt and because of this, the potential for close relationships to be damaged is created.

Also, the borrower may have other financial liabilities they have to pay, but the family or friend may expect their debt to be prioritised over other lenders.

What is Good Practice when Lending to Family and Friends?

When lending to family and friends, it is quite easy to feel put upon and placed in an impossible position.

The first thing you need to do is ask yourself can you afford to give the money in the first place?

There is a strong possibility that if someone is borrowing from you, it is because no-one else will lend to them, so there is a strong possibility you may not be repaid.

If this is the case, think how it may affect your relationship with this person.

It may be worthwhile, first, to offer the person advice, before you give them any money. Would they be better seeking advice from their local Advice Agency? Could they help them deal with their other debts? Could they see if they are entitled to other sources of funds, such as Community Care Grant or Crisis Grant from the Scottish Welfare Fund? These don’t need to be repaid.

Alternatively, the Local Authority may operate schemes that can help people get top ups on their electricity and gas or can make a referral to a local foodbank for them. They may also be able to identify other benefits they are entitled to.

Equally, has your family or friend considered borrowing from someone else, such as your local credit union? Possibly they could also help.

However, if these other sources of help are not available, and you do feel you can afford to give this person money, ask yourself, do you need it back? If this is a close friend or family member and you do want to help them, possibly the kindest thing to do is make it a gift. If you decide this is your intentions, make it clear to the person in writing the money is being given to them as a gift.

However, if you do decide you will need the money repaid, equally make it clear to the person, this is your intention, and the basis on which you want the money repaid. Tell them the amounts each week or month and of any interest you want to charge them (although be careful, as you could later be accused of being a loan shark or illegal money lender).

What to do if you are not Repaid?

Finally, what do you do if the person who borrowed from you starts missing payments, ignoring your calls, and generally trying to avoid you? Or what if they claim the money was always intended as a gift and accuse you of being an insincere giver?

Well, first there is the presumption against gift in Scots Law, so if they have not got something in writing to say the money was intended as a gift, then legally it will be considered a loan. However, you will also need evidence to prove you gave them the money and how much. So, again it is better you have something in writing or can evidence, possibly through a bank transfer, that you loaned them the money.

Second, you need to ask yourself why the person is not repaying you? There is a strong possibility the reason they borrowed from you was because they were having financial difficulties, so things may have got worse. Would it be more helpful for both you and them if you were to possibly help them to get debt advice? Or maybe you should just write the loan off and make it a gift and save your relationship?

But ultimately, if you find they won’t communicate with you, is there another family member or friend that could mediate between you and try get them to fulfil their obligations to you? You may have to be realistic, possibly the terms of the loan, how much they were to repay you, will have to be rescheduled and the payments made lower.

Ultimately, however, you may be able to take them to Court and enforce the debt that is owed, but again you must be realistic. Taking someone to Court can be complicated and stressful and will cost you more money to get the court order and recover the debt. If the person who owes you the money doesn’t have money to repay you, you may be throwing good money after bad. Again, you’re also going to have to be prepared to evidence the debt that is owed to you, so you will need to be able to show you loaned the person the money in the first place.

In the final, analysis, you may have to accept you will need to write the money off, and accept it is not recoverable. Whether that means you must write off the relationship, is for you to decide, but it may be that with the money you spent you have bought a life free of a person that was never your friend in the first place.

That may be a price worth paying.  

Scottish Government needs to act to Protect Homeowners

Scottish Government needs to act to Protect Homeowners

If the Scottish Government are considering extending the Protections that were introduced by the Coronavirus (Scotland) Act 2020 beyond the 30th of September 2021, they should do what they failed to do last time and increase protections for Scottish Homeowners.

Throughout the Coronavirus Crisis, the plight of tenants has attracted more attention than that of Homeowners, to the extent you would be forgiven for believing there is no risk to homeowners or a greater risk for tenants.

However, this is not the case, and arguably, the risk to homeowners is greater now than it is for tenants.

Homeowners lack a Safety Net

Like tenants, homeowners are at the same risk of experiencing income shocks and have been as likely to have been furloughed, or made unemployed.

Also contrary to popular perceptions, the vast majority have no more financial security or stability than many tenants do. In addition to that, the safety net that is the UK Welfare State, barely exists for them.

Homeowners, do not have the same level of protections as Tenants: they cannot claim Housing Benefit or their Housing Costs when they claim Universal Credit. Discretionary Housing Payments, a discretionary benefit paid by local authorities, to help with housing costs, is not available to them; and the Scottish Government’s Tenants Support Hardship Fund, is only, as the name suggests, for Tenants.

The only UK benefit that exists for them is the Support for Mortgage Interest Payments Scheme, which you would struggle to call a benefit anymore.

Support for Mortgage Interest (SMI)

Since the last crisis (the Credit Crunch) the benefits of SMI have now been eroded under 11 years of Conservative Government, with the waiting time before someone can claim now being 39, rather than 13, weeks; in addition to that, whereas the payments received were previously a benefit, they are now effectively a loan secured over your home.

In addition to that, SMI does not even pay all of someone’s mortgage, but only interest up to the first 2.09% on mortgages up to £200,000.

Now for those who are in a position to have been able to benefit from historically low interest rates, 2.09% may seem more than sufficient, but this fails to acknowledge that across the UK there are millions trapped in higher rate mortgages, where the finance company’s standard variable rate is sometimes as high as 4-5%.

For those with those higher-level mortgages, or higher interest rates, the Scheme will not even pay the interest on their loans.

Coronavirus (Scotland) Act 2020

Now during this Crisis, unlike the last one, homeowners do appear to have been overlooked.

Last time around, there were working groups set up, Pre-Action Requirements were introduced through the Homeowners and Debtor Protection (Scotland) Act 2010, the Scottish Government’s Homeowners Support Fund was refreshed, with a Shared Equity Scheme introduced to compliment the existing Mortgage to Rent Scheme.

However, this time around, homeowners, appear to have been overlooked by the Scottish Government when drafting the  emergency legislation that was laid before the Scottish Parliament. Like with tenants, no eviction or repossession ban was introduced until December 2020; but in April 2020, tenants got the additional protection of landlords (both social and private) being required to give them 6 months’ notice before they raised court action against them.

Homeowners got no such protection and still don’t have any similar protection, despite it being within the legislative authority of the Scottish Parliament to require Mortgage providers to serve a 6 months, rather than 2 months calling up notice on homeowners before raising legal action.

The piece of legislation that governs this area of law is the Conveyancing and Feudal Reform (Scotland) Act 1970 and it is wholly with the legislative powers of the Scottish Parliament to amend it.

We cannot just rely on Lender Forbearance.

The reasons why Homeowners were overlooked when this emergency legislation was introduced, is not exactly clear. Possibly the thought of Homeowners losing their home did not occur to the Scottish Government.

However, it is also true at the time when Lockdown began, the UK Financial Conduct Authority was quick to act and issued guidance to all UK banks that anyone affected by Covid 19 should be offered a 3-month payment break. Some were then offered additional payment breaks. 

However, as we now enter the 14 month of this crisis, lender’s forbearance is wearing thin and we must remember that although many  were offered payment breaks, lenders on the whole did not freeze interest and charges on their loans. Also when people do begin making payments again, many lenders want higher monthly payments to catch up on missed payments.

For those who are continuing to struggle and who may still be affected financially by Covid, the risks that a lender may issue a calling up notice and raise a repossession action within 2 months is now a real danger and will only grow.

This risk can only increase as we come out of this public health crisis and the support schemes that were put in place, such as the Furlough and Self-employed Income Support Schemes are withdrawn. We will not know what the medium to long term effects are of this until March 2023, at the earliest.

Unemployment may increase and people may be forced to accept reduced hours of work or lower rates of pay as businesses look to recover. Against that background those that are struggling to get by will have pretty much no benefit system available to support them with their housing costs. 

It, therefore, seems inevitable that the Scottish Government will have to consider extending many of the protections in the Coronavirus (Scotland) Act 2020 for tenants and consumers to the beginning of 2023 or even longer. If they do, then they need to also think about placing homeowners on an equal footing with tenants and requiring any calling up notice to give 6, rather than 2 months notice of any intended legal action.