Advice Scotland News

Scottish Labour to Vote on Bankruptcy Fees

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On Friday the 9th March, the Scottish Labour Party will vote on a motion calling for the Scottish Government to accept the recommendations of the Money Advice Service (MAS) and re-introduce fee remissions and fee waivers for bankruptcy in Scotland.

Fee waivers were previously possible in Scotland, through legal aid, prior to 2008, but since then even people surviving on £73.32 per week, have to find £200 to apply for bankruptcy.

MAS in its report Debt Solutions in the UK: Recommendations for Change, recommended both the UK and Scottish Government look at reintroducing fee remissions for those who cannot afford the fee.

The Accountant in Bankruptcy, the Scottish Insolvency Service, is currently consulting on their fees, but has ruled out fee remissions for bankruptcy.

Currently, the application fee for a Full Administration Bankruptcy in Scotland is £200; whereas a Minimum Asset Bankruptcy is £90.

FCA fine Vanquis £1.96 million and orders them to pay compensation

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The Financial Conduct Authority have fined Provident Group, credit card lender, Vanquis, £1.96 million and ordered them to pay compensation.

The FCA found that Vanquis mis-sold its customers, from 2003, an add-on product for its credit cards, called a Repayment Option Plan (ROP).

The product was intended to give Vanquis customers the option of an annual payment holiday, without fees or charges, for the cost of the ROP.

However, Vanquis failed to alert it’s customers to the fact the ROP fee attracted interest and this wasn’t cleared until the balance was cleared at the end of each month.

The FCA Fine has ordered Vanquis to pay compensation to all its customers affected from the 1st April 2014, when they took over regulation of the consumer credit market; however Vanquis has voluntarily agreed to pay it to customers who bought the product between 2003 to the 31st March 2014.

Customer affected by the product do not need to do anything, as Vanquis has offered to identify and contact all affected customers.

For more information, see here.

Money Advice Performance Report Published

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The Money Advice Outcomes project team in the Improvement Service have published their Money Advice Performance Management Framework (MAPMF) annual report for 2016/17.

All Scotland’s 32 local authorities submitted data returns regarding the funding of money advice service in 2016/17.

The key findings were:

  • Investment by local authorities totalled c.£11.72m, representing a reduction of 5% since 2015/16
  • 305 FTE paid staff members were employed by the services, which represents a 5 FTE decrease when compared to 2015/16
  • 31% of service users had a disposable household income of less than £6,000, and 50% less than £10,000 – the median household disposable income in the UK is £26,300
  • 53% of clients reported having a disability or long-term condition, whereas around 20% of the general Scottish population has a disability or long-term condition
  • The total debt owed by clients was c.£217m, an increase of around £2m in comparison to 2015/16
  • c.111,000 people contacted the services, and c.49,000 new clients received support – in both cases this represents a 5% increase since 2015/16
  • 19% of clients initially sought advice because of council tax arrears
  • Money advice services delivered or funded by local authorities secured £101m in client financial gain
  • For every £1 that was invested in money advice services, clients achieved financial gains of £4-9

The full report can be read here.

Bankruptcies Down, Protected Trust Deeds Up

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The Accountant in Bankruptcy in Scotland have released their third quarter Statistics for 2017-18.

The figures show that the number of sequestration in Scotland have fallen, whilst the number of debtors granting protected trust deeds has increased.

There has also been a slight increase on the number of debtors who have entered debt payment programmes under the Debt Arrangement Scheme.

Speaking on the release of the figures, the Minister for Business, Innovation and Energy Paul Wheelhouse said: “The longer term trend for bankruptcy is very much a downward one and it is heartening to see this reflected in these recent figures.

“There is absolutely no doubt in my mind the UK Government’s persistence with its failed policy of austerity is causing real hardship and strain for financially vulnerable families all across Scotland. They face even more challenges once the impact of the UK Government’s reckless determination to pursue an economically damaging Brexit becomes known.

“However, these Accountant in Bankruptcy figures indicate the numbers of people falling into bankruptcy and signing protected trust deeds are around half of what we saw eight or nine years ago. The Scottish Government is doing what it can to mitigate the worst of these Westminster policies.

“The Debt Arrangement Scheme is the only statutory debt management programme in the UK and we are rightly proud of its success in providing a viable option for those seeking to pay their debts without plunging into insolvency.”

The full report can be accessed here.

Poorest paying nearly 50% of income to debt

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A new report by the Institute of Fiscal Studies, carried out on behalf of the Joseph Rowntree Foundation, has found that one in five on low incomes have problem debts, compared with one in twenty on the top pay scales. It also found that on average the poorest fifth, are under pressure to spend £457 a month on paying back their debts out of an income of £1,012.

About a third of the poorest tenth of households are also likely to owe more than they have in savings, compared to only 10% of those in the top 10% income groups.

Key findings of the report, which can be found here, are:

  • 50% of UK households between 2012-14 had some unsecured consumer credit debt, with over 10% having more than £10,000;
  • Although those on lower incomes are less likely to hold any debt, where they do, they are more likely to hold more debt than they do savings;
  • Those who held debt in 2012-14 are likely to have held it for a number of years;
  • Whilst debt can be a sign that a household is struggling, it can also be an appropriate response to an income shock or anticipated drop in income.

Are young financially savvy, renters driving the credit boom?

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New research by the Financial Conduct Authority (FCA) and the Bank of England, suggests the 10% increase in borrowing, which we have seen in recent years, is being driven, not by sub prime borrowers, but those with better than average credit ratings.

The research, which was carried out by the FCA, and was based on data provided by Credit Reference Agencies, for one in ten UK Consumers, also found consumer credit borrowing in the UK was being driven by borrowers without mortgages.

This suggests the increased borrowing is either being taken out by people who own their property outright, or by people who do not own their property at all, and rent instead.

Finally, the study also found that people were remaining in debt longer and although people may be clearing their balances on products sooner, their overall indebtedness was not falling, suggesting they were possibly switching to 0% interest products.

What the study suggests to me, is although the rise in debt may well be by those with above average credit ratings, the fact that borrowers were not clearing their debts, but switching them, means the long term affordability of their borrowing may be getting masked.

The fact the report did not decisively identify who the group were that did not have mortgages, also makes me suspect it may be younger, financially savvy borrowers, who know how to protect their credit ratings, but still lack the means to get on the property market or clear their debts.

Money Advice Service Release Recommendations for Changes to UK Debt Solutions

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The UK Money Advice Service have released its recommendations for change for UK debt solutions (albeit only a couple of the recommendations will impact on Scottish debt solutions).

The recommendations are contained in a report that can be downloaded here and follows on from a comprehensive study that was carried out by the Money Advice Service into UK debt solutions.

In carrying out the research, the Money Advice Service and the University of Bristol engaged with the Money Advice Sector through expert workshops, interviews, group discussions and a consultation process, which approximately 60 individuals and organisations responded to.

A summary of the recommendations are:

  • A review into fees for debtor applications for bankruptcy in England, Wales and Northern Ireland;
  • The re-introductoon of fee remissions for low-income applicants;
  • Better online information about going bankrupt;
  • More prominent and easy to understand information and tools on the online bankruptcy application portal;
  • Further exploration of debt rehabilitation, including better recognition of debt repayment;
  • The introduction of a statutory debt management scheme for England, Wales and Northern Ireland;
  • Innovations in the equity release market for people who are asset rich, but cash poor;
  • The development of one online income and expenditure portal.

Credit & Debit Card Fees to Go Please

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From Saturday, the 13th of January 2018, it will no longer be possible for consumers to be charged a fee for deciding to pay a bill by credit card or debit card.

The new rules are aimed at stamping our current practices, where many businesses and government agencies routinely levy a surcharge on consumers who opt to pay by card.

Ironically, however, businesses will still be able to charge a fee where payment is made using cash or a cheque.

The rule will not just affect businesses dealing with consumers, but also Government departments, such as local authority departments, HMRC and the DVLA.

HMRC has already said it will no longer accept credit card payments for tax bills, but will continue to accept debit cards.

Firms, however, will not be prevented from refusing to accept card payments altogether, although it is expected this will only apply to the smallest retailers.

Fears Businesses will Raise Prices

There are some fears that some businesses, in response to the changes will now just raise their prices for all customers, to ensure they do not lose out as a result of the changes.

Business Accounts Not Affected

The new regulations will not extend to business credit cards. However, where service providers are hoping they can charge fees in relation to the payment of business debts, they will only be able to do so where the card is a business card. What will be important is the type of card being used, not the purpose of the transaction.

Panorama: Millionaire Bankrupts Exposed

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BBC’s Panorama will tonight be running an investigation into the millionaire bankrupts who abuse the bankruptcy process and system.

The programme will be particularly galling for many money advisers to watch when they work with clients struggling to pay their monthly contributions and make ends meet.

The investigation includes convicted fraudster, Barry Hughes who the BBC report declared himself bankrupt owing £10 million, then claimed he had no assets, but was seen with his wife driving a line of luxury cars worth £500,000.

It also covers Malcolm Scott, a former treasurer of the Conservative Party in Scotland, who was given a Bankruptcy Restriction Order in 2015, after he was found to have transferred shares, secretly sold a luxury car, without declaring the proceeds, and failed to declare a speedboat and other assets in the Bahamas.

The Accountant in Bankruptcy for Scotland, Richard Dennis appears in the programme and admits no-one is pro-actively monitoring and enforcing Bankruptcy Restriction Orders.

The programme runs on BBC One at 8:30pm on the 8th January 2018 and, thereafter, will be available on the Iplayer.

A New Year: but Consumers will Struggle in 2018

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The Financial Times is reporting the majority of economists they surveyed, expect UK Consumers to find 2018 as hard, if not more difficult, than 2017.

The findings have been revealed after they completed their annual survey of economists.

Although most agreed inflation would subside, they also worried unemployment would rise and wage levels would continue to stagnate.

Some also believed, after a sharp increase in levels of personal debt in 2017, the availability of affordable credit would become less available in 2018, and with interest rates increasing, consumer confidence would be weakened.

The full findings of the survey can be found here.