exceptional attachment order

Beware the Danger of the Return of Warrant Sales

Beware the Danger of the Return of Warrant Sales

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THERE have been calls of late for the Scottish Government to reintroduce warrant sale-style procedures; these seem now to have found a sympathetic ear.

The Accountant in Bankruptcy (AIB), a Scottish Government agency that advises ministers on matters relating to debt law, has said it is prepared to consider how the replacement procedure that was introduced, known as Exceptional Attachment Orders, can be simplified and streamlined to allow more easy use.

The process of poindings and warrant sales, which allowed sheriff officers to enter people’s homes and remove their household possessions for sale, was abolished by the Scottish Parliament in 2002, after becoming synonymous with the poll tax campaign. Tommy Sheridan, who would later be elected to the Scottish Parliament and introduced a private member’s bill which led to the abolition of the procedure, famously went to prison after disrupting the first attempt to hold one for the poll tax.

The AIB has also said it will consider whether the current procedure that was introduced, and requires a judge to authorise an order, could be removed. Sheriff officers could then threaten use of the procedure more easily against those who cannot pay their debts.

However, if the AIB position is adopted, this could well herald the return in Scotland to a Dickensian-style system of debt recovery laws which allows people to be threatened with humiliation and home intrusion, unless they can find the money to repay their debts, even if that means driving them into the hands of illegal and predatory money lenders. It was this legal abuse that led to poindings and warrant sales being abolished in the first place. In 1999, for example, the year Mr Sheridan’s bill was introduced, there were 16,585 poindings (although thousands more were threatened), but only 110 warrant sales executed. The reason being, warrant sales themselves were never an effective method of debt recovery, whereas the threat of humiliation and home intrusion was. Even people who genuinely couldn’t afford to repay their debts would be panicked into a response where they would do anything to raise the money.

Sheriff officers know this and it is why some are now claiming the new procedure is no longer effective and needs to be made easier for them to use as a threat (there has been no exceptional attachment orders executed in Scotland since 2012).

Responding to a consultation carried out by the AIB, sheriff officers Scott & Co stated, that in their experience the

“proceeds of auction in most cases are very low due to the poor value of second-hand goods and tendency towards hi-spec electrical items being subject to finance agreements.”

The question then needs to be asked, why does the AIB believe it would now be appropriate to increase the use of such procedures, even when sheriff officers acknowledge they are likely to fail? The only logical reason is the hope that by issuing such threats to the poorest in society, more people will then seek advice for their debt problems.

However, although some may well do so, many will struggle to find services or solutions that can assist them, with funding to local authority money advices services having been cut by 44 per cent in the last three years. More likely is many will become prisoners in their own home, fearful of every knock at the door, whilst suffering the stress and anxiety of believing their home will be invaded and their possessions seized with those of their family.

First published in The Herald on the 16th April 2018.

The Iron Fist of Debt Recovery

The Iron Fist of Debt Recovery

It has been a decade since statistics were available into the use of diligence in Scotland. New figures show a country ridden with increased aggression in debt recovery, and a Sheriff Officer profession largely sustained by the enforcement actions of local authorities.

New Scottish Government figures have provided the first real look at how the use of diligence in Scotland has evolved over the last ten years with the abolition of poinding and warrant sales and the implementation of the Bankruptcy and Diligence Etc (Scotland) Act 2007.

What is revealed is that the use of diligence has increased by 134% in the last ten years and that local authorities are now responsible for 84% of all the 387,945 diligences executed in 2011/12. It is also clear Councils are now spending millions more in debt recovery than previously, with 76% of the total 338,701 charge for payments being served being done so for local authority summary warrants (prior to 2008 there was no requirement to serve a charge to execute diligence using a summary warrant.)

Non earnings arrestments have also increased with local authorities now executing more than three times the number they executed in 2002, which indicates increased aggressiveness by councils, but also possibly that more arrestments are failing and being repeated because of changes introduced by the 2007 Act, which introduced protection for minimum amounts in bank accounts.

Earning arrestment figures have also doubled, indicating changes in recovery strategy for councils and other non summary warrant lenders, but also possibly the success of the new s70A of the Debtors (Scotland) Act 1987, which introduced a new requirement on employers to inform creditors of employee’s new employment details when employment with them has ceased.

Not all diligences have, however, proved popular. The replacement to poinding and warrants sales only saw 2,758 attachments and 51 exceptional attachments being executed. Contrast that with the number of poindings in 1997 (18,980) and its clear to see the corporeal property of debtors is now safer than ever.

Money attachments have also not proved a hit with only 502 being executed nationally.

Some diligences are more common amongst certain creditors than others. HMRC, for example, most commonly use non earnings arrestments (6,437) rather than earning arrestments (467). They also are more likely to use money attachments than local authorities and other non summary warrant lenders.

Local authorities most commonly use non earnings arrestments (219,905) than earning arrestments (116,703) and rarely appear to use any other type of diligence.

Non summary warrant creditors in contrast are more likely to use earning arrestments (17,127) than non earnings arrestments (7,643) and are also the highest user of attachments (1,755), possibly indicating more intelligence based recovery as they are more likely to have information on debtors employment, unlike statutory creditors like local authorities. In one sheriffdom there were more earning arrestments executed for summary warrant debts than non earnings arrestments, but that was the exception.

A number of conclusions can be drawn from these statistics.

First, recent criticism that Scotland has become overly debtor friendly is not true, but clearly local authorities are struggling to recover local taxes.

Second, it is also obvious that although many of these problems may disappear should Scotland introduce a Scottish Income Tax, collected at source this will have a dramatic effect on Scotland’s legal debt enforcement system as sheriff officer firms are clearly over dependent on local authority revenue.

Third, if the whole purpose of the review carried out by the fist Scottish Executive into debt recovery which culminated with the Striking the Balance Report was to create a less coercive system then it’s failed. Even allowing for changes in tactics, no one could have imagined a 134% increase in the use of diligence. The recent growth in schemes like the Debt Arrangement Scheme, which now see over 3,000 people applying per year, is still not enough, when over 338,701 Charge for Payments are being served, 134,297 earning arrestments are being executed and 233,985 non earnings arrestments are being applied for. It is clear the collaborative approach that was hoped for is still not being achieved and legal debt recovery is still, in relation to local authorities at least, based on a hit and miss, threat based approach rather than one based on intelligence and working with debtors.

It also doesn’t help that the Scottish Government has still not implement S74D of the Debtors (Scotland) Act 1987, which requires lenders within 48 hours of executing a non earnings arrestment to serve on the debtor a Debt Advice and Information Package advising them where and how to seek advice on how to deal with their debts.

There is no easy answer to the current problems, but encouraging more people to seek advice and agreements with their creditors should be a priority for the Scottish Government; also a further review of local authority enforcement powers under the summary warrant procedure is now long overdue. It should be borne in mind that widespread abuse of these powers and the diligence of poinding and warrant sales is what eventually discredited that diligence and led to its abolition: we can avoid repeats with other diligences by acting now.