In February 2021, I featured on the Financial Times, Claer Barrett’s Money Clinic with Chris Browning of US Podcast, Popcorn Finance. I come on at 14 minutes as we discussed the case of Duncan, from Scotland, who was beginning his journey to become debt free.
Please download my free electronic Guide for Scots Struggling with Problem Debts.
It contains links to online tools, videos and information on how to deal with problem debts.
In the Guide you will find information on
- How to Maximise Income.
- Draft a Budget.
- Different Debt Repayment Strategies.
- Debt Enforcement Procedures; and
- Formal Debt Solutions
Please wait while flipbook is loading. For more related info, FAQs and issues please refer to DearFlip WordPress Flipbook Plugin Help documentation.
Stella Creasy, the Labour MP who became a champion of the campaign against Payday Lenders, has now compared “Buy Now, Pay Later” (BNPL) credit providers with the high-cost lenders that exploded across the UK after the last financial crisis.
Klarna, Clearpay, Laybuy and Paypal she suggested could become the new Wonga’s of this crisis.
And alongside another 70 MPs, she has now tabled an amendment to the Financial Services Bill, that is passing through the UK Parliament, calling for them to be better regulated within three months of the Bill becoming law.
This would force the UK’s Financial Regulator, the Financial Conduct Authority (FCA) to accelerate its current plans to regulate this new market, which otherwise could take 18 months.
Any new regulations will be vital if UK Consumers are to be protected from what is currently a poorly regulated financial market and should take the form of limiting the number of agreements that are exempt under the Consumer Credit Act 1974.
Are there Similarities between Payday and Buy Now Pay Later Lenders?
Stella Creasy is correct there are similarities between Payday Lenders and Buy Now Pay Later firms, and many debt advisers have been warning if we don’t learn from the past, many UK Consumers will indeed have to pay later.
The first similarity is for many BNPL firms, the pandemic has been what the Credit Crunch was for the Payday Lending industry: an opportunity.
In the aftermath of the Credit Crunch, many traditional sources of lending were heavily restricted for consumers. Many found banks were reluctant to lend and were reducing their overdrafts, whilst many credit card firms reduced the credit limits and even cancelled the cards of customers who had never missed a payment. Some creditors, on the other hand, just did not know who they had been lending to and what risks they had exposed themselves to. The Bank of England, also had most of them on a choker leash, having bailed them out at the expense of the UK public.
Similarly, even before this pandemic began many lenders had already began restricting access to their credit facilities, wary of an increasingly interventionist Regulator, the Financial Conduct Authority. They were warned about irresponsible lending, not carrying out proper creditworthiness checks and effectively farming many of their customers in persistent overdraft and credit card debt.
Many of their Payday lending competitors, have also now left the consumer credit market, many through liquidation, after collapsing under the weight of mis-selling claims and tougher regulation.
Other firms, like Amigo are currently praying for the FCA to give them a last-minute reprieve.
In addition to that, consumer credit borrowing from many traditional sources were already maxed out and coming to an end for many consumers as we came to an end of this consumer credit cycle which began in 2014/15. As with the last financial Crisis, they were weekly reports in the run up to this pandemic by the UK’s banks and financial regulator saying they were not concerned with levels of indebtedness. It was all very manageable.
Since then and the beginning of the pandemic, many lenders have now had to offer their customers payment breaks, because they cannot afford to make monthly payments.
Against such a backdrop, the lightly, to non-regulated, Buy Now Pay Later firms have arrived with their fun, lifestyle marketing campaigns, and easy to access credit facilities. It does not matter if you have a poor credit score, nor does it matter if you are already over committed, with light touch affordability checks and non-regulated agreements, you can buy now and pay later.
This is a classic case of financial markets moving faster than regulators and like with Payday Lenders, if we don’t act quickly, the damage will already be done to the finances of millions by the time we do.
The Rise of Buy Now Pay Later Lending
This is not scaremongering, as just over Christmas, UK consumers spent £2.3 billion using Buy Now Pay Later (BNPL) facilities, whilst since the pandemic, it is believed that consumer spending, using BNPL, increased by 35%.
The fact is the unregulated products that many of these firms are offering present a risk to consumers, even if the Lenders claim they don’t. Deals such as pay within 30 days or pay over 3 months are still debts if they cannot be paid: the fact they don’t charge interest and fees doesn’t remove the risk. The simple fact is for these products, the business model is to encourage people to buy (and, therefore borrow) more, so the BNPL Firms can charge the retailers a fee. The dangers of people becoming over indebted is, therefore, real.
Such deals are possible because they take advantage of UK Consumer Credit Law that exempt fixed sum loans from regulation providing payments are paid within 12 months and no interest or significant charges are applied to the debts.
Similar exemptions also apply for running credit agreements, which allow consumers to spend within certain credit limits, providing interest and charges are not applied, and the number of monthly payments are less than three.
However, contrary to popular belief not all credit agreements being offered by Buy Now Pay Later lenders, like Klarna, are unregulated. Some, where they do not meet the criteria for exemption, are governed by the Consumer Credit Act 1974, which means proper affordability checks should be carried out, and if they are not, those lenders could face the same mis-selling claims that pay day lenders did. Another possible similarity in future?
FCA Must Regulate and not in 18 Months
The reality is it is now time for the Financial Conduct Authority to act and they should do so to reduce the number of agreements that are exempt under the Consumer Credit Act.
The number of agreements that qualify as exempt was expanded in 2015, to reduce the number of products the FCA had to regulate. This was understandable at the time, as they were taking over the regulation of 50,000 consumer credit firms.
However, that time has now passed, and as we have seen and will see, opportunistic, new consumer finance firms will always find new and innovative ways to get ahead of the Regulators.
They may claim they want regulation, but that is usually only if it is on their terms. However, if this financial crisis and the last one has taught us anything, it is like Coronavirus, if we are still talking about it, it’s probably already overdue.
As we begin a new year, and set new resolutions for the year, many will make their target for 2021 to pay down their debts.
We, therefore, look at five ways that you can pay down your debt.
The Snow Ball Approach
The Snowball approach is a simple one. It involves you paying down the debts that you are paying most for, first. The idea is to reduce how much your debts are costing you each month.
Normally, this will mean paying off the ones with the highest rates of interest first, but not always.
Sometimes, even debts with lower levels of interest can cost you more each month, if the balance is higher.
You still must pay all your ongoing liabilities as normal, such as your gas, electricity, council tax, rent, or mortgage.
You must also make sure you pay the minimum amounts towards your other debts each month, before you pay everything else to your most expensive debt.
As you pay off each debt, you move onto the next one, until you have none left.
The Money and Balance Transfer Approach
The Money and Balance Transfer Approach is a form of refinancing and involves using credit cards, so is only likely to be possible if your credit rating is good enough to successfully apply for a credit card. Alternatively, you may have one that you have not used.
A Balance Transfer is when you transfer one credit card balance over to another credit card, to take advantage of an interest free period.
A Money Transfer is similar but involves transferring cash from a Credit Card over to another account, such as an overdraft and using that to pay off the balance on the other account.
Again this is with a view to taking advantage of an interest free period.
The two things you must watch for is there will normally be a transfer fee, that will be a percentage of the money you borrow. You just need to make sure that will not be more than you will pay in interest if you do not transfer the money or balance. You also must make sure you use the interest free period to reduce your debt and stop using credit.
The Consolidation Approach
The next approach is a common one, and that is to consolidate your debts, so you make only one payment each month.
This involves taking out a loan to repay all your other debts. You then just have one debt to pay each month.
The problem with this approach is you can end up owing more, even if you do not borrow any more than you owe. The problem is you will have to pay the interest on the loan, which means you will likely have to repay more than you originally borrowed.
Also, the danger is if you keep borrowing from other sources of credit, such as credit cards and overdrafts, your debts can quickly become a problem again.
The consolidation Loan approach can help you deal with your debts, but it is also the one that is most likely to fail if you do not address the underlying reasons why you were using credit in the first place.
The Incremental Approach
The Incremental Approach is like the Snowball Approach, but in reverse. The idea is also to achieve the same outcome as the Consolidation Approach, only having one debt to pay, then none.
The way the Incremental Approach works is you pay off your smallest debts first, then when that is paid off, move onto the next one. This may be more costly than the Snowball Approach, but you will reduce the number of debts you have sooner, which can sometimes make it easier for people to manage their monthly payments.
You still must pay all your ongoing liabilities and maintain minimum payments to all your other debts.
The Formal Debt Solution Approach
The Final option is to seek advice from an advice agency and use a formal debt solution.
This can mean the Debt Arrangement Scheme, a Protected Trust Deed, or a Sequestration, which is the name for Bankruptcy in Scotland.
The Scottish Government’s decision to extend its eviction and repossession ban has thrown a lifeline to many Scots and their families.
However, although the Scottish Government has said they have an option of extending the ban beyond the 31st March 2021, people should not assume they will and should use this time to take steps to help themselves.
In this post we look at what tenants and homeowners can do to help themselves.
The most important thing you can do if you have mortgage or rent or mortgage arrears is get advice.
The second most important thing you can do is speak to your Landlord or Mortgage providers. They may be able to help you.
In terms of Landlords, it is in their interest to help you. Currently the law states that if they want to evict you, they must first give you six month notice before they even initiate legal action. Even if they have done that and obtained an order to evict you, the eviction ban means they currently cannot remove you from the property. The most effective way for them to get their money, therefore, is to work with you.
Also, Mortgage Providers have been told by they UK Financial Regulator, the Financial Conduct Authority, that they must work with home owners and where it is required give them support.
If you don’t feel able to do this or you need help claiming benefits, then contacting your local advice agency is important as they can assist you.
Maximise your Income
If you have been affected by the Covid 19 Crisis fiancially, then you may be entitled to financial assistance from the UK Government.
This may come in the form of the UK Furlough Scheme (speak to your employer) or the Self-Employed Income Support Scheme .
Also you may be entitled to additional social security benefits such as Universal Credit and help with your housing costs.
Unfortunately, you cannot get help with your mortgage through Universal Credit, but there is some support in the form of a secured loan available through the UK Government’s Support for Mortgage Interest Scheme (although you do need to wait 39 weeks before that support becomes available).
The most important thing you can, therefore, is look at how you can maximise your income.
One way of doing this, is by completing a full benefit check for yourself.
Discretionary Housing Payment
If you are a tenant and you are having difficulty paying your rent, you may be entitled to a Discretionary Housing Payment.
A Discretionary Housing Payment is a payment that your Local Authority can pay to you or your Landlord to help you with your rent.
These payments can be in addition to other payments to help you with your housing costs, such as through Universal Credit.
They cannot be use to pay rent arrears, however, where you cannot pay your full rent because Universal Credit won’t cover the full cost, or you have been affected by the Benefit Cap, or your income has dropped, DHPs can be awarded to make up the difference.
They can also be backdated, so they may reduce your rent arrears.
If you are interested in applying for a Discretionary Housing Payment, you should contact your Local Authority.
Scottish Welfare Fund
All of Scotland’s Local Authorities can provide people with non-repayable grants through the Scottish Welfare Fund.
The types of grants that are available are Crisis Grants and Community Care Grants.
Non of these can be awarded to help pay rent or mortgage costs, however, they can be provided for other reasons if you are struggling financially and this may help you with other costs.
Crisis Grants can be paid to help you with your day to day living costs if you are experiencing any financial hardship and are intended to pay for essential living costs such as food and ensuring you home is heated.
Community Care Grants can be paid to cover the cost of larger items that need replaced, and are essential, such as beds, flooring, curtains and cookers.
If you want to apply to the Scottish Welfare Fund, you should contact your local authority.
Tenancy Support Hardship Fund
The Tenancy Support Hardship Fund should be the last option you should explore if you have rent arrears.
This is because it means borrowing from the Scottish Government a loan to pay your rent arrears, that you then must repay.
However, the Loan is interest free and does not need to be repaid immediately. Once you have borrowed from it, you don’t need to make any payments for the six months.
After that you have up to five years to repay the loan.
In addition to that if you are financially struggling to repay the loan, you cannot be evicted, unlike if you don’t repay your rent.
The Tenancy Support Hardship Fund can only cover rent arrears that have been accrued since the 1st of January 2020.
If you want to apply to the Tenancy Support Hardship Fund, you do online via a Scottish Government Webpage.
Once the sequestration is awarded by the Accountant in Bankruptcy, or by the Court (where a creditor makes you bankrupt), the Trustee notifies the creditor and the wage arrestment should cease.
Dealing with Rent Arrears
If you are experiencing difficulty with your rent arrears, our page on Rent Arrears and how to deal with them will provide you with more information.
Dealing with Mortgage Arrears
Our page on Mortgage Arrears also explains the process that mortgage providers must use when you get into mortgage arrears and tell you what your rights are. For more information, click below.
Today’s announcement by Nicola Sturgeon in relation to the Coronavirus (shortly followed by a similar announcement by Boris Johnson), has effectively plunged Scotland back into Lockdown.
This is the closest we’ve been to having a full Lockdown since the first one ended. They are not identical, but judging from the pattern of how things develop, it is highly likely they could end up appearing very similar.
The reality is, though, this Lockdown will not be a repeat of the last one, even if the measures introduced eventually rival those of the first.
Where our financial and mental resilience is, 10 months on, is a pale imitation of what it was.
Jobs have been lost, relationships and families broken, businesses closed, savings exhausted and debts accrued. Even the measures introduced to protect people are now worn out and nearing their expiration dates.
It also appears there is no exit strategy, beyond the vaccination programme, as to how we will extricate ourselves financially from this crisis.
Regardless of this, expect a day, not so far in the future, where our political leaders will declare victory over the virus, like , George Bush did a month and a half into the Iraq War.
This crisis, however, like the Iraq War will continue for years to come and, similarly, we will be counting the costs for years to come. There won’t be any daily press conferences, however.
It will be at that point, we will learn we are not all in this together.
First, there is the issue of homelessness.
The safeguards that were introduced in April last year in Scotland, to help prevent evictions, are no longer as effective as they were.
At the time, they did not ban evictions, but only required landlords to give six months’ notice where they wanted to evict someone (3 months for antisocial behaviour).
Where that notice has now been served and expired, court actions can now begin. So in this Lockdown, evictions will occur, even as we tell people not to leave their home and to stay safe.
Even the temporary ban on evictions that was introduced through the Scottish Parliament, just before Christmas, now expires on the 22nd January.
Banks and Credit Card companies are also not showing the same understanding they initially did.
They now want people to start paying something to their credit cards, car finance and loan agreements.
They may still be prepared to give payment breaks, but only on a case-by-case basis; and let’s just say there is a presumption against them. They are also still adding interest and charges by default; and missed payments are being reported to Credit Reference Agencies, trashing credit scores.
There is also still no solution for Home owners who have lost their job or are struggling to pay their mortgages; and there is no support for housing costs available through Universal Credit, like there is for tenants.
You can get some help with your mortgage interest payments, though, through the UK Support for Mortgage Interest Scheme.
However, you need to wait 39 weeks for that, which means if you lost your job in April 2020, you may now, in January 2021, be entitled to some limited support with your mortgage interest payments.
If you have a capital and repayment mortgage, it won’t pay everything, so your 9 months of arrears is likely to grow.
On top of that, the help you do receive is not a benefit, it comes in the form of a loan and is secured over your home.
During the last Credit Crunch, it was still a benefit and you started receiving help after 13 weeks.
Also, for those who are self-employed: the Payments on Accounts they were allowed to miss in July? These may become Balancing Payments and be due for payment at the end of January. HMRC will expect them to be paid.
If people cannot pay them, they may be able to seek Time to Pay Arrangements. Interest will be added.
On top of that, Local Authorities are now actively seeking to recover Council Tax Arrears, built up earlier in the financial years and debts are now in the hands of Sheriff Officers.
People can also expect next years Council Tax Bills in March, and its likely they will be increased to fill the black hole in many Local Authority budgets.
Those on Universal Credit and Working Tax Credits will also likely see a reduction in their income in April 2021, when the amount they receive is cut, unless the UK Government decides not to end the increases they introduced last April.
For single claimants this reduction will be worth £92.07 per month, with their monthly payments falling from £409.89 down to £317.82.
UK Furlough Scheme
We also have no commitment from the UK Government that their Furlough Scheme will continue beyond the 30th April 2021, which means many employers will have to start issuing redundancy notices at the end of this month.
Scottish Emergency Legislation
Also, in addition to that the Scottish Government have given no indication whether the emergency provisions they introduced via the Coronavirus (Scotland) Act 2020 will continue beyond the 31st March 2021, many of which are designed to protect tenants and those in debt.
Bad Tempered Lockdown
The truth is this Lockdown is likely to be a bad tempered one, without the scenes of people clapping our National Health Service Workers on their doorsteps. It’s not because the goodwill for them has gone, but it is melting like snow off a dyke for our political leaders.
If our political leaders want people to stay the course, then it is time for a full refresh of the measures in place to protect people, not only during this crisis but for the months and years that follow.
Now much of what is needed is in the hands of the UK Government and is contained in reserved powers. To that extent the Scottish Government are powerless to do anything in those areas.
However, there remains large devolved areas where the Scottish Parliament can make a difference. Housing and debt laws are but two areas and ones that this blog is concerned about.
The Scottish Government, therefore, need to look at those areas where they can act to protect those who are vulnerable and those who have been financially impacted by this crisis.
One way of doing this would be to immediately seek to extend the Eviction Ban to the the end of March 2021, before it expires on the 22nd January.
They also need to give an undertaking they will extend the provisions contained in the Coronavirus (Scotland) Act 2020, until the 30th September 2021 in relation to debt and evictions.
They could also take a leaf out their own book from 2009 when they convened the Debt Action Forum (DAF) in response to the Credit Crunch, which led to the Homeowner and Debtor Protection (Scotland) Act 2010.
A similar initiative now and the reconvening of the DAF, could look at what other medium to long term measures could be introduced to support people with the effects of Covid 19 on their finances.
Otherwise, any declaration of victory and of the war being over, will be a hollow one.
Stepchange, the UK debt charity and provider of Debt Management Plans (DMP) has claimed to have launched a new debt solution for people who are struggling with their debts.
However, there are concerns the new plan is just a normal Debt Management Plan and offers Consumers nothing new.
On their website Stepchange states the new plan will last for 12 months and cannot guarantee:
- It will not damage people’s credit rating; and
- Will stop interest and charges from being applied to people’s debt.
In addition to that, it will not stop Sheriff Officers from taking action against consumers, such as serving Charge for Payments, and also executing Wage and Bank Account Arrestments.
Why may the CVPP not be suitable for many Scots?
For these reasons, the CVPP will be a sub-standard product for many Scots who are struggling with their debts.
Instead in Scotland a far more suitable option is likely to be the Scottish Government’s Debt Arrangement Scheme.
The Debt Arrangement Scheme is a formal debt solution, that allows people to repay what they can afford to their debts, but unlike the CVPP,
- Automatically, freezes all interest and charges
- Stops any existing Earning Arrestment
- Protects people from Sheriff Officers and being made bankrupt
- Allows them to make just one payment to a Payment Distributor, each month, who then pays all their debts for them
- It is also free to people, regardless of whether they apply through a local authority money advice service, a charity or a private sector provider.
- Also, like Stepchange’s CVPP it is flexible, so if people’s circumstances improve they can increase their payments to allow their debts to be repaid sooner.
What Stepchange say about the CVPP
Speaking about the new Plan in a Press Statement, Stepchange has said:
“We have developed the CVPP in consultation with HM Treasury and is supported by the Money and Pensions Service [MAPS] – which will be signposting potentially eligible consumers to it via its online Money Navigator assessment tool.
We have also consulted widely with the lending industry and other creditors while developing the new plan.”
How does the CVPP Work?
However, from reading the information Stepchange have provided, it is difficult to understand what “development” was required for the CVPP and what input HM Treasury or MAPS had, as it is in essence identical to a DMP.
- You include your debts into it;
- You make one payment per month;
- These are distributed to your creditors.
However, where the CVPP appears to differ is
- It is only supposed to last for 12 months (although it is not clear what happens at the end of those 12 months – Stepchange suggest you speak to your creditors); and
- Unlike DMPs Stepchange suggest you don’t need to go through the full Debt Advice Process to enter one.
Does the CVPP pose Problems?
Well, first of all, there is the problem of what you do at the end of the 12 months.
To be clear if you miss contractual payments, you will go into arrears with your agreement.
The Financial Conduct Authority has also been quite clear to Lenders, they must now report these missed payments to Credit Reference Agencies, where it is a firm’s practice to do so.
So, it will damage people’s Credit Rating.
Consumers will also receive a Notice of Arrears, which under the Consumer Credit Act 1974, must be served after they are in more than 2 months arrears. This is not optional for Lenders and must be sent every 6 months, whilst the Consumer remains in arrears.
Whether the Lender places the debt into Default will be for them to decide and Stepchange are silent on this.
In relation, to what happens at the end of the CVPP, is unclear, but it’s likely for most it will just become a Debt Management Plan, albeit the person may increase their payments if they can.
The reality is for many, after 12 months of making reduced payments, accounts will not just return to normal. People will not just be able to return to making normal payments, and using their card as before.
In my opinion, this should be clearer to people. Telling people they will just have to speak to their creditors is not enough. Arguably people are going to be left believing after the 12 months, everything just goes back to normal.
This is almost impossible and Stepchange should be clearer about the impact a CVPP will have on people and their credit rating and ability to obtain credit in future.
Avoiding Full Debt Advice
Equally concerning, is what the effects of the CVPP being an alternative to full money advice solutions will be for consumers.
It is not even clear it will have any benefits and a more traditional solution might be better.
Lets be clear a CVPP is a Debt Management Plan and for many, not only is this not always the best option, but can make their situation worse.
The problem here is it is also not clear if consumers entering CVPPs, will still go through the traditional Money Advice Process.
This seen as best practice in helping people with their debts.
The first step of which is to maximise someone’s income, and identify benefits and other sources of income they may be entitled to. This part of the process is important as it may help avoid someone entering a CVPP and damaging their credit rating.
Second, it is about exploring all the options with clients, including Individual Voluntary Arrangements and Bankruptcy in England, Wales and Northern Ireland; and in Scotland, the Debt Arrangement Scheme, Protected Trust Deeds and Sequestration.
If the full Money Advice Process is not being used, will these other options even be discussed?
Will people possibly be put into a CVPP, without exploring other options?
This may make people’s situation worse and may even see the amount people owe increase.
The problem is Stepchange is not clear what the benefits are of people not looking at all the options open to them just now, and have no clear exit strategy for people after 12 months, other than speak to your lender.
The problem is people may spend a year in a solution that is completely inappropriate for them and they shouldn’t haven’t entered into in the first place.
My concern is the CVPP is more marketing than substance.
It is in essence a Debt Management Plan, but is being spun as something else which has added benefits, of which I see none for the Consumer that is not offered by a DMP.
It would be interesting to know what the Financial Conduct Authority’s view on this is, as they are the regulatory body that authorises organisations to provide debt advice.
Interestingly and, maybe notably, they are not named as one of bodies Stepchange developed this product with.
Almost eight months since the Lockdown began, Scots now stands at an economic precipice.
In the next couple of weeks, a number of different things will occur which will likely tip many over that precipice.
Stepping up to Edge
First, the UK Furlough Scheme will end and the UK Government’s new Job Support Scheme will begin, leaving millions of UK employees possibly living on two thirds of their wages.
Second, the Financial Conduct Authority’s (FCA) payment holidays for mortgages, credit cards, personal loans and car finance agreements will move onto their next stage, meaning they will now only be issued on a case by case basis. This is likely to mean many, if not the majority of people, will see their payment breaks end and for those that don’t, interest and charges will continue to be added. Creditors will also now begin reporting such missed payments to Credit Reference Agencies, damaging people’s credit rating.
Third the Repossession Ban imposed by the FCA for Home Owners, will also come to an end, raising fears by many that as they slide into arrears with their mortgages, legal action to recover their homes may begin. For car owners, with 9 out of 10 of all new car agreements being subject to car finance agreements, the likelihood is many will now have to choose between keeping their homes and their cars.
Fourth, the number of actions being raised to evict both private and social landlord tenants will begin to climb, as there has never been an eviction ban on tenants in Scotland; and for many the 6-month extended period of notice that landlords were required to give them, will be coming to an end.
Finally, with most Council Tax Payers having used their two-month payment break at the beginning of the financial year, hundreds of thousands of Summary Warrants will be getting issued in coming weeks and will shortly be getting passed to Sheriff Officers to serve Charge for Payments and execute Wage and Bank Account Arrestments.
For many Scots the precipice is only a step away and in the next few weeks, many will be taking a step closer.
So what is the Scottish Government Doing?
The reality is, in relation to many of the above threats that people face, the Scottish Parliament has a lot of power to take the necessary steps to protect people now.
It may lack the financial means to provide its own financial support schemes to subsidise Scots that face losing their wages or jobs, but this is not to say it lacks the legal powers to help people.
First, it has the power to introduce powers to freeze all interest and charges and fees on debts for Scots that are experiencing financial difficulty.
This could be done through using the Scottish Statutory Moratorium procedure that currently protects Scots from Sheriff Officers and being made bankrupt.
This procedure , which previously only provided six weeks protection, now offers six months protection. However, it unfortunately doesn’t protect people from Creditors still adding interest and charges.
However, proposals to allow this were laid before the Parliament in May by Jackie Baillie (MSP) during the passing of the Coronavirus (Scotland) (No 2) Bill 2020 and rejected by the Parliament.
Since then, the UK Government has laid it’s own Regulations for a similar UK Scheme, called Breathing Space, that will introduce not only interest freezing power to their Scheme, but also powers to stop evictions and repossessions.
The Scottish Government have no such progressive plans.
On top of that whereas the legal notice period for tenants was extended from one month to six months for tenants, no similar legal protection has been introduced for Home Owners in Scotland.
Such a measure, however, could be introduced, imposing a requirement on mortgage providers, that when they serve Calling Up Notices on Homeowners, instead of giving them 2 months’ notice, they will be required to give 6 months’ notice, providing Home Owners with parity with Tenants.
In addition to that it is within the Scottish Parliament’s power to provide even greater protection for those who are in debt with their Council Tax.
Currently, when debts are passed to Sheriff Officers, they can serve legal demands for payment, demanding the full debt be repaid within 14 days. This is known as a Charge for Payment.
Last year over 200,000 of these were served on Scots.
They can then execute Bank Arrestments.
These allow Sheriff Officers to arrest what sums they find in people’s bank accounts.
There is some protection for those in debt, however, that allows the first £529.90 to be protected (Minimum Protected Balance). However, this amount doesn’t change if you are a single person or a couple with three children.
Obviously, as a result this can cause severe hardship and although it is possible to challenge such arrestments, it can take a minimum of 8 weeks before any case will be heard by a Sheriff (in normal times).
By then the hardship will already be experienced.
However, there is nothing to stop the Scottish Parliament softening the effect of this debt recovery procedure, by only allowing a % of the person’s money above the Minimum Protected Balance to be taken, as happens with Wage Arrestments.
The reality is, although the Scottish Government introduced some measures to protect people in debt with the Coronavirus (Scotland) (No 1 and No 2) Acts 2020, both statutes were knee jerk responses to a quickly developing public health crisis that had not yet become a fully blown personal financial crisis.
In the next couple of weeks, however, the Covid 19 Crisis is about to mature fully as a Personal Financial Crisis and the level of protections for Scots are no where near enough.
In addition to that , the protections that have been introduced are only in place until the 31st March 2021 with the option for the Parliament to extend only until the 30th September 2021.
In no playing out of this Crisis will Scotland financially have recovered by then, especially with the possibility of a hard Brexit on the horizon.
In all likelihood, what tends to occur with financial crisises is many of the protections introduced to help people are withdrawn just as the threats they were introduced to protect people from, become real.
Can we Learn from the Credit Crunch?
There are, however, lessons that we can learn from the last financial Crisis when Fergus Ewing introduced the Home Owners and Debtor Protection (Scotland) Act 2010.
That piece of legislation was pivotal in providing Scots, reeling from that financial crisis, with much needed protection and relief and suppressed the number of homes lost, whilst also allowing tens of thousands to deal with their historic debts in as painless a way as possible.
Key, the measures were also timeously introduced not in the immediate aftermath of the crisis, but as the delayed effects of it began to feed through to consumers.
Such a step is now required of the Scottish Government and Parliament.
In many ways the first two Coronavirus Acts have dealt with the immediate public health effects of this crisis, but as the financial rug is now pulled from the feet of Scots and we enter into the personal finance crisis, a third Coronavirus Bill that looks to address the impact on people’s personal finances is now necessary.
If we don’t we cannot say we have done enough and in many ways, morally, are no better than the UK Government, which is currently pulling away financial support from people when they need it most.
Why, during a pandemic, did the Scottish Government and Universities encourage tens of thousands of young people from across the UK, and further afield, to leave their homes and move into large overcrowded student accommodation?
The only logical conclusion was because Universities were worried if the Students didn’t, they would lose millions in revenue with Halls of Residence and Student Villages lying empty for the rest of the year.
Clearly, the Scottish Government must have been aware of the risk to students and the wider public of the Coronavirus spreading, but instead of giving the same advice they have given to others to work at home, they cynically approved plans to get students back, to pay rent for their accommodation.
What makes matters worse is the likelihood of further lockdowns and restrictions over the next six months must be high, with suggestions students will not be able to go home at Christmas.
Should they stay or Should they Go?
It begs the question where is the sense in Students remaining in their student accommodation?
It is expensive, clearly not serving the purpose many wanted it for, to be close to classes and is clearly more high risk than being with their families.
Why not use the rights the Scottish Parliament gave them in the Coronavirus (Scotland) Act (No 2) Act 2020 and leave their accommodation by giving 28 days notice to terminate their tenancies?
Even if students do not want to leave, threatening to do so on mass is likely to wring more concessions out the Scottish Government and Universities than any threatened rent strike, such as that which has been proposed at Glasgow University.
The prospect of losing tens of thousands of tenants, in a month’s time, will force Universities to face up to the risk of losing millions in revenue over the next six months.
It is hard to believe, in the face of such a likelihood, Universities and the Scottish Government will not offer more concessions. Students also would not need to worry about the legal problems arising from a rent strike: such as breach of contract, rent arrears and disciplinary action being taken by Universities.
And if the situation is not improved within the next month, they can at least return home, save £600 per month in rent, and continue their studies at home, probably enjoying more freedom than they would if they remained in their student accommodation.
Even under full lockdown conditions, moving home was still allowed if it was unavoidable: if your tenancy has come to an end, it is unavoidable. And how can anyone blame you for exercising a right that the Scottish Parliament gave you only a few months ago, because it was anticipated that during the lockdown, many students would want to return to their homes.
What has changed since then? I would suggest not a lot, except Universities fear losing millions of pounds.
How do you Terminate a Student Tenancy?
To terminate a Student Tenancy, the notice that you give must be in writing and delivered to your landlord. It also must be for reasons relating to the Coronavirus.
This could be because you only moved into accommodation to be close to the University in order to attend classes. As these classes will not be resuming and instead will be delivered virtually, because of the Coronavirus, there is no requirement for you to continue with your lease.
The Notice must also state the day you intend to leave your tenancy, which should be 28 clear days from the date the Notice is provided to the University.
Glasgow’s Advice Agencies have secured a last minute temporary rescue plan after half faced closure in just over a month.
The news comes after it was announced last week that Glasgow advice agencies faced swinging cuts from Glasgow City Council, with some facing closure within just a month, in time for the UK’s Furlough Scheme coming to an end.
The plans, which are believed to have been drafted before the Lockdown would have seen potentially five Citizen Advice Bureaux, Drumchapel Money Advice Centre and Castlemilk Law and Money Advice Centre (Scotland’s oldest law centre) close possibly by the end of the year.
The Citizen Advice Bureaux facing closure were:
- Castlemilk Citizen Advice Bureau;
- Glasgow Central Citizen Advice Bureau;
- Bridgeton Citizen Advice Bureau;
- Parkhead Citizen Advice Bureau; and
- Easterhouse Citizen Advice Bureau.
Other Agencies Facing Closure
Other agencies across the city including the Legal Service Agency (Scotland’s largest Law Centre), Govan Law Centre, Pollok Citizen Advice Bureau, Money Matters, Drumchapel Citizen Advice Bureau and the Ethnic Minority Law Centre also faced cuts of up to 36%, meaning many of their core services would have been impacted.
However, after a demonstration was called in Glasgow’s George Square, a last minute transitional rescue plan has been offered by Glasgow City Council of £4 million, although details of the plan are still unknown.
First Minister Wants Agencies to go from Strength to Strength
Nicola Sturgeon, First Minister of Scotland, has been called to intervene to protect Glasgow Advice Agencies and provide leadership to secure their long term future.
Speaking at First Minister’s Question Time, Nicola Sturgeon, herself a former solicitor at what was formerly Drumchapel Law and Money Advice Centre, has said she wants to see advice agencies go “from strength to strength”.
Speaking at the protest, Mike Dailly, Solicitor Advocate, and Principal Solicitor of Govan Law Centre said of the proposed cuts:
“The idea you would reduce the capacity of the Advice Sector in Glasgow during the worst pandemic in my lifetime and I am sure during your lifetime, is reckless, it’s feckless, its dangerous and its downright not acceptable.
“Ultimately”, he continued, “I think we are going to win this, but we need to see the details of the Transitional Plan and we need to make sure this never, ever happens again”.