Eviction Ban: How to use it to your Benefit

Eviction Ban: How to use it to your Benefit

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. 

Episode Two: The Scottish Tenancy Hardship Loan Fund

Get Advice

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.

What is Changing with the Debt Arrangement Scheme

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.

rent arrears

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.

Rent Arrears

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.

Why the Lockdown will be Different this Time

Why the Lockdown will be Different this Time

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.

Preventing Homelessness

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.

Consumer Credit

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.

Home Owners

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.

Self-Assessment Debts

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.

Council Tax

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.

Universal Credit

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.

Why Scots should avoid Stepchange’s Covid Payment Plan

Why Scots should avoid Stepchange’s Covid Payment Plan

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.
The Scottish Debt Arrangement Scheme: A better alternative to Stechange’s Covid Payment Plan

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.

 

Are Scots now on the Financial Precipice of this Crisis?

Are Scots now on the Financial Precipice of this Crisis?

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.

 

Should  Students bring their Tenancies to an End?

Should Students bring their Tenancies to an End?

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.

 

 

 

 

 

Last Minute Deal to Save Glasgow Advice Agencies

Last Minute Deal to Save Glasgow Advice Agencies

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”.

Breathing Space: Are there Lessons to be Learned?

Breathing Space: Are there Lessons to be Learned?

The UK Government has laid the draft Regulations for its much-awaited Breathing Space Scheme for people struggling with problem debt in England and Wales.

The new Debt Respite Scheme is outlined in Regulations made under the Financial Guidance and Claims Act 2018, and essentially contains two, new short-term, statutory solutions for people in debt.

The first of these is a Breathing Space Moratorium and the second is a Mental Health Crisis Moratorium.

Both are planned to commence on the 4th May 2021.

The UK Scheme’s are more far reaching than Scotland’s, in the level of protection they offer, but the dynamics behind them are different.The UK version requires more preliminary checks. Its like they don’t trust the debtor and miss the point behind a Moratorium.

Statutory Moratoriums

In the UK, the only Scheme that currently exists that is similar, is what is known as a Statutory Moratorium and has operated exclusively in Scotland since 2011. Initially introduced for the Debt Arrangement Scheme, the process was extended in 2015 so it can now be used without reference to any one formal type of debt solution.

Clearly the Scottish Scheme has been the inspiration for the UK Scheme, but how do the different Scheme measure up, when compared?

What are the Differences between the UK’s Debt Moratoriums?

How Long does a Moratorium Last?

The first point to note is which Moratoriums you use will depend on where you live.

Scottish Statutory Moratoriums can only be use by those who live in Scotland, whilst Breathing Space and Mental Health Crisis Moratoriums will only be available to those who are usually resident in England and Wales.

Another important difference will be how long they can last.

Scottish Moratoriums normally only last 42 days (although they have currently been extended to six months under emergency legislation related to the Covid 19 crisis, but this is due to be repealed on the 30th September 2020 – although Scottish Ministers can extend the emergency provisions for  another two successive six month periods).

A UK Breathing Space Moratorium, however, will last for up to 60 days normally.

UK Moratoriums, for those who are experiencing a Mental Health Crisis will continue to receive protection from their creditors for up to 30 days even after their treatment stops, and then will be able to apply for a Breathing Space Moratorium. There is, therefore, no time limit on how long the Mental Health Crisis Moratorium can be used for.

The UK’s Scheme’s are, therefore, more generous than the Scottish Moratorium, putting aside the current emergency arrangements in place.  Scotland also has nothing that is the equivalent to the Mental Health Crisis Moratorium.

Which Schemes offer the Greatest Protection?

Scottish Moratoriums are, relatively speaking, simple in the protection they provide. They stop Sheriff Officers (the Scottish equivalent of Bailiffs) from taking any legal recovery action, such as wage arrestments and bank arrestments and stop any creditor raising a bankruptcy petition if someone has registered a Moratorium. They are free to apply for and can be done relatively quickly online by either the client themselves or their money adviser on their behalf (although the client is required to sign the application form).

The UK Moratoriums, on the other hand will offer far greater levels of protection.

First, they will stop any interest, fees, charges, and penalties being applied to a Moratorium Debt by a creditor whilst it is active, and the Creditors will not be able to recover these charges even after the Moratorium ends.

However, they will also prevent a Creditors from commencing any court action to obtain a court order or judgement against the person in debt for a Moratorium debt or using Bailiffs or Enforcement Agents to recover the debt. They will also normally require a Court to pause an action where it has already been commenced before the Moratorium has been applied for and will stop landlords from applying for or executing an order to take possession of a property from a tenant, for a Moratorium Debt. They will also prevent mortgage lenders taking action to enforce the security they have over someone’s home, where the homeowner has mortgage arrears.

Scotland’s Moratoriums do not offer the same protection, albeit under housing and repossession legislation, Sheriff’s may choose to delay an eviction or repossession order where a Moratorium has been applied for.

The UK’s Moratoriums, however, also offer protection from utility providers installing prepayment meters and disconnecting gas and electricity supplies that the Scottish procedure does not (though it’s likely the Scottish Parliament does not have the authority to legislate to introduce these protections).

Other protections that UK Moratoriums have, that Scottish Moratoriums don’t, is they prevent lenders from relying on missed payments during a Moratorium to put an agreement into default, although it’s unlikely the Scottish Parliament would have such power under the Consumer Credit Act 1974, as it is a reserved matter.

In conclusion, even allowing for those areas that the Scottish Parliament cannot legislate in, it is clear that Scottish Moratoriums have significant short comings in term of the level of protections they offer people in debt, when compared with what people in England and Wales will have once their Schemes are introduced.

One other issue is the UK’s Moratoriums clearly put a responsibility on the creditors to observe them and raise the prospect that where lenders do not, they may be liable to the person in debt for any losses they suffer. In Scotland, although it is incompetent for lenders and Sheriff Officers to take enforcement action during a Moratorium, few Sheriff Officers bother to check before acting. This often means people still get their bank accounts frozen and wages arrested during a moratorium, which can have costs for them. These actions are usually recalled once it pointed out a Moratorium has been registered, but as Sheriff Officers face no repercussions, they regularly still take these actions without checking. Its never been heard of a Sheriff Officer or Creditor paying compensation.

How does the Administrative Arrangements for Moratoriums Compare?

Scotland’s Moratorium procedure is administratively lite. The provisions that cover it are contained in 4 Sections of the Bankruptcy (Scotland) Act 2016. The UK’s procedure is contained in 40 provisions in the draft Regulations.

The reason for this is simple. First Scottish Moratoriums do not offer anywhere near the same level of protection that the UK procedures offer.

However, another reason is in Scotland, there is a different legal tradition where all debts are included in most formal debt solutions, so the concept of eligible debts that exists in England and Wales for bankruptcy and IVAs, doesn’t apply in Scotland. The Scottish tradition is all debts are included, albeit, there are certain debts, when it comes to bankruptcy, where you do not get them written off at the end. Also, with the Debt Arrangement Scheme, some Creditors still deduct their debts via direct deductions from benefits.

This means in the Scottish provisions there is not an exhaustive list of what debts are eligible as a Moratorium Debt and which are non-eligible.

Also, the Moratorium in Scotland has also always been an emergency step that a person takes because of the urgency of their situation, especially when they may not be able to obtain advice before applying. There is, therefore, almost no eligibility criteria, other than you cannot have applied for one within the last 12 months (currently suspended because of Covid 19) and you must be habitually resident in Scotland.  Its for this reason, someone in debt can apply themselves.

In contrast, the UK Schemes specify what types of debts can qualify and which cannot. They also require a person to apply via an approved Debt Advice Provider and require that provider to be satisfied that the consumer meets the extended eligibility criteria, that includes answering the question whether they can pay their debts as they fall due. This undoubtedly will create a problem in a free money advice sector that is currently under capacity and inevitably will require advice agencies to carry out checks and verify information, before they are prepared to apply for a Moratorium. Often, in Scotland, the reason a Moratorium is applied for is to provide a consumer protection before this often-lengthy process is undertaken.

In addition to that, under the UK’s Scheme’s Creditors can request a review of an application for a Moratorium from the Debt Advice Provider.  This will undoubtedly place an administrative burden on advice providers, if Creditors or their Agents choose to use the option with any regularity.

Advice Providers will then have to decide whether to cancel the Moratorium for that Creditor within 35 days of the Moratorium being registered.

This forces Agencies into the role of having to judge their clients, and become decision makers, possibly making decisions that will not be in their client’s best interest. A role that is contrary to the fundamental money advice principle of being non-judgemental.

Where Advisers choose to cancel Moratoriums for one Creditor, this may also lead to other Creditors requesting a review based on the fact excluding one Moratorium Debt, and not another, may unfairly prejudice the interests of the other Moratorium Debt Creditors.

The problem is not made any easier, where the Debt Advice Provider refuses to cancel a Moratorium, as Creditors can then seek a Court Review as to whether the Scheme should be cancelled. This then raises the question of whether advisers will be expected to defend their decision and their client in Court, and if, they are unsuccessful, who will be liable for possible legal expenses incurred by the Creditors.

Advisers will also be required to carry out reviews of Breathing Space Moratoriums before the expiry of 35 days after it has been registered and every 30 days for a Mental Health Crisis Moratorium.

In addition to this, there are circumstances when advisers will be required to cancel programmes, if for example the client cannot be contacted.

Likewise, with Mental Health Crisis Moratoriums, due to the circumstances that clients may find themselves in, it is unclear how advisers will obtain credit reference agency checks for clients, when that client may be unwilling or lack the capacity to apply for one, or provide information about their income and expenditure, to allow the adviser to say whether they can afford to repay their debts or not.

What are the Lessons to be Learned?

There are lessons to be learned from the various types of Moratoriums across the UK, for all the home legal systems of the UK.

Scotland’s Moratoriums clearly do not go far enough and although when compared with the UK Government’s Scheme are simpler and more accessible, arguably as they don’t offer the same level of protection, less people will probably use them than the England and Wales Schemes.

The Scottish Moratorium, however, still has an advantage in that people who use the Moratorium Scheme can use the Debt Arrangement Scheme afterwards, which is a non-insolvency statutory repayment plan. This at least offers more than temporary respite for those struggling with problem debt and is not a form of insolvency.

However, there are plans in the pipeline for a statutory repayment plan for England and Wales, like Scotland and will eventually compliment the two new Moratoriums. Once that is in place, it is likely it could be said the English and Welsh systems will offer more protections than the Scottish Schemes. Particularly, as it appears the English and Welsh Schemes will mean the interest, fees, penalties, and charges will not be recoverable even if they come to a premature end, as people stop paying.

In Scotland, Creditors are still able to recover interest, fee, charges, and penalties, if a Debt Payment Programme is revoked.

However, the English and welsh moratoriums do appear like they will be administratively burdensome and will require more intensive advice to provided before people can access the short-term relief that Moratoriums can provide. It also appears this may be an obstacle for agencies wanting to provide them.

The Scottish Government, should, however, learn more from England and Wales’ Breathing Space and Mental Health Crisis Moratoriums and look to do more to increase the protections for Scottish Consumers.

They should ensure not only can a Statutory Moratorium freeze interest, fees, penalties and charges, but also stop Creditors from raising court action, once a moratorium is registered, and stop secured lenders from enforcing securities held for debts, whilst a client is using a Moratorium. They should also ensure no eviction can take place when a tenant has arrears on their rent and is using a Statutory Moratorium or paying those arrears though the Debt Arrangement Scheme.

All these powers are currently withing the legislative competence of the Scottish Parliament, and the only thing stopping them at present, is a lack of imagination and political will by the Scottish Government.

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COVID 19: Responding to the Debt Crisis

COVID 19: Responding to the Debt Crisis

As the public health crisis of Covid 19 unfolds, it is still too early to know the extent the financial crisis will impact on the personal finances of millions of Scots; but with over one million new claimants already claiming social security benefits across the UK; and predictions growth in the economy could fall by 25-40% this quarter, it’s not unreasonable to anticipate the effects will be severe.

Particularly, as almost 700,000 Scots were already struggling with problem debt before this began.The problem is unlike in the aftermath of the Credit Crunch, the free Money Advice Sector in Scotland is not in any state to respond. After 10 years of austerity and cuts of 45% to free money advice by local authorities between 2014-17, the Sector was already 50% under capacity according to the Money Advice Service. What that number will be after this crisis is anyone’s guess.


After the last Credit Crunch, we were in a much stronger position.

Between 2003-2005 there had been an additional £3 million invested each year; and from 2005-2007 an additional £5 million per year. In addition to that we still had a relative progressive system of laws that could help people.


Between 2009-15, there were over 140,699 personal insolvencies and 21,364 Programmes under the Debt Arrangement Scheme. This allowed Scotland to effectively respond to that crisis in a way that other countries couldn’t.


Take Ireland, for example. In the first quarter of 2015, they still had over 104,000 mortgages in arrears, and of those, 37,933 had arrears of more than 2 years. Limited in the immediate aftermath of the credit crunch by what was a Victorian era insolvency system, between 2009 and 2015, there were only 1,163 personal insolvencies.


The lesson is clear, if you want to recover from a financial crisis, you must have the resources and laws in place to address the issue of problem debt.
In addition to funding free Money Advice services properly, you need to think radically.


To begin with, Scotland could waive bankruptcy fees for everyone who is in receipt of income-based benefits, whilst increasing the maximum level of debt that can be included in fast track Bankruptcies from £17,000 to £25,000. We could also discount the first £50 of disposable income, so those on low incomes don’t need to unnecessarily contribute to their bankruptcy.

This could see 1,000’s debt free within 6 months.
We could also disregard the first £30,000 of equity in homes in all bankruptcies and avoid their unnecessary sale.

In addition to that, the new Debt Arrangement Scheme Regulations, passed only in November 2019 that banned all private sector fees, could be applied to cases entered prior to them commencing. That would assist thousands struggling to repay their debts and raise an additional £2-3 million for the free money advice sector.


We could also increase protections in bank account arrestments (last year there were over 170,000), so only a percentage of funds held in accounts over £529.90 is frozen, instead of the full amount, like with wage arrestments.


Such radical thinking is necessary, if we want to ensure Scotland responds effectively to this crisis, like we did the last one.

Covid 19 Information and Advice

Covid 19 Information and Advice

PROTECT YOUR INCOME AND FINANCIAL WELL-BEING

During the Covid 19 Crisis we are facing two threats. The first of these is the public health crisis of Covid 19. This page does not deal with that. That is for Scottish Adviserthe medical profession.  The second risk is the financial one. That threat has seen the financial well-being of millions threatened. That is the risk this page deals with.

My advice to anyone who has been impacted is maximise your income.

This page helps you do that by providing links to benefit and budget calculators and provides information on where you can get free advice locally.  If you have any questions, please post them in the comment section and I will try my best to help you.

Scottish Adviser

COVID 19 – GET ADVICE FROM YOUR LOCAL ADVICE AGENCY

MAXIMISING INCOME AND BUDGETING

BENEFIT CALCULATOR

STATUTORY SICK PAY

BUDGET CALCULATOR

INCOME REPLACEMENT

COUNCIL TAX CALCULATOR

UNIVERSAL CREDIT

DEBTS – DON’T LET THEM MANAGE YOU

PAYMENT BREAKS

DEBT ARRANGEMENT

RENT ARREARS

TRUST DEEDS

SHERIFF OFFICERS

BANKRUPTCY

Realistic Advice Strategy for Covid 19 Required

Realistic Advice Strategy for Covid 19 Required

Realistic Advice Strategy for Covid 19 Required

Covid 19 has exploded like a hand grenade in every home and workplace across our Society.

No-one feels safe. Any complacency we had only weeks ago is now gone.

We are now all facing a real, tangible threat to our health and well-being and that of our friends and loved ones.

Two Contagions

However, there are two contagions ripping through our communities at the moment.

First, there is the Covid 19 contagion, which is a serious threat to public health, the likes of which has never been seen since 1918. It will push our National Health Service to breaking point and every day we see health sector workers take the type of life threatening risks that they never signed up for: of going to work and not coming home.

Despite that, our Doctors, Nurses, Auxiliaries, Porters and Cleaners are on the front line, daily risking everything, including not being able to return to see their own children and families, so ours can be safe   There can be no question, that after this, we will all be indebted to them.

However, there is also a second contagion ripping through our Society, the contagion of financial failure and that threatens to be deeper and more enduring than the financial crisis that we witnessed in 2008.

Within weeks of the lock down millions have already been affected, with almost one million having to claim Universal Credit.

As staggering as these figure are, they don’t take into account those working poor that were already claiming it and because of falling income, will now see their claims rise. It doesn’t take into consideration those that are now eligible to claim, but through a lack of familiarity with the benefit system, have still not done so; or those only claiming contribution based Job Seekers Allowance and Employment Support Allowance or Statutory Sick Pay.  Nor does it take account of the hundreds of thousands that will have to claim it in the weeks and months ahead.

Hopes that in three months time, the lock down will be lifted and gradually we will all return to some form of normality and these people will return to paying their mortgages and credit cards and loans, are as unrealistic and complacent as were our attitude to Covid 19 two weeks ago.

This will not happen, despite the payment breaks (where interest and charges are still being applied), despite the standing down of Sheriff Officers and debt collectors, despite the amnesty on evictions, despite the furlough payments of 80% of employees wages and the earnings of the self-employed, which won’t even arrive to June.

A New Strategy for Helping People will be Necessary

How long we will be required to address this second crisis, the financial crisis, will have to counted in years, not months. 

This will be necessary for a  number of reasons.

First there is the scale of the problem: it will be huge and complex and the advice sector in terms of money advice simply just doesn’t have the capacity to tackle that problem.

This was the case before this crisis with the Improvement Service reporting that local authority funding for free money advice had been cut by over 45% since 2014; and the Money Advice Service (the predecessor to the Money and Pension Service) reporting that Scotland was already 50% under capacity before this crisis even began.

What that percentage will be after this crisis is anyone’s guess.

Problem Debt Route Map Without Direction

Second, Scotland doesn’t have any strategy for dealing with Problem debt.

In January 2019, money that is raised by the Financial Conduct Authority from banks to fund the free money advice sector, The Debt Advice Levy, was devolved to the Scottish Government. 

A Tackling Problem Debt Working Group was established to come up with a Debt Advice Route Map.  The problem was, as I have previously wrote about (Route Map Without Direction) the subsequent Route Map that was produced, lacked any direction, because I suspect, as is common and understandable in a sector where funding is scarce, many of those who sat on the Group approached it with the attitude of what was in it for their respective organisations, rather that what was strategically best for  Scotland as a whole.

This was evidenced only months ago, when a decision was taken to just  renew all funding grants, most of which had been awarded prior to the funding being devolved.

A Divided Sector

Thirdly, if I was to be honest, as a Sector, the money advice sector don’t work well together. I say this as one of the few advisers who has worked for the public sector, the third sector and the private sector. 

The Third Sector don’t trust the Public Sector to give them any funding; the Public Sector fear the continued encroachment by the Third Sector, staffed by lower paid advisers and unpaid volunteers, who are often viewed as a cheaper option by funders; and neither trust the Private Sector, despite the fact they provide access to more formal debt solutions than the other two together. If any evidence is required of this, one only needs to look at the recent evidence gathering sessions by the Economy, Energy and Fair Work Committee of the Scottish Parliament in relation to Protected Trust Deeds. That descended into nothing more than private sector bashing eventually.

This is not to say that rivalry exists between front line advisers across the three sectors. The truth is, there is actually a strong level of solidarity between front line advisers, regardless of the sector they work in, as they are all doing the same job and face the same challenges.

The problem is, however, although it is true there is no shortage of work for all, there is a lack of funding, which doesn’t cultivate joined up working at a higher level in all sectors.

Scottish Government’s Response is Not Joined up

This lack of strategy will now be a problem, as will this lack of joined up working.

Quite simply if many of the protections that we have seen rushed in over the last few weeks are then rolled back over the next 3-6 months, the demand for free advice will overwhelm  the free money advice sector in Scotland.

There is clearly a lack of understanding of this problem in the Scottish Government who have already, in the middle of a lock down began directing people to Citizen Advice Bureaux, a primarily face to face service, through social media advertisements, like the one below.

This is wrong on so many levels.

First, all Citizen Advice Bureaux should be closed. We are all on lock down. If any are still open, they should be closed. The advice sector exists to help people and many of our clients are the most vulnerable in Society, often with serious underlying health problems. No advice agency should have their doors open. What we do is key, but in the context of this Crisis, it is not on the whole, life saving.

Secondly, although I am sure every Citizen Advice Bureau in Scotland is scrambling to put remote working in place, like every other advice agency, and offering services like telephone services from home, few of us were set up for this and we are all scrambling to adapt to the situation we are now in.

It is not an easy process.

Thirdly, to direct everyone down the one channel, when much of the advice capacity in this country doesn’t exist solely in Citizen Advice Bureaux, but across the sector as a whole, which includes Local Authority Money Advice Agencies, private sector insolvency firms, and national debt charities is ridiculous. Basically this is the recipe for creating a bottle kneck, that will quickly become choked and lead to many not being able to obtain the advice and support they need.

What would be more sensible would be for the Scottish Government to contact all local authorities and request they post prominently on their websites what local services are available for people (and most will anyway), with links and contact details.

These pages should also contain details of national websites and telephone helplines (most of which are partly funded by the Scottish Government anyway). The Scottish Government could then direct people to visit their local authority websites for information on what local services are available to them, which would contain details of Citizen Advice Bureaux, but also local authorities services, law centres, housing associations, foodbanks etc.

It’s clear to me this marketing campaign is more about the Scottish Government being seen to be doing something, rather than actually doing anything. It’s cover for the fact the Money Advice sector is in a very poor way.

It ignores the limited resources and challenges that all advice agencies are currently facing and does not even attempt to take a joined up approach to helping people.

A Strategy for Tomorrow

In the medium to long term, we need to now start thinking of a strategy for how we are going to deal with the problem that is coming down the line in a matter of months. The likliehood is, when the lock down is over, significant numbers of people are going to be traumatised.

Mental health problems will have increased, debts will have built up, households which previously survived on earned income will be workless and struggling with mortgages and problem debts.

Some will be struggling with bereavements.

The idea that this can be tackled with an army of volunteers, based on David Cameron’s Big Society, has to be shelved alongside the ideas of austerity.

The reality is most Citizen Advice Bureaux, like all advice agencies need more full-time paid, specialist staff to deal with the complexity that is the modern day benefit and debt advice sector we work in.

Don’t tell me we can’t afford it.

This is not the post war Britain that the Citizen Advice Movement was born into and their advisers have to be paid a wage that is commensurate with the level of expertise and skill they are expected to have and the level of responsibility they are expected to shoulder. They shouldn’t have to be claiming benefits and worrying about how they pay their mortgage as they help others do so.

We also need a more joined up approach between advice agencies, including the private sector. The truth is if you want to add capacity quickly, then private sector firms and national charities like Stepchange can help us do that quickly and recent changes to the Debt Arrangement Scheme, banning private management fees, will allow that to happen without the client suffering a detriment.

Equally, however, there will be huge numbers of people whose issues will be that complex, as will their wider needs, that face to face money advice services will need to work in partnership with other local support agencies, such as welfare rights, mental health, addiction and family support services. These will be required in greater numbers than before.

We need to be doing this now, as from experience I can say that skilled money advice workers can take between 18-24 months to train and we have lost a lot of that experience after ten years of austerity and cuts and don’t have that amount of time.

Maybe we could even ask some of those advisers that left if they will return to help us with what lies ahead.