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Bankrupt Home Owners to lose out because of Fees

Bankrupt Home Owners to lose out because of Fees

Bankrupt home owners in Scotland, from the 3rd of April 2017, will pay substantially more when their home is sold by the Accountant in Bankruptcy (AIB) in a sequestration.

The massive fee hikes, being proposed by the Bankruptcy Fees (Scotland) Regulations 2017, will see the AIB increase their fees, when selling a debtors home, by as much as 188%.  What this means is where a debtor’s home is sold, more of the money realised from the sale will now go to the AIB, a government quango, and less will go to creditors or be returned to the debtor after creditors have been paid.

What makes these increases the more shocking, is they come 2 years after the Scottish Government changed the law to make Scottish debtors pay for longer: on the pretext it was necessary to increase returns to creditors.

However, the AIB’s concerns for increasing dividends appears to have subsided with the new proposed fee increase, where the Scottish Government quango will max out its potential revenue from the sale of family homes.

As the table below shows, under the old rules, the AIB took significantly less to what is now being proposed under the new regulations, with the increase being as much as 188%, where there is £50,000 equity in a home.

AIB Costs and Full Cost Recovery

There is a growing concern what lies at the heart of these fee increases, and indeed the Scottish Governments decision that debtors should pay for longer, is the need to fund the Accountant in Bankruptcy, an organisation whose entire business model appears to be to increase fees when revenue drops from falling caseloads, without making any corresponding efficiency savings to reflect their reduced workload.

As the graph below shows, despite the level of debtors seeking formal debt remedies over the last 9 years being on the decline, there has been no corresponding reduction in the AIB’s staffing levels, or costs overall to reflect this.

The irony of all this is, that many of the cases that will be impacted by these increases will be creditor petitions, where it is the creditors who makes the debtor bankrupt. These tend to be local authorities, who do so to try and recover unpaid council tax. The result will be less funds will be returned to these local authorities, who have suffered budget cuts imposed by the Scottish Government, whilst the AIB, a Government quango has been allowed to insulate itself from cuts by increasing fees on debtors, creditors and the personal insolvency industry.

Funding of Personal Insolvency

It is clearly time there was an open discussion about how personal insolvency in Scotland is funded and whether a policy of full cost recovery is sustainable, whilst the AIB make no cuts to their own staffing levels and costs.

Until there is such a discussion, there should be no further fee increases for the AIB authorised by the Scottish Parliament.

Already, it has been shown that as a result of the introduction of the Bankruptcy and Debt Advice (Scotland) Act 2014, the number of debtors applying for sequestration and the Debt Arrangement Scheme (DAS) has reduced (50% reduction in relation to DAS). Over the long term this will mean a reduction in fees recoverable by the AIB, which whilst they continue to pursue a policy of full cost recovery and no cuts to their own services, can only result in a greater short fall that will need to be met by future fee increases.

These fee increases will only result in remedies becoming less accessible by debtors and creditors and result in a further decline in numbers using the remedies.

At some point we must ask who is the intended beneficiaries of Scotland’s personal insolvency regime?

The Bankruptcy Fees (Scotland) Regulations 2017

The regulations were laid before Parliament on the 20th February 2017 and are a negative procedure instrument. The Lead Committee is the Economy, Jobs and Fair Work Committee. The report date for the instrument is the 27th March 2017.

Ireland Insolvency Laws: No Quick Fix

Ireland Insolvency Laws: No Quick Fix


As Ireland’s new personal insolvency laws passed an important milestone this week, with Monaghan Circuit Court granting the first protective certificate to a Donegal Man, there will be much relief in the 26 counties that the country’s new personal insolvency solutions are beginning to come online.

However, such optimism may still be short-lived, judging from the recent comments of some of Ireland’s top bankers, with Richie Boucher, CEO of the Bank of Ireland stating recently, “…Every forbearance costs us money. We look to maximise recovery” and that debt forgiveness was not a “policy of the bank”.

The fact debt forgiveness is not a “policy of” one of the major banks in the Republic is not a promising sign for two of the three new personal insolvency arrangements being made available, as both Debt Settlement Agreements and Personal Insolvency Agreements require the qualified consent of all creditors.

It would appear, however, that Ireland’s parliamentarians have suffered from the same dilemma many parliamentarians do when creating a modern personal insolvency system.  That is the fear and general unease that they are creating a “cheat’s charter”.

In any modern credit based society, however, there is a need to ensure that those who become over indebted, either through misfortune or poor decisions are not left buried under a mountain of debt and financially excluded from society for any unduly length of time. There are little benefits for anyone in allowing such a situation to exist.

Equally there is also a need to build risks into the system to ensure that those that make lending decisions act prudently and don’t pose an unacceptable risk to the wider economy, which arguably was what did happen in Ireland during the Celtic Tiger boom years.

These dilemmas are the same ones other Governments, including the Scottish Government have struggled with for years. The need to create an effective system of debt relief and balancing this with the need to avoid the moral hazards of creating a can pay, won’t pay culture; or an environment that encourages what the Allied Irish Bank recently called “strategic defaulters”.

The difficulties of introducing Ireland’s new schemes, however, has also been compounded with adverse publicity that the schemes will only be available to the well off and will be of little benefit for those on low incomes; coupled with accusations that the banks have had too much influence in drafting the new legislation.

There does appear to be some merit to such accusations and it is hard to believe that it will be possible for Ireland to realise the 15-20,000 cases per year that the new Insolvency Service believe desirable until there are further legislative reforms or a sea change in the attitudes of creditors.

Two of the new schemes, Debt Settlement Agreements (DSAs) and Personal Insolvency Agreements (PIAs) require 65% of lenders to accept some form of debt relief or write down before a case can become approved. This isn’t unlike schemes that exist in UK legal systems; however, there is an important difference in that both of the UK’s legal systems the more formal solution of bankruptcy, which is often used in negotiations with creditors, is far more accessible and potent a negotiating tool.

In Ireland, despite important reforms to judicial bankruptcy, reducing the duration from 12 to 3 years, it is still unlikely bankruptcy will be as effective a negotiating tool as it is elsewhere on these islands.

One of the problems is the system is almost totally inaccessible to the private sector, with a civil servant, the Official Assignee normally acting as Trustee in all cases.

In addition to this, there remains the problem that in some cases debtors may even receive a 5 year bankruptcy payment order after discharge, meaning they could be paying towards their bankruptcy for as long as 8 years.

If Ireland can learn anything from personal insolvency laws in Scotland it is this: people heavily indebted by itself is not enough to ensure that debt relief remedies will be widely used; it is also necessary to ensure that the correct environment exists. This means allowing the private sector access to help drive take up and the right legislative conditions in place to ensure not only that debtors can access remedies.

This can be seen in Scotland where bankruptcies rose from 560 in 1986/87 to 11,970 in 1992/93 after the introduction of the Bankruptcy (Scotland) Act 1985; and again with protected trust deeds, which rose from 282 in 1993/94 to 5,363 in 2002/03 after the Bankruptcy (Scotland) Act 1993.

Again more recently this can be seen in 2008/09 when the number of bankruptcies increased from 6,158 in the preceding year to 14,777 after the introduction of the Bankruptcy and Diligence (Scotland) Act 2008 and in relation the Debt Arrangement Scheme (not a type of insolvency), where the number of plans approved jumped from 1,190 in 2010/11 to 3,319 in 2011/12 after the Debt Arrangement Scheme (Scotland) Regulations 2011 were introduced.

What is characteristic about all these changes is the various legislative measures either increased access for the private sector to provide solutions or removed legal and financial obstacles to debtors allowing them access remedies.

In a country where it is believed as many as one in four mortgages and one in three buy to let mortgages are in arrears and unsecured personal debt levels are well over double what they are in the UK, there is no better time for Ireland to begin opening the personal insolvency valves to allow consumers to access debt relief and debt management remedies.

Taking again Scotland as an example, since 2008 over 102,000 Scots have used some form of personal insolvency to deal with their over indebtedness, whereas in Ireland only 20 petitions for bankruptcy were awarded last year.

The benefits of this are clear to see for Scotland where the Scottish Government are reporting the number of personal insolvencies are continuing to fall and the average debt levels being seen by insolvency practitioners are often half what they were even a few years ago. It is also rare now to find debtors in Scotland with more than 10% negative equity in their principal home.

It seems logical then that as the Scottish Government begins to close the valve allowing access to personal insolvency with the Bankruptcy and Debt Advice (Scotland) Bill, the Irish Government needs to begin opening theirs.

However, it also seems unlikely in a country that has a broadly similar sized population as Scotland and a far greater level of personal indebtedness, that the 15-20,000 personal insolvencies per year that Scotland has been witnessing for the last five years is anywhere close to being achieved in Ireland.

Unless creditors begin to accept debt write downs, it would appear inevitable that further primary legislation will be required; indicating that it’s unlikely Ireland’s new modern personal insolvency laws will begin to do their job for at least another 12-18 months.

Inevitable Ireland will need to open its formal bankruptcy laws up to the private insolvency industry and or allow the Irish Insolvency Service, or the Circuit Courts to set aside creditor objections in Debt Settlement and Personal Insolvency Agreements.

Creating the correct legal environment is vital if any country wants to see the volume in personal insolvencies increase to what is required to help with significant over indebtedness: otherwise it is unlikely any private sector firms will make the necessary investments in software, staff and procedures to ensure costs are reduced and returns to creditors are maximised; whilst also allowing the remedies to be widely available to not only high net income borrowers, but also the thousands of middle income consumers needing debt relief.

However, not all aspects of the current Irish scheme are likely to be slow in developing.  Ironically, despite fears that the new insolvency remedies will not be accessible to the poor, it is likely the most successful of the three new remedies, Debt Relief Notices, which are similar to Debt Relief Orders in England, Wales and Northern Ireland and Low Income, Low Asset bankruptcies in Scotland will be the remedy that first succeeds.

In the other legal systems of these Islands, the comparable remedies have all proved to be popular, but crucially because like Debt Relief Notices and unlike the other schemes, they do not require creditor consent.

Trust Deed Bubble to Burst

Trust Deed Bubble to Burst

No one should be in any doubt, the Scottish Government’s new proposals for Protected Trust Deed reform is about taking the heat out of the Protected Trust Deed market and ending the trafficking of debtors between lead generation and personal insolvency firms.

It’s no secret that with some firms now reportedly paying in excess of £2,000 for referrals, Scotland’s Trust Deed market has become an overinflated bubble with debtors being “mis-sold” products as new lead generation firms sprout up daily and chase down every possible lead for the lucrative fees that some firms are now dangerously paying.

The exorbitant fees have resulted in saturation level TV and radio campaigns that push and sell statutory remedies as products and don’t promote best advice. For some firms, the use of the products themselves in their company names, like Trust Deed, give away the game.

However, what many debtors are unaware of is in actual fact many of these firms are just lead generators whose entire business model is about trafficking debtors to insolvency firms for ridiculous referral fees. In addition to this, many debtors don’t realise that such levels of fees have created a high risk culture of mis-selling, with many being pushed into solutions that are not appropriate and are destined to fail when payments are not maintained and debts are handed back; but only after the lead generator has been paid and the debtor has made months of contributions towards a remedy that was never going to work.

The practice of paying fees has been allowed in Scotland since 2008, but only for work done. The logic being where someone else has gathered information about a debtor and passed it to an Insolvency Practitioner, then it is acceptable for that practitioner to pay that intermediary for the work they have done. This removes the need for the practitioner to do the work and prevents duplication, although they are still obliged to validate the information provided.

However, whereas such fees began at £2-300, they have exploded in recent years with some English firms now paying in excess of £2,000 per referral, allowing them to buy up significant portions of the Scottish Market.

However, the new Protected Trust Deed regulations which will be laid before the Scottish Parliament in early September and are expected to come into force by November are the clearest sign yet that the Scottish Government intends to curb the practice and clamp down on the mis-selling culture.

The new provisions that will be introduced will no longer allow trustees to recover referral fees as part of their outlays for a case and instead will require them to include them as debts into the case, where they will only receive a dividend on the fees and be treated like other creditors.

The way trustees charge their fees against cases will also change, meaning they will no longer be able to charge on a time and line basis and will have to propose a setup fee at the outset to creditors, with proposals thereafter only to take a percentage of the ingathered funds from the case. Effectively this will mean trustees will have to share the risk of the case failing with the creditors throughout the lifetime of the case and, logically ensure only those cases likely to succeed are taken on at the outset.

In addition to this new provisions will be brought forward extending the minimum time a trust deed lasts from 3 to 4 years, whereas the duration a debtor pays into a bankruptcy will, for the time being anyway, remain at 3 years. This means many debtors faced with the prospect of having to pay a trust deed for 4 years are more likely to opt for a bankruptcy where they will only pay for 3 years; or alternatively where they want to avoid that remedy and can repay their debts within a reasonable timeframe, a debt payment programme under the Debt Arrangement Scheme.

The only obvious conclusion that can be drawn from a consideration of these proposals, is that the Scottish Government are determined to take the air out the over inflated bubble that is the Scottish Trust Deed market.

And who can blame them?

The current state of the market is now at a dangerous level. The risks of mis-selling are high and many vulnerable debtors are now being targeted by firms, who to put it simply should not be advising anyone on anything and it would not be unfair to call them rogues.

The end result will probably be more sequestrations and a greater uptake of the Debt Arrangement Scheme by debtors. It will also probably mean that the high profile TV and radio campaigns will also come to an end as the commercials behind such campaigns will no longer be sustainable. We are also likely to see more insolvency firms, who are far better regulated by regulatory professional bodies, having to market themselves directly to consumers.

If this leads to better advice and less mis-selling, then that’s no bad thing.

I am looking forward to it and being able to breathe again.

The Good, the Bad and the Ugly

The Scottish Government have released their response to the consultation they held earlier this year on bankruptcy law reform. Alan McIntosh takes a look at the implications.

After 10 years of progressive modernisation of Scotland’s debt laws and increased debtor protections being introduced by the Scottish Parliament, the current Government have now set out a number of proposals that can best be described as the good, the bad and the ugly. Considered as a whole, the proposed reforms can only be viewed as a backward step and instead of reforming our current system to ensure its fit for an era of austerity, will only likely exacerbate the effects of that austerity on many Scottish consumers and creditors.

The Good is the length of payment holidays in debt payment programmes under the Debt Arrangement Scheme will be increased as will the accessibility of the scheme for joint applications to be made; a new 6 week moratorium period will be introduced for all of Scottish formal debt remedies that will see interest , fees and charges on debts being frozen at an earlier stage and debtors will be provided with protection from enforcement action; there will be earlier discharges for those debtors who qualify for a new “no income” route into bankruptcy; and there will be a common financial tool introduced to harmonise how much debtors pay, regardless of the remedy they use.

The Bad is there are the proposals for a new route into bankruptcy, which will be known as a “no Income product” and be far less accessible than the current Low Income, Low Asset route; there will be an increase in the length of time that debtors will have to pay contributions in Protected Trust Deeds and Sequestrations, from three to four years; there will also be no automatic discharge after one year and debtors will have to apply for this, which will be linked to financial education and co-operation with trustees, increasing uncertainty; the power to make income payment orders will be taken off sheriffs and transferred to the Accountant in Bankruptcy’s office, creating Article 6 issues under the ECHR in relation to the right to a fair hearing as the Accountant in Bankruptcy will also be the trustee in most cases.

The ugly will be the exclusion of debts accrued within 120 days of the debtor entering a protected trust deed or bankruptcy, which will benefit the payday loan companies and others who prey on distressed debtors and only force debtors to delay in seeking protection; there will also be the introduction of a statutory minimum dividend for Protected Trust Deeds, which will limit accessibility to a wealthy few and force thousands more each year to become bankrupt.

To understand the thinking behind these policies, the temptation may be to think it’s the fear of creating a moral hazard that the Government is guarding against, which may lead to people believing it’s too easy to just not pay their debts; but this is unlikely considering it was this Government in 2010 which made it easier for debtors to go bankrupt; and where is the need to guard against such a hazard in a system where the numbers going bankrupt each year has been in decline for the last three years?

More plausibly, at the heart of the Scottish Government programme for reform is the need for the Accountant in Bankruptcy to be fully self funding. Already their level of public funding is at a 20 year low and saw 40% of cuts this year on top of the 37% of cuts the year previous to that.

In actual fact, it’s only when you place the events that surrounded the announcement of this consultation and its execution in this context, does any of it make sense.

In August last year, the Scottish Law Commission at the behest of the Accountant in Bankruptcy began a consultation on consolidation of bankruptcy law. All the indications were the Scottish Government were getting ready to let this much reformed area of law bed in. Then in December, unexpectedly it was announced there would be a root and branch reform of Scots law on bankruptcy to make it fit for the 21st century. No-one had anticipated such a move, especially as the implementation of the Bankruptcy and Diligence Etc (Scotland) Act 2007 and Part 2 of the Home Owner and Debtor Protection (Scotland) Act 2010 had only been implemented; but then it was probably around such times the decisions were made to further slash their public funding.

Then the consultation was hurried. It ran only between February and May this year. There was no underlying, unifying theme underpinning the consultation and when the eventual 124 page consultation document was released, it was made up of what some described as a ragbag of ideas that you wouldn’t expect to appear in the same strain of thought. There was no clear analysis of what was wrong or what the challenges were for the future.

Then there was the bizarre events during the consultation when the AIB announced they were developing a triage advice tool, with funding from the Money Advice Service, despite the fact this was an issue still being consulted on; then an advertisement was sent out to money advisers asking them to apply to be seconded to the AIB to provide an in house advice service, despite the fact they was no statutory role for them to perform such functions.

Then with little notice, it was announced the bankruptcy application fee was to be increased by 100% across the board for debtors, which resulted in a 36% increase in debtor applications as debtors hurried to beat the fee hike and was followed by a 50% decrease in the latest quarterly insolvency statistics.

We now have a non cohesive programme of reform. The good are to be welcomed, but none are that urgent to justify the bill that is being proposed or the hurried consultation process. The bad clearly appears driven to help the AIB meet the financial needs of their service, largely caused by the funding cuts, and the ugly are just that, policies with no evidence underpinning them and almost definitely will have consequences that will harm the vast majority of creditors and debtors.

There was a hope, albeit a tentative one at the beginning of this process, that the Scottish Government was going to rise to the challenge of the economic crisis and use imagination and innovation to develop a system that would help Scottish consumers and creditors tackle the problems facing both.

That hope, I believe, was dashed yesterday with the Government’s response to the consultation on bankruptcy law reform. It’s not all ugly, some of it is good, but on the whole its bad and arguably we’d be better off with what we have.


It’s time to widen the floodgates

It’s time to widen the floodgates

First published on the 5th of September in the blog A Burdz Eye View

Bankruptcy law is like criminal justice.  It’s a political football: no one wishes to be soft on crime and no one wishes to create a moral hazard by allowing a cheat’s charter.  However, Scotland, like the rest of the UK, is facing a huge personal debt problem and although austerity measures are being introduced to tackle soaring public debt, all evidence suggests that our personal debt levels will continue to rise over the next five years.

It is, therefore, correct that the Scottish Government brings forward a new bankruptcy bill in this parliament, which will launch a new Financial Health Service.

Personal debt in the UK currently stands at £1.45 trillion (that’s almost equal to the UK’s Gross National Product). The Scottish share of that is possibly as much as £145 billion. Of that, approximately £125 billion could be on mortgages and other secured debts with the remaining £20 billion being on credit cards, loans and other unsecured debts.

Of those that owe this £20 billion on unsecured debts, recent research by the University of Wales has found that possibly up to 200,000 Scottish consumers could be what they call iceberg bankruptcies: that is, debtors who are only making minimum payments to their debts and who could quickly slip below the water line if they were exposed to any type of income shock.

And this situation is unlikely to improve anytime soon. The UK Office of Budgetary Responsibility is anticipating that UK personal debt could increase to over £2 trillion by the first quarter of 2017 with incomes stagnating or falling in real terms and the cost of living increasing. Put simply more and more of us will need to continuing borrowing to maintain our lifestyles. And it’s not just a case of having to cut our cloth accordingly, either, as The Joseph Rowntree Foundation found out with their Minimum Income Survey: society appears to have changed. For example, many of us now live out of town and have to commute to work: so we need to own cars or pay excessive rail tickets; we have to pay the mortgages for the homes we bought but no longer can afford to live in or sell, with the housing market in the doldrums and negative equity being prevalent.  The most that is possible for many of us is cutting down on eating out and spending at Christmas.

It is, therefore, vital that the Scottish Government recognises the scale of the task ahead, although judging from the consultation document on bankruptcy reform, it is not clear it does.  The introductory text to the document states that the Scottish Government has a broad and ambitious agenda for reform and has looked at not just the processes but also the principles of bankruptcy and debt solution reform.  However, examining the questions asked, it is clear this is not the case. It is certainly true that what has been discussed is a modernisation of the laws and many of the suggested reforms are welcome, but it is unlikely these new reforms will be sufficient to deal with the challenges ahead.

The basic premise behind the reform proposals appears to be that bankruptcy is to be discouraged, suggesting a political fear of creating a moral hazard.  This is also the inference ­­­every time the quarterly insolvency figures are released by the Accountant in Bankruptcy and the Minister, Fergus Ewing, holds up the falling numbers as a success.

The question, however, that should be asked is whether those who need access to the remedy are getting access to it. A see no evil – hear no evil policy is never to be commended.  There is also evidence in relation to the lowest income debtors suggesting they are being excluded from obtaining access to bankruptcy due to the level of application fees.

The Scottish Government should note the recent observations of the International Monetary Fund in its 2012 World Outlook Report that schemes which write down and restructure personal debt can be desirable and can assist economies to recover more quickly from economic shocks like those experienced in the last few years.  This is particularly so, where there has been a rapid build up of personal debt and substantial levels of public funding to support financial institutions. It is one of the reasons the Republic of Ireland is currently being forced to liberalise their bankruptcy laws as part of the IMF recovery plan.

It is also not a new idea and is best illustrated with the comments of the Roman philosopher and lawyer, Cicero in the first century BC, who said when speaking about Nexum, a form of Roman debt bondage:

“ When the plebeians have been so weakened by the expenditures brought on by a public calamity that they give way under their burden, some relief or remedy has been sought for the difficulties of this class, for the sake of the safety of the whole body of citizens”

The Scottish economy and its consumers are that class and now need wider relief from their debts.

Which is not to criticise the proposals in the forthcoming bill, but simply to suggest that they do not go far enough. The Scottish Parliament has already done much in its short existence to assist debtors: arguably, we now have some of the most progressive debt laws in Europe.  But to face the tasks ahead, the Scottish Government needs to be bolder and recognise the full potential of using bankruptcy laws not only as a means of recovering debts, but also as an economic lever to assist in reviving our economy and encouraging growth.

Our current bankruptcy laws are dreadfully old century and were created for another era.  Despite being reformed in 1913, 1985, 1993, 2007 and 2010, they are essentially underpinned by the same principle which existed in 1856.  Our system was essentially created to allow creditors to recover debts but this is no longer an appropriate primary role in a credit based society.  The role of bankruptcy law today should be to provide debt relief, encourage entrepreneurship and act as a safety net for the poorest.

This was the case even before 1985, when less than 300 people were made bankrupt each year and over 86% of those bankruptcies were initiated by creditors.  These days, those figures have been almost reversed with over 90% of all Scotland’s 20,000 plus personal insolvencies each year being initiated by the debtors themselves, primarily to seek debt relief.

These levels of personal insolvency, however, still represent less than 0.38% of all those eligible to use the remedy, providing no evidence we are creating a can pay, won’t pay culture and by international standards well within the “safe limits”.

But the figures show that consumers are now burdened with unmanageable debts and their inability to resolve their situation will hamper the Scottish economic recovery and result in greater cost to the public purse and financial hardship amongst debtors.

While this bill will bring immediate improvements to the system, it is unlikely to stand the test of time and will require further, future reform.  Any hope that we are laying the foundations of a system which will serve a generation is overly optimistic.

By opening the gates to bankruptcy more widely for a short period of time and enabling greater protections for debtors, Scotland’s economy could benefit from the relief and begin the recovery that could prevent others from defaulting on their debts. We already have seen evidence of this potential with the financial stimulus the UK economy received by consumers reclaiming Payment Protection Insurance: some have even suggested it has done more to encourage growth than any UK Government initiative.

If we do not open these gates, we will need to return – at some point in the future -to, and address, the issue of personal debt. The UK economy is barely growing; 80% of the austerity measures and cuts have still to be made; personal debt is rising.  The Scottish Parliament does not require Westminster’s permission to legislate in this area, so the only question is: are we independently minded enough to follow our own path?  Ironically, for a pro-independence government, I have my doubts.

Brighthouse: Light At The End Of This Tunnel?


By Alan McIntosh

I was fascinated to read an article that’s been written by Richard Dyson of the Financial Mail on Sunday, exposing the true extent of the rip off being perpertrated by Brighthouse, the high street hire purchase company.

I genuinely believed it wasn’t possible to be more shocked by their conduct after dealing with them for years as an adviser for clients.

It wasn’t unusual to hear of tragic stories involving children having TVs taken off them within a month or two of Christmas after hard up parents had desperately tried to make sure Santa didn’t miss their kids on Christmas day.

Even more tragic was when children’s beds, taken out on hire purchase, were repossessed.

Its one of the sad things about people who live in poverty, often  essential items are obtained using hire purchase.

The effect is the person doesn’t own the goods until all payments are made and if they are repossessed before half the payments are made, the consumer can even be left with a debt for the goods they no longer have.

That’s why, if possible, its always best to buy such essential goods outright and judging from what Mr Dyson found, you are likely to save yourself a lot of money doing so.

He found in his investigation Brighthouse used unique, non industry codes to make price comparison impossible and priced some electrical goods  by up to a third more than an other retailers.

He also found they often mis-sold product insurance even when people already have contents insurance and charged interest not only on the goods, but the insurance and warranties.

What Can Consumers Do?

If you cannot afford to buy the goods outright and are on benefits,  you may be able to get a community care grant (which doesn’t need to be repaid) or a budgeting or crisis loan, which are interest free.

Alternatively credit unions rarely charge more than 11-12%, compared to the normal 30% APR that Brighthouse charge.

The benefit of buying essential goods, rather than obtaining them using hire purchase, is even if you struggle to repay the loan, the goods belong to you and legal action has to be taken to take them off you.

Many essential items like TVs, beds, tables and computers are protected in Scots Law,  where you own them and even sheriff officers cannot take them. So the children’s beds will be safe as well as other items like cookers and fridges.

People who have goods from Brighthouse should seek advice.

It may be the mis-selling of such insurance policies can be challenged and the money claimed back. Also if attempts are made to repossess good in people’s homes, they can never do this in Scotland without agreement or a court order.

If they do, it may be possible to get all payments under the agreement refunded and where anyone tries to enter your home without a court order, the police can be called.

So there may be light at the end of the tunnel for Brighthouse customers, they just need to walk towards the light.

Online Exclusive: Debt Roulette

Online Exclusive: Debt Roulette

Scotland’s pioneering scheme to assist homeowners in debt is facing funding cuts that look set to reduce protections available for debtors’ homes in personal insolvency.  Alan McIntosh takes a closer look.

Since the credit crunch, the Scottish Government have been keen to highlight the initiatives they are taking to support Scottish home owners. In 2009 they have launched the Home owners Support Fund and in 2010 they enacted the Home Owner and Debtor Protection (Scotland) Act 2010. Less fanfare is now being made of plans to slash funding for the Home Owners Support Fund by 46%, from £18.5 million to £10 million from the 1st of April.

The Fund which runs the Mortgage to Rent and Shared Equity Schemes had been acclaimed for its progressiveness and was the first of its kind in the United Kingdom. Westminster drew on it in 2009 when it launched the Home Rescue Scheme for England and Wales. Yet despite the huge risk that repossession and bankruptcy numbers will increase, new rules due to introduced will roll back the availability of the scheme for families facing the loss of their home. Both schemes attempt to keep home owners in their homes: the Mortgage to Rent Scheme by arranging the sale of a debtor’s home to a social landlord; and the mortgage to shared equity scheme, by providing a Scottish Government loan to reduce the level of indebtedness in return for an equity share of the property.

The new rules now being introduced will cap the financial assistance provided to participating social landlords and restrict the amount trustees in personal insolvency can receive to that which their clients can receive. This creates a risk landlords will now stop participating in the scheme with funding being capped at 60% of the house’s value and trustees will not allow debtors to use the scheme when equity exceeds the £8,000 or £12,000 that they are able to receive.

It is arguably correct that funds available to trustees should be cut, as where a debtor is not insolvent they are restricted in how much equity they can receive from a mortgage to rent sale, but where a debtor is insolvent, trustees previously were entitled to the full equity. In effect, this meant public funds were being used to pay trustee fees and unsecured creditor claims. However, the planned changes, which stakeholders have not been consulted on, will result in the removal of one of the few protections available for debtors’ homes in personal insolvency and with the Scottish Government not prepared to look at the issue of debtor’s homes in their current Bankruptcy Law Reform, be a real loss in protections for home owners.

With the Accountant in Bankruptcy’s office having suffered over 60% cuts in the last two years and advice agencies throughout Scotland facing closure and cut backs, these swingeing cuts to the Home Owners Support Fund indicates a continuing trend. That is despite the furore a few weeks ago, when it was wrongfully suggested five of Glasgow’s Citizen Advice Bureaux would have to close, the current government does not believe providing support to indebted Scots and their money advisers is high on the agenda.

Credit Union Decision on Current Accounts a Set Back For the Poor

Credit Union Decision on Current Accounts a Set Back For the Poor

By Alan McIntosh

The Decision by Glasgow Credit Union to close all its current accounts will come as a blow for hundreads of Glasgow residents who are not able to get a bank account anywhere else.

The decision, taken apparently because of a lack of take up will be devastating for many of the Credit Union's customer who are not able to get current accounts anywhere else.

The accounts allow customers access to direct debit and standing order facilities as well as somewhere to get wages and benefit paid into. They also provide access to ATMs and in many cases switch.

At a time when thousands of customers are scunnered by mainstream banks and their exploitative practices, credit union current accounts provided a valid community based and managed alternative and freedom from the abusive charges that banks proivided.

After the UK Government has back British banks to the tune of billions, it is shameful that Credit Unions like Glasgow are having to close current account services.

The Scottish Government have to step in and at the very least if they won't help support the continuation of these services, provide solutions for those customers, many of whom have bad credit ratings, that will now be left without bank accounts.


Glasgow Plans Propose Advice Agency Fire Sale: All Must Go!!!

By Alan McIntosh

Dramatic new plans, which it is believed will be presented to Glasgow City Council Chief Executive could, if implemented, result in Glasgow’s network of law, advice and information centres being closed.

It is believed a Financial Inclusion Plan has been drawn up which, if implemented, will result in 25% of cuts and end face to face advice for Glaswegians at a time when repossessions, unemployment and the cost of living are rising and brutal social security benefit cuts are being implemented.

The plans are also believed to propose one large tender for the city’s legal, money and benefit advice services, which will threaten independent community managed services. The dramatic plans, echo proposals earlier this year in England which if it hadn’t been for a last minute u-turn would have resulted in over 900 advisers being made redundant and Birmingham City Council closing all its Citizen Advice Bureaux.

The plans come on the back of announcement by the Council of Mortgage Lenders that repossessions are beginning to rise and warnings by Shelter and Govan Law Centre of a “coming storm” and “summer spike in repossessions”.

One commentator has already described the plans as being tantamount to expecting road accident victims with head injuries to be treated by NHS Direct.

Glasgow is currently served by eight Citizen Advice Bureaux (Pollok, Drumchapel, Maryhill, Easterhouse, Castlemilk, Central, Bridgeton and Parkhead), five law centres (Govan, Govanhill, Castlemilk, Drumchapel and the Legal Service Agency) and the city council money advice and benefit services. It also has a number of local independent advice centres.

Despite these waiting times for clients can still take 7-8 weeks and many clients facing repossession and evictions cannot get appointments in time. These cuts, if implemented will be a huge attack on vulnerable families and people and its unthinkable that it could occur under a Labour led council. The fact such plans are even seriously being proposed only weeks after the Labour Party lost a number of safe Scottish Parliament seats within the city beggars belief, with local council elections due next year.

These cuts have to be fought, otherwise many of the protections that have been implemented by the Scottish Government over the last few years for home owners and debtors, including most recently with the Home Owner and Debtor Protection (Scotland) Act 2010, will be lost.

It will also mean families facing scathing benefit cuts by the Tory/Lib Dem coalition being left without any defence.

Is this what Iain Gray meant about the Scottish Labour Party being the only party able to defend Scottish voters from westminister cuts and attacks?