Blue Sky Thinking Scotland’s Debt Law

On the 19th April the Scottish Government’s consultation into Protected Trust Deeds closed. For many the process will have felt like being trapped in a spinning hamster wheel.

The expression Groundhog Day doesn’t do the experience justice.

Another consultation on debt, more forewords littered with un-insightful arguments, and soundbites. 

I don’t believe Minister write these forewords, so hopefully without the risk of offending them, I will say I do think they speak volumes as to the lacklustre mindset that exists within the whole process of developing policy in relation to debt.

I recognise many of the arguments, I may even originally have made some of them in articles ten years ago, but re-reading them now, a decade later, still echoing around policy documents, is despairing.                                                                                 

Scotland’s debt laws are exceptional; the most progressive in Europe; we are the only part of the UK with a statutory repayment plan; we were the first to introduce a statutory moratorium; we need to strike the balance between the debtor and the creditor; those that can pay, should pay…ad infinitum.

The UK Government is playing catch up with Breathing Space, Statutory Repayment Plans, and tougher regulations for bailiffs, but at least their policy development has oomph and is responding to the needs of our time.

I have seen this before, in other countries, such as Ireland, where they may come late to the party, but the process can bring together new people, fresh ideas and perspectives and an enthusiasm to learn from other systems.

For those systems that don’t change, the risk is their complacency finds them stuck on the same track and the gloss fades quickly.

This is Scotland, caught in a post BADAS Act regulatory loop.

And I hesitate to say this, because inevitably the conclusion will be that even the most hardened in the industry are suffering consultation fatigue and this will be an argument for future inaction.

I am, however, suffering consultation fatigue. Fatigue from the same old lacklustre and tired ideas being reheated. Fatigue from the same over-used soundbites.

In 2011, I enthusiastically argued that Scotland’s debt laws were the most progressive in Europe. That was a long time ago and we have been eating out on that accolade for too long.

Debt law and policy began going wrong in 2013, underpinned by the completely unevidenced argument that the pendulum had swung too far in favour of the consumer and only creditors were allowed to make money from debt. The rest of the industry were only there to have their costs driven down by the AIB and to pay rising fees.

I honestly don’t understand why the Trust Deed consultation was run. If it was to ask whether Trust Deeds should be abolished, I could have understood that (although it’s not something I support), but we all know that the AIB are not about to slaughter the goose that lays the golden egg for their fees.

If it was to ask were failure rates too high, I could understand, but the AIB don’t discuss failure rates about any of their products, DAS or Protected Trust Deeds.

If it was to pick up the discussion on protecting equity in personal insolvency, which was shelved in 2010 and has never been revisited, I would have enthusiastically welcomed it.

Instead it’s about making Trust Deeds less accessible and driving down IP fees and forcing more consumers into paying longer in Debt Payment Programmes.  How is that progressive?

In their defence, the AIB argued this is what Creditors and the advice sector want. For Creditors, this means credit unions; and for the advice sector, I would challenge the AIB to evidence this assertion. I thought we were more concerned about consumer welfare, not maxing out creditor returns or minimising what they may pay in fees. Silly me.

In terms of Credit Unions, lets have a consultation on how personal insolvency should affect their debts. Surely this would be a worthwhile discussion. Better than the tiresome process of personal insolvency bashing and driving policy for minority creditors whose total debt makes up less than half of one percent of all debt in personal insolvency solutions.

I have in the past been described as a blue-sky thinker, which I believe in some circles is a derogatory term.

However, if ever Scotland required some blue sky thinking, it is now. We cannot go back to 2011, but if I could, I would hit the reset button tomorrow, so we could return to a time when it could be said Scotland had the most progressive system of debt laws in Europe.

My only consolation is I know the cracks and failings in the Scottish system cannot be bandaged up forever with AIB tinkering and soon it will become apparent to politicians that the arguments and soundbites are out-dated, plagiarised and from another time and no longer apply.

Then the narrative will have to change.

In the meantime, I suspect the Scottish Government will not be submitting any controversial regulations to the Economy, Energy and Fair Work Committee of the Scottish Parliament without two or three parts of the sector supporting them.

I don’t see that support being there for anything covered in the Trust Deed consultation. Certainly not anything that will stand up to robust scrutiny. It will certainly take more than a survey monkey style poll to conclude otherwise.

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