Tag Archives: govan law centre

Are Bankruptcy Fees Immoral and Illegal?

Are Bankruptcy Fees Immoral and Illegal?

The Scottish Government’s decision to reject a call by Govan Law Centre for a fee waiver for consumers wanting to use bankruptcy laws, is not only disappointing, but ultimately likely to be an expensive mistake, resulting in £8.6 million of fees having to be repaid if legal challenges are successful.

There have always been application fees for people who want to go bankrupt; however, prior to 2008 the process was carried out by the courts, and as such, where someone was not able to afford the fee and in receipt of certain benefits, they could get a fee waiver or apply for legal aid.

In 2008 this changed, when the function was transferred to an officer of the court, the Accountant in Bankruptcy (AiB). With that change, fee waivers and legal aid were removed. The effect of this is we have people crippled with debt, surviving on £73.10 per week, who must find £90 to apply for their bankruptcy, or £200 where their debts are over £17,000.

The nature of the remedy has not changed, so why abandon the principle of helping people access justice when they cannot afford it? An AIB spokesperson has said that they are “fully satisfied that fees for accessing bankruptcy are fully compliant with the law”, but provide no explanation as to why,in light of the Supreme Court ruling in relation to Employment Tribunal Fees.

We do not know how many people who apply for bankruptcy can afford to do so and the AiB have never explained it, particularly when they are on benefits. The irony is that once a debtor is bankrupt and their only income is Jobseekers Allowance or Income Support,they are not required to pay anything towards their debts, as their income is too low, yet we expect them to find £200.

They can pay the application fees in instalments, but considering the subsistence lifestyle of many, there is irrefutable evidence that this causes hardship.There is also evidence many are forced to borrow money, which is a reckless situation for the Scottish Government to create, knowing as they do, that those wanting to apply for bankruptcy cannot afford to repay the debts they already have.

The problem with the Scottish Government bankruptcy fees are they do not recognise some people cannot afford to pay them and don’t offer any form of fee waiver or remission on the grounds of affordability. That is what is likely to make them illegal. They lack proportionality.

This inevitably will mean, considering the Supreme Court ruling, there will be challenges and if it is found the fees are unlawful, the AiB may have to refund the £8.6 million in fees they have collected since 2008.

Or they could just join their clients in bankruptcy.

Why the SNP won’t remove the threat of eviction

Why the SNP won’t remove the threat of eviction

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Margaret Burgess, Scotland's Housing Minister, has said she will not prevent Bedroom Tax evictions.

The reason: she doesn't believe the cuts will result in evictions.

If that's true then why not just remove the threat of eviction from those affected by them?

The reason why she won't is simple: neither the SNP or Margaret Burgess want the threat of eviction to be taken off the table. They don't want benefit claimants to decide whether they should eat, pay the heating or pay the £12 per week from their other benefits towards their rent.

And that's the brutal truth of these cuts and the SNPs unwillingness to remove the threat of eviction. Some will be faced with evictions, but many instead will voluntarily disconnect their gas or electricity or go hungry and this is in a country where already one in six children go hungry according to Save the Children Scotland.

So in a nutshell, the real reasons why section 16 of the Housing (Scotland) Act 2001 will not be amended as proposed by Govan Law Centre is the threat of eviction is too important.

These cuts may be made in Westminster, but they are going to be enforced in Scotland using Scottish laws and the SNP know this, as does Margaret Burgess, an ex Citizen Advice Bureau Manager of 20 years from East Ayrshire.

Ultimately, this is the true shame of the SNPs inaction to date. They understand exactly what they are doing, or not as the case is, and the Minister has the experience to know exactly what she is doing.

This inaction would be more understandable if other action had been taken, such as proposed by Shelter, like making £50 million available in the next year to compensate social landlords, but none is being taken.

It's certainly possible action could be taken.

Already the SNP have found £40 million to protect Scots from 10% cuts to Council Tax Benefit. Would this money not be better spent protecting the more vulnerable from housing benefit cuts? It may still mean people would accrue debts, but not the type that could leave them on the street.

These are indeed difficult times and difficult decisions have to be made. Unfortunately, the SNP don't appear able to make those decisions, or if they can, they are making the wrong ones.

In the long run people will blame the Tories for the Bedroom Tax, but I suspect they will also blame the SNP and when they are evicted in Scottish courts using Scottish laws, it will be hard not to see their point.

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Bank Charges Case is appealed to the ECHR

Bank Charges Case is appealed to the ECHR

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Walls v Santanders UK PLC

A recent decision by Sheriff Cubie at Glasgow has destroyed any hope that Scottish bank customers will be able to use the small claims procedure to reclaim bank charges.

The fatal blow which prevents litigants using the procedure arose after the Sheriff agreed the case should be remitted to ordinary cause procedure due to it complexity.

Mrs Walls had raised an action using the small claims procedure to reclaim £3,000 of bank charges. Small claims procedure in Scotland allows litigants to claim up to £3,000 in the sheriff court, but importantly protects them should they be unsuccessful. Where the claim is for under £200, the fee for raising the action is £15. Where it is for more it is only £60. Even if the consumer is unsuccessful and expenses are awarded against them, where the claim is for more than £200, expenses are limited to £150 where the claim was for £1,500 or less and 10% of anything above that. This means normally a consumer risks only incurring expenses of £300.

However, by allowing the case to be remitted to ordinary cause, expenses can be unlimited meaning a consumer who raises an action for £3,000 could be faced with expenses of £10,000 or more where unsuccessful, particularly as the banks tend to be using senior counsel in such cases.

For many the risks in such cases will clearly be too high for consumers to risk raising such actions unless they have access to legal aid.

What is more worrying about this development is the banks are claiming the revised arguments used in such cases by Mike Daily, the principal solicitor of Govan Law Centre, which concerns amongst others the unfair relationship test, are too complex to be heard using the small claims procedure. This argument has been deployed after obiter comments by judges in the recent Supreme Court test case on bank charges. It was suggested although charges cannot be challenged on the basis of the level of the charges, they may still be challengeable by reference to the relationship between the lenders and borrowers.

The unfair relationship test was a new legal test introduced into the Consumer Credit Act 1974 by the Consumer Credit Act 2006. Its introduction was specifically to replace the extortionate credit test which had over 30 years prove to ineffective as a remedy to protect consumers.

There is now a suggestion, however, by Sheriff Cubie that it may not be appropriate to use small claims procedure when using the unfair relationship test due to its complexity. This could effectively deny Scottish consumers from not only raising actions to reclaim bank charges unless they can access legal aid, but also may eventually prevent them from being able to use the important unfair relationship test under the small claims procedure.

The implications of this decision to remit the case to ordinary cause, which Mike Daily had challenged on the grounds that it was a breach of Article 6(1) of the European Convention of Human Rights (right to a fair hearing), is that any wealthy defender may by forwarding spurious, but complex legal arguments deny consumers access to a fair hearing by remitting the case to the ordinary cause procedure. Although, it could be argued litigants will still have access to a fair hearing, if the risks of the costs heavily outweigh the amounts being claimed, most litigants will not raise actions. Some would argue banks are cynically betting on this. The result is the merits of the banks defence has still to be decided and are unlikely to be in this case as Mrs Walls has already indicated she will unlikely continue with the claim.

Furthermore, such tactics could also be used by banks whenever they raise actions against debtors for payment of money and the debtor intends to defend the action. The result: to frustrate debtor attempts to deny their liability for such debts.

Mike Daily has called for changes in the court rules so that when any action is raised in small claims, the rules relating to expenses should follow the action even if remitted to ordinary cause. Importantly, however, if there is an attempt to exclude the use of the unfair relationship test in small claim actions, then arguably the summary and ordinary cause rules should be altered to ensure regardless of what procedure  is used to raise an action, the level of expenses even in these actions should be restricted by the amount the action is for.

Anything less will leave scottish consumers exposed and vulnerable to spurious claims for money by wealthy creditors.

Mike Daily has now applied to appeal the decision of Walls v Santander UK PLC to the European Court of Human Rights.

However, despite the rejoicing of many creditors and recovery lawyers, Mike Daily has another bank charges case still in the courts. In the case of Sharp v Bank of Scotland, the consumer raising the action is entitled to legal aid and its likely the cases will be heard later this year and the merits of the banks defences will be considered.

The tragedy, however, will be even if Sharp is successful in reclaiming her bank charges, unless the court rules are changed, many consumers not entitled to legal aid, will be denied access to justice.

For more info see Govan Law Centre.