Debt Action ForumPaper DAF 4/3/1
Debt Action Forum
Minutes of Meeting 11 February 2009
2.30pm, Stevenson House, Edinburgh
Present:
Fergus Ewing MSPMinister for Community Safety
Gillian ThompsonAccountant in Bankruptcy
George WayLaw Society of Scotland
Ann CondickICAS
Susan McPheeCitizens Advice Scotland
Yvonne GallacherMoney Advice Scotland
Lindsay MontgomeryScottish Legal Aid Board
Anne FeeneyConfederation of Scottish Local Authorities
Andrew RudgeRoyal Bank of Scotland
Adrian StalkerAdvocate
George GrettonThe Scottish Law Commission
Paul D BrownLegal Service Agency
Frank JohnstoneFinance and Leasing Association
In Attendance:
Sharon BellAccountant in Bankruptcy
Simon RobertsAccountant in Bankruptcy
John St ClairSolicitors Constitutional and Civil Law
Division
Apologies:
Karen TitulaerCommittee of Scottish Clearing Bankers
Welcome and Introductions
1.All members were thanked for their attendance by the Minister, with the two new members Anne Feeney and Frank Johnstone being welcomed to the Forum.
2.These opening remarks were followed by introductions by Forum Members and attendees.
Minutes and Action Points
3.The minutes of the previous meeting were agreed by all attendees.
4.Attendees were reminded by the Minister of the short timescales involved in the Forum, with a request made that information required by the Forum is produced timeously.
5.An update of the Action Points was given. Action Point 4 has been removed from the Debt Action Forum Action Points. It was agreed that this area is being covered by the Repossessions Sub-Group.
6.The Forum were advised that there is a new Minister for Housing and Communities, Alex Neil, and it is the intention of both Ministers to meet with the banks.
Repossessions Sub-Group Feedback
7.Feedback from this Group, which had met in the morning, was given by its Chair, Adrian Stalker. The Forum were advised that the Sub-Group had good representation from different agencies and that there had been discussion of various areas, beginning with why the group had been established. This included a paper from Scottish Government giving statistics on repossessions. Discussion also took place around the Sub-Group’s remit and their proposed structure for discussion of issues. (Paper attached)
8.It was agreed at their meeting that the Sub-Group will meet half an hour earlier in future and run from 11am – 1.30pm.
9.It was recognised by Mr Ewing that the Forum and Sub-Group are examining interlocking and related topics, and must, therefore, work in tandem. Furthermore whilst the Sub-Group has the remit of protection for homeowners at risk of repossession and reform in this area, the Forum can discuss and assist with these issues.
Lenders Protocols
10.The importance of protocols was highlighted. Mr Ewing advised that he and Mr Neil would take a lead on persuading major lenders to take a common approach to those in financial difficulty. It was hoped that other lenders would follow the major lenders.
11.The Forum were advised that organisations such as the Finance and Leasing Association have voluntary protocols which govern the conduct of their members, and that although these are voluntary, they should be adhered to.
1. ACTION POINT: AiB/Frank Johnstone to obtain lender codes of practice and protocols for circulation.
12.The conduct of Debt Collection organisations was raised, as this also has an impact on those in financial difficulty, where debts have been pushed to organisations other than the original lender who may use different tactics to pursue repayment. The Forum was also advised that there have been recent discussions with Debt Collection organisations going on in England and Wales.
2. ACTION POINT: AiB to establish what is being done in the rest of the UK regarding debt collectors and feed back to Forum.
13.The issue of the non-conforming sector was raised, that is, licensed lenders operating on the edges of society, who may charge high interest and allow less time for the collection of money when a borrower goes into arrears. It was recognised that these bodies are becoming more active. This may be one of the reasons that there has been an increase in the numbers of those looking for money advice.
3.ACTION POINT: Anne Feeney to provide information on money advice trends within Local Authorities.
4. ACTION POINT: Yvonne Gallacher to produce paper on non-conforming lenders.
14.Whilst recognising that lenders have a right to recover debts due to them, protocols should be produced which govern all lenders. This would expose those which are non-compliant. It is intended that these protocols should cover both secured and non-secured lending.
Advice
15. The Forum recognised the importance of getting advice to a group of people not used to looking for advice, and agreement that a separate group looking at communication and engagement with those having debt problems would be of benefit.
16.The Forum were reminded that there are many people sought out for advice, such as Councillors, MPs and MSPs, along with other agencies.
5. ACTION POINT: Communication and engagement of debtors with advice providers to be examined. Lindsay Montgomery and Sharon Bell to co-ordinate. Susan McPhee, Yvonne Gallacher and Anne Feeney to be involved.
Proposed Debt Solutions – discussion (Papers 11/2/2 and 11/2/3)
17. The Forum were advised that there is a slot earmarked in the parliamentary timetable for legislation of the type being considered by the Forum.
Solution 1
18.An amendment was proposed to extend the definition of Apparent Insolvency by allowing Apparent Insolvency to be constituted by a certificate completed by an IP, money adviser or adviser appointed by the AiB. Although it was mooted that LILA could be extended to cover those with heritage, LILA conditions are set and a report is due in March on the first year of LILA which would highlight any issues/areas for change.
19.Discussion took place around persuading lenders and banks to concur with individuals in Debtor Applications, but there seems a reluctance for them to do so, as only 2 applications had been received with creditor concurrence within the last year. It was suggested that creditors may be unwilling to concur if this means the debt being written off.
20.Concerns were raised that increasing access to bankruptcy may discourage take up of DAS or Trust Deeds, although increasing Apparent Insolvency may allow those in financial difficulty to act sooner, thus releasing them from the burden of debt earlier.
Solution 2
21.The introduction of this solution is intended to improve protection of the family home by introduction of a contribution only Trust Deed.
22.Anecdotal feedback was given from Ann Condick that there are very few cases where an IP acting as Trustee in a Trust Deed has applied to Court for repossession.
23.The point was raised that AiB cannot supervise Trustees in Trust Deeds granted before April 2008, and that a minority of such Trustees do realise family homes in circumstances where the AiB would possibly not agree if they had the power to intervene. It was noted that Trustees are regulated by their own regulatory bodies such as ICAS.
24.It was stated that Mr Ewing would wish to meet with IPs to discuss this issue in an endeavour to gain more information about what happens with homes in practice.
6. ACTION POINT: AiB to facilitate a meeting between Mr Ewing and IPs.
25.It was decided that more information is to be gathered and this issue should be brought back as an agenda item on the next meeting. The issue can then be discussed with reference to John St Clair’s paper on cancellation of debt.
7. ACTION POINT: AiB to provide more information on introduction of contribution only Trust Deed for next meeting.
Solution 3
26.Where a spouse or children are involved, a Sheriff can currently postpone an eviction for the maximum of one year, as long as the Trustee has carried out his or her actions correctly. It is proposed to extend this period to three years. It was established that three years is the time limit in England and Wales presently.
27.The group was advised that in some cases a Sheriff will postpone an eviction for a period longer than a year, for example until a ‘life event’ such a child’s exams has taken place, and that the proposed legislation would be a formalisation of this practice. Furthermore, the Sheriff automatically looks at postponement when an eviction action is pursued,
28.It was established that there is a difference between those being evicted due to mortgage arrears, and those who are bankrupt where eviction is sought by the Trustee. It may be that under proposed legislation, debtors with unsecured debts would have more protection against eviction than those whose homes are being repossessed by secured lenders.
29. At present single debtors are not protected, this protection is for family homes only, although in all cases the selling of property should be for the benefit of creditors. If there is no benefit, it won’t normally be sold, although in some cases creditors will still push for a sale. The law at present does not offer protection in those cases.
30.The Forum were advised that in the USA for example, when a householder hands back keys to a lender, they are no longer responsible for the debt. In the UK if the secured creditor repossesses, they are responsible for any shortfall when the house is sold on, whilst if a debtor is bankrupt, and there is a shortfall when the house is sold, the shortfall is included in the bankruptcy.
31.Best practice was confirmed as a sale to a family member, and in cases where there is no equity, this should be for a nominal amount. Trustees should not hold onto a property waiting for the property prices to rise. Guidance for both AiB and Insolvency Practitioners should be examined with a view to tightening this up as necessary.
8. ACTION POINT: AiB and ICAS to provide copies of their guidance on sale of property.
Solution 4
32.With the Minister’s agreement the fee for access to the Register of Insolvencies would be removed. This would allow free access for those wishing to check a personal sequestration. It was commented that the Register of Insolvencies is in some cases more reliable than the Edinburgh Gazette.
33.In the first instance this change would be for individual cases, with Corporate Insolvencies being prospectively added at a later date. In future this may also be linked to a European Portal sharing information throughout Europe.
Solution 5
34.The Forum were advised by Adrian Stalker that although bankruptcy is not itself a reason for someone to be classed as intentionally homeless, the Code of Guidance for Local Authorities is that they look at wilful neglect of financial affairs rather than genuine hardship and make a decision based on this.
35.Anne Feeney, however, advised that Local Authorities would not normally consider someone who has lost their home because of bankruptcy intentionally homeless.
36.Because of these differing viewpoints, it was decided that further clarity was needed on this issue.
9. ACTION POINT: AiB, Adrian Stalker and Anne Feeney to clarify current LA position.
Solution 6
37.It was suggested that in some cases, if debtors don’t seek advice with regard to their bankruptcy, they do not understand that they are liable for ongoing liabilities. They believe bankruptcy cancels these, and, especially in cases where the debtor is paying a contribution toward their bankruptcy, they do not have to carry on making payments themselves.
38.It was felt that there should be greater guidance given to those applying for, or newly made bankrupt, so that they are aware of their responsibilities.
39.It was noted that in Money Advice Scotland’s experience, debtors who are aware will pay their ongoing liabilities if offered the facility to do so.
40.Banks and Credit Unions must be involved in discussions over making it easier for debtors to deal with their financial responsibilities. It was recognised that there is no legal reason that debtors cannot be given bank accounts, however this is a commercial decision by the banks, and banks must thus be engaged in this discussion.
41.It was agreed there should be further endeavour to make debtors aware of their ongoing liabilities. This issue should also be looked at in the context of Action Point 5.
Solution 7
42.It was stated that the AiB have a gap in their service at present, as they cannot give advice, and although they have a Helpline, in many cases they are not allowed to answer the query and must pass to another body. One of the outcomes of this is that they cannot advise a debtor, even in instances where they have received bad or dubious advice.
43.Concerns were raised with this proposal: that advice, including financial education and rehabilitation, is better given face-to-face and AiB could not achieve this, where local services such as Local Authority advisers can. Concerns were also raised over the conflict of interest and lack of separation of roles if AiB were to take on an advice role.
44.There was recognition that there are gaps where different debtor types may not want to contact the voluntary sector; there are those who trust Government or ‘official’ bodies. There is also a gap where a clear Scottish Brand is needed as at present, when accessing advice on the web, many debtors have done research into their options based on English law which does not apply.
45.The Forum was advised by Gillian Thompson that she appreciated the Forum’s concerns, but the proposal was for the AiB advice role to be in addition to what is already there, not for the Agency to take over the work of other services. It would be potentially filling the gap for those in debt who are comfortable with web based, phone, email contact, rather than face to face.
46.It was also mooted that with private debt solutions being widely advertised and becoming more used, there was nothing to advise people to beware of these, and there is a need for some trusted body to warn the public of the pitfalls of these types of solutions.
47.It was felt that there was a need for more discussion around the AiB’s specific role which should not trespass on, but rather work to complement the Money Advice area.
10. ACTION POINT: AiB to facilitate meeting with COSLA, MAS, CAB and SLAB representatives regarding AiB advice role and come back to Forum in April with proposals.
48.The group were reminded by the Minister that if they have other ideas they must feed them into the group quickly, as it moves towards conclusions. Susan McPhee advised that she had produced a paper re. the prescription of debt.
Exemption of Cars as Assets (Paper 11/2/4)
49.The Forum were advised that currently if a debtor has a car worth over £1000 it is realised, whilst if it is valued at under £1000 it can be kept by the debtor. All assets vest in the Trustee, thus the Trustee is the decision maker with regards to the vehicle. Creditors can take the Trustee to Court if they feel they have acted incorrectly with regard to an asset.
50.In practice few cars are sold, and the car can be used as a tool to persuade the debtor to co-operate and/or pay contributions towards their bankruptcy. The car being bought by a family member is also an option open to a debtor.
51.It was recognised that people rely on cars to gain and keep employment and for use, for example in childcare, doing school runs etc. Whilst there may be abuses if the position on cars is changed, the benefits to debtors, particularly in rural areas, would outweigh these.
52.There was discussion as to whether guidance would be enough to change current practices with regard to cars, or whether primary legislation would have to be introduced, or both used. It was stated that there was scope for a clear simple legal exemption.
53.It was decided that more advice to be taken before recommendation made on this issue and, in particular, to seek input from ICAS on the views of insolvency practitioners who have dealt with debtors’ cars.
11. ACTION POINT: Ann Condick to report to Forum on views of ICAS members on debtors’ cars in sequestrated estates.
Credit Unions, Cheque Cashers and Experian Findings
54.Papers 11/2/5 and 11/2/6 were not discussed, and it was decided that they should be put on the Agenda for the next meeting. Comments on both papers can be sent to the Secretariat for distribution before the next meeting. These can include solutions with regard to the issue of cheque cashers and incorrect blacklisting.
12. ACTION POINT: All Forum Members to provide feedback or indicate ‘no comment’ on papers which have been issued for discussion.
55.The Forum were advised by Anne Feeney that she did not agree with some of the findings of the Cheque Cashers paper, and that she has information pertinent to Credit Unions.
13. ACTION POINT: Anne Feeney to provide further information on Cheque Cashers and Credit Unions.
Date of Next Meeting 4 March 2009
Diane Dunn
Debt Action Forum Secretariat
16 February 2009