What has the Scottish Parliament ever done for us?

The day after Professor Bonnington claimed the Scottish Parliament was damaging Scots Law, I provide one example in relation to debt law, where this is not the case.

Scotlands Best Kept Secret: The Debt Arrangement Scheme

In 1985 when the Scottish Law Commission produced it’s report into diligence, the area of Scots Law that deals with the legal recovery of debts, it was proposing reform of an area which had not been kept up to date with changing values .

It was possible back then when you owed money for your creditors to instruct officers of the court to seize your possessions and have your neighbours funnel through your home with a view to buying them. You not only had to contend with the embarrassment of being publicly humiliated, but also the knowledge that the predatory behaviour of those attending would mean your property would in all likelihood be sold for peanuts.

Unfortunately, the Scottish Law Commission didn’t think this was too bad and just a few adjustments were required, so it didn’t recommend abolition. However, it did make a number of other recommendations, one of which was there should be a new scheme for people with multiple debts who needed time to pay them off.

When the Debtors (Scotland) Act 1987 was introduced, Poindings and Warrant Sales as they were known, were kept, but slightly reformed (your neighbours couldn’t come into your home anymore, but they could watch from their windows as the court officer carried away your goods). And the scheme to help people repay their debts? Well that was a nice idea, but really why bother?

By 1997, nearly and 18,980 poindings were being executed in Scotland. Good times.

Then in 1999, Tommy Sheridan with the assistance of Mike Dailly, the Principle Solicitor of Govan Law Centre brought forward one of the first member bills in the newly formed Scottish Parliament: The Abolition of Poinding and Warrant Sales Bill.

Despite Scottish Executive resistance there was a back bench revolt (interestingly, primarily by woman) and this archaic practice was abolished. The Scottish Executive then brought forward their own legislation, the Debt Arrangement and Attachment (Scotland) Act 2002 which confirmed the abolition of poinding and warrant sales, albeit replacing them with a new type of attachment that distinguished between good kept in the home and outside the home. They also dusted off the old Scottish Law Commission recommendation of a new repayment scheme and called it the Debt Arrangement Scheme.

It was introduced in 2004 and allowed people to enter into formal repayment schemes with their creditors, letting them pay their debts, but with the full protection of the law. Once in a scheme, creditors could not do earning arrestment, bank arrestments, attach people’s property or make them bankrupt. And if the creditors objected? Well the new government officer, the Debt Arrangement Scheme Administrator could say tough, you’re in, providing she thought it was reasonable.

As a result of a painfully slow start, however, in 2007 the Scottish Government then introduced reforms so that once a  programme was approved, all interest, charges, fees and penalties on debts were frozen and if the plan successfully completed, written off.

Then in 2011, to give it another kick it was reformed again, this time to widen the type of money advisers who could apply for a programme on behalf of their clients. They also introduced payment breaks, so if your income dropped more than 50%, you could qualify for six month’s grace to get back on your feet again. And if you had ten different creditors to pay each month, well that was okay as everyone in the scheme has to pay their debts through a payment distributor who collects the money then distributes it to the creditors. And the cost of that service? The creditors have to pay for it.

The Scheme is still the little brother of Scotland’s two other formal debt remedies: 9,194 people signed Protected Trust Deeds last year; 11,056 people were declared bankrupt; and only 3,319 had Debt Payment Programmes approved.

However, as the graph below shows, if the first 8 years of the Debt Arrangement Scheme is compared with the first 8 years of Protected Trust Deeds, its growth pattern matches that of Protected Trust Deeds and in the last year has begun to grow even more steadily. In all likelihood in a few years time it will become Scotland’s main debtor remedy.

And it’s good for creditors also. The average dividend paid to a creditor in a Protected Trust Deed is less than 16p in the £ and less for bankruptcy: in a Debt Payment Programme, as the longest they normally last is 10 years, creditors get at least 30p in the £ back over the same period, but also with the hope of more in future years as it is not a form of personal insolvency.

The Scottish Government is also now looking to extend the Scheme so it can be used more easily by sole traders and partnerships to let them repay debts and avoid bankruptcy: creating a culture of recovery rather than one of liquidation.

And as for the replacement of poindings and warrant sales: in 2011/12 there were only 2,758 attachments, which is for property outside the home, such as cars and commercial property, and only 51 exceptional attachments carried out in the home (compared with the 18,980 poindings in 1998).

Now that’s not bad and as for the rest of the UK: they are still waiting for their reforms.

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