Scottish Government provide flawed reasoning and no evidence to reject the principle of 'No evictions for bedroom tax arrears'

Addressing a packed roundtable meeting of Scottish community groups, trade unionists and representatives of civic Scotland bodies organised by the Scottish Trade Union Congress (STUC) tonight, Govan Law Centre set out why it believed the Scottish Government had based its decision to reject the 'No evictions for bedroom tax arrears' campaign on flawed reasoning and without any evidence.

The Scottish Government set out its position on why it would not amend section 16 of the 2001 Housing (Scotland) Act to prevent evictions caused by under-occupancy deductions to housing benefit during General Question Time in the Scottish Parliament today (the BBC Scotland video of GQT is below).

Govan Law Centre's analysis of the reasoning put forward by the Scottish Government today can be read here, and these points were discussed at the STUC this evening, where all participants very strongly rallied around the principle of 'No evictions for bedroom tax arrears' in Scotland.

GLC hopes that the Scottish Government will reconsider its position here, and take the opportunity to ingather empirical evidence, as well as taking evidence on the proposal from Scottish community representatives, trade unions, disability rights campaigners, advice agencies and civic Scotland.

GLC calls for Scottish Government to deploy its powers to mitigate the scourge of payday lending in Scotland

GLC has prepared a Scottish Parliamentary briefing for all MSPs in advance of this afternoon's debate on payday lending in Scotland ('Cost of Living' debate). Our briefing is available here as a PDF.  We believe that the UK payday loan market is predatory, usury, dysfunctional and immoral. 

In our briefing we address the powers that the new Financial Conduct Authority will have, which we think will be central to tackling the undisputed serious consumer detriment caused by payday lending in the UK.  However, the Scottish Government and Scottish Parliament have a number of powerful levers at their disposal which we believe are equally central to tackling the scourge of payday lending in Scotland. 

GLC has made the following recommendations to improve consumer protection against payday lending in Scotland: 

> Investment in Scottish credit unions to enable them to offer equivalent products to ‘payday loans’ on a fair and affordable rate of interest.  HM Treasury is currently consulting on raising the 2% per month interest cap on credit unions, and we support an increase to enable credit unions to offer a fairer alternative to payday loans in Scotland.[1]

> Improving our debt relief remedies so that Scots entrapped in a cycle of dysfunctional payday loan interest and charges can be untangled swiftly and fairly – Govan Law Centre has proposed a Fast Track or enhanced Debt Arrangement Scheme for this purpose.[2]  This could be done quickly by Scottish statutory instrument under existing legislative powers.

> Education is a key part of the solution, and we believe the Scottish Government should deploy resources to mount an educational campaign to help Scots avoid the pitfalls of payday loans. Such a campaign could be tied in to awareness raising of alternative forms of short-term credit (e.g. through credit union products) and the availability of enhanced forms of debt relief.

 > We would conclude by noting that if no action is taken on these issues in Scotland, then the consumer detriment caused by payday loans will escalate from April 2013 with the introduction of the bedroom tax.  Scottish tenants faced with eviction from the effect of UK Government under-occupancy charges to housing benefit will turn to payday loans, which will exacerbate their problems.  Govan Law Centre has advocated a ‘no eviction for bedroom tax arrears’policy, with bedroom tax arrears being treated as an ordinary debt. This could be achieved by a minor amendment to the Housing (Scotland) Act 2001.[3]

---

[1] http://www.hm-treasury.gov.uk/consult_creditunion_cap.htm

[2] http://govanlc.blogspot.co.uk/2012/09/new-fast-track-debt-arrangement-scheme.html

[3] http://govanlc.blogspot.co.uk/2012/11/cross-party-agreement-to-consider-no.html

 

Scotland lags behind the rest of the UK in protecting consumers against claims management companies

The Claims Management Regulation Unit shut down 209 claims management companies (CMCs) in England and Wales between April and November in 2012. Three more rogue firms were suspended and a further 140 were warned. 

The unit, which is part of the Ministry of Justice (MoJ) for England and Wales, is also working with the UK's data watchdog to tackle firms who break the law with unsolicited calls and texts. The MoJ has now shut down over 900 CMCs over the last five years, meanwhile CMCs operating in Scotland remain wholly unregulated and free to rip-off Scottish consumers with impunity.

GLC's Principal Solicitor, Mike Dailly said: "Scotland is now seriously lagging behind the rest of the UK when it comes to protecting consumers from the rogue practices of claims management companies. CMCs have a licence to do as they please in Scotland, with no regulation, minimum standards or consumer friendly rights of redress. In short, CMCs can rip off Scottish customers without fear of any sanction. It is troubling indeed that the Justice Secretary in Scotland does not feel it important to give Scottish consumers the same quality of protection that exists in England and Wales".

CMCs frequently engage in high pressured cold-calling or texting, taking up-front fees from customers through credit and debit card payments over the phone. This year CMCs in England and Wales will be obliged to provide written contract in advance of taking fees, with the Legal Ombudsman being empowered to regulate complaints and award compensation where appropriate. 

Claims firm advertise widely on TV, newspapers and the internet and are not solely concerned with PPI (payment protection insurance claims), for example they encourage people to sue for personal injury compensation, and for other losses. Some firms also use improper cold-calling, by phone or text, to procure clients.

Northern Rock drops appeal as Scottish Government promises law reform for lenders

Northern Rock (Asset Management) plc (NRAM) has asked the Court of Session to dismiss its appeal against the decision of Sheriff Deutsch in the NRAM plc v. Millar GLC test case. NRAM's appeal was dismissed on Friday, 7 September 2012 (the procedural hearing date of the case) with judicial expenses awarded in favour of the defender.

The reason given by NRAM for abandoning its appeal to the Inner House was because it had become aware the Scottish Government was now willing to bring forward law reform to amend its 2010 Pre-Action Requirements Order (PAR) so that 'default' would mean a simple missed mortgage payment. The ruling in Millar meant that key information - and a final last chance to remedy mortgage 'default' - had to be provided on or after the expiry of the calling up notice, generally served before court proceedings were raised.

It is understood* (see update below) the Scottish Government will amend the definition of 'default' in the PAR, so that there will be no need to provide key PAR information prior to proceedings being raised.

GLC's Principal Solicitor, Mike Dailly said: "We believe the Millar judgment was fantastic news for Scottish consumers because it meant they would always get an extra and final chance to avoid court proceedings after a calling-up notice.  Govan Law Centre is dismayed to hear that the Scottish Government will now scrap this final last chance for Scottish homeowners, and in so doing render the Pre-Action Requirements toothless, and in effect a duplication of the FSA's existing equivalent MCOB rule. The Scottish Government should be backing struggling homeowners and not legislating for lenders".

GLC notes that Sheriff Deutsch had eloquently explained the logic of PAR information being sent after the expiry of a calling up notice in his judgement in Millar (at paragraph 84, which is reproduced below).

The first public mention of the Scottish Government legislating for lenders was raised in an article in the industry magazine, the Mortgage Finance Gazette, where Mr Rob Aberdein of Aberdein Considine & Co., Solicitors (a Scottish firm who act for a number of lenders in repossession proceedings in Scotland) said in relation to the NRAM v Millar case:

"Should an appeal not be forthcoming or be unsuccessful then I did meet the Scottish Government at the start of the year on the matter of the impending Glasgow cases decision and have exchanged correspondence with Alex Neil MSP, the cabinet minister for infrastructure and capital investment, on the topic.  Both are supportive of corrective secondary legislation as they believe the decision is not consumer friendly and potentially damaging to their goal of avoiding repossession and resultant homelessness".

GLC is not aware of evidence whatsoever to support the assertion by Mr Aberdein, which he ascribes to the Scottish Government.  We note that lenders have already changed their practice since earlier this year to comply with the legal reasoning in Millar. Further, we note that any proposed law reform cannot be retrospective.

Note
NRAM plc v. Millar &; RBS plc v. McConnell judgment:
[84] Regardless of whether those responsible for managing the bill which gave rise to the 2010 Act operated under a misunderstanding as to whether non-payment constituted a default for the purposes of section 19 of the 1970 Act, now that the position has been clarified, it appears to me that the required information will actually be sent to debtors at a time when, given the recent expiry of the calling up notice, they might be more inclined to pay that information some serious regard. At that point the debtor should be in no doubt that the creditor may apply to the Sheriff court for warrant to repossess and to sell the property. That level of understanding on the part of the debtor might be less likely to exist if, in accordance with the pursuers' interpretation, the default which triggers the requirement to provide information, need be no more than one month of arrears. The possibility must exist that there will be debtors with a tendency to pass in and out of an arrears position on a regular basis. One corollary of that situation might be that such persons would receive a regular stream of correspondence providing the required information. Such a volume of similar correspondence might be expected to be ignored. It might also be expensive for creditors.

* Update from 24 September 2012: Scottish Government confirms it has not made any decision to amend the 2010 Order: link to letter confirming same.

Time to protect Scottish consumers against CMCs

Govan Law Centre welcomes news of additional consumer protection for customers of Claims Management Companies (CMCs) in England and Wales, but remains concerned that Scottish consumers continue to go without any legal protection in relation to CMCs providing services in Scotland.

The UK Government has announced that from next year people who are ripped off or receive a poor service from CMCs will be able to pursue a complaint to the Legal Ombudsman for England and Wales. The Ombudsman can award up to £30,000 in compensation in individual cases. CMCs are regulated by the Ministry of Justice (MoJ) under the Compensation Act 2006 for services provided in England and Wales, whereas in Scotland they remain unregulated, albiet the subject matter is devolved to the Scottish Parliament.

GLC's Principal Solicitor, Mike Dailly said, "Consumer protection is being strengthened south of border in relation to poor service by CMCs – and rightly so - while Scotland remains an oasis for CMCs to do as they please.  Our unregulated market means that the people of Scotland continue to have no redress or protection against CMCs. We call on the Scottish Government to close this major gap in Scots law sooner rather than later'.

Many CMCs are well known for malpractice and ripping consumers off; including not providing customers with contracts or paperwork, not allowing cancellation of their service or refusing to allow any refunds, misleading and exaggerating their success or service during sales calls, taking payments from customers’ bank accounts or cards without authorisation, and using third parties to engage in unsolicited marketing.

GLC backs Scottish Government's position on RBS plc v. Wilson

Govan Law Centre (GLC) supports and welcomes the Scottish Government's decision to take no legislative action in light of the UK Supreme Court's decision in RBS plc v. Wilson and others as the 'right thing to do' in the circumstances. 

While the majority of consultees alleged that the implications of this case would be negative, GLC believes there is no empirical evidence to back up such assertions, and that the Scottish Government was correct to advocate no law reform response, particulary so in the current climate of forebearance and difficult economic circumstances.

GLC's Principal Solicitor, Mike Dailly said: "Calling-up notices are the equivalent of 'default notices' for consumer credit debts and they serve a useful purpose in enabling the debtor to address problems before litigation can be raised. The only difference with a mortgage is the fact it is secured on heritable property and it is therefore entirely consistent to support the requirement for lenders to serve calling-up notices prior to entitlement to raise litigation. It is in the interests of both parties, lender and borrower".

"It is also instructive to note that some lenders and their solicitors did generally serve calling-up notices and did so as a matter of good practice without any difficulty".

"GLC rejects the Council of Mortgage Lenders (CML) assertion that the Wilson decision may not be in the 'best interests' of borrowers. For those with no prospects of retaining ownership or occupancy of their homes a calling-up notice can act as a spur to selling their property with or without their lenders assistance, and for those that need more flexibility to pay their debts the calling-up notice acts as a spur to take advice to set up a repayment solution which the lender would have to explore in any event in terms of the Pre-Action Requirements'.

"What the CML calls 'delay' is in fact a sensible and reasonable opportunity for practical solutions to be brokered and found to enable the mortgage to be paid, arrears cleared and homeowners to retain their homes. GLC is pleased the Scottish Government has acted to safeguard the rights of vulnerable homeowners in Scotland".

Royal Assent for Property Factors (Scotland) Act 2011

The Property Factors (Scotland) Act 2011 has received Royal Assent this month, marking the end of a four year campaign initiated and led by Govan Law Centre (GLC), and the start of a better deal for Scotland's homeowners.

The genesis of the Bill was grassroots. At GLC's fortnightly casework meetings our solicitors would repeatedly flag up the growing number of instances of homeowner exploitation by property factors. GLC's local Board of Trustees were equally troubled with the ability of Glasgow's citizens to be ripped-off with impunity. It was apparent something had to be done to redress the imbalance between the rights of unregulated companies and the rights of Scottish homeowners, many of whom were financially or otherwise vulnerable.

A Bill proposal and consultation paper drafted by GLC was first introduced in the Scottish Parliament by the then Govan MSP Gordon Jackson QC in March 2007, but had insufficient time to progress. The reins were quickly picked up by Maryhill MSP Patricia Ferguson and in October 2007 a fresh proposal and consultation paper was published by the Scottish Parliament. High profile support came from a series of BBC tv and radio investigations and a campaign for law reform sponsored by Glasgow's Evening Times newspaper.

Constant publicity led to the OFT launching a market investigation into Scotland's property factor industry, which had the effect of kicking Patricia Ferguson's Bill proposal into the long grass. Despite the OFT recommending the Scottish Government's favoured solution of 'voluntary accreditation', Patrica Ferguson and GLC ploughed on, gathering support and finally making a winning case for major law reform to protect Scottish homeowners.

GLC's Mike Dailly and draftperson of the Bill said: "We're very proud of the Property Factors (Scotland) Act 2011 because its a victory for common sense, and will help prevent homeowners in Scotland being exploited, while providing a new accessible tribunal remedy with 'legal teeth' if they do get stung.  It's also an example and case in point of the importance of local community law centres. Law centres are being threatened in England and Wales, but we need more of them in the UK, not less".

"Without Patricia Ferguson's tireless dedication and hardwork the Bill would not have seen the light of day. We would acknowledge the tremendous support from Patricia's researcher Chris Kelly, the Parliament's excellent Legislation Team, the Local Government Committee and various civil servants at the Scottish Government who all helped to make this progressive piece of legislation possible".

GLC welcomes £2m rescue plan for Govanhill

Glasgow's Evening Times reports that nearly £2million of Scottish Government money has been set aside to help transform Govanhill. The South Side community has long struggled to cope with cowboy landlords, poor housing, overcrowding and fly-tipping.

Campaigners, supported by Govanhill Law Centre, have been pleading for years for help to address the area’s complicated problems. Now, backed by local councillors, MSPs and Govanhill Housing Association (GHHA), locals have been given £1.8m to start tidying the area.

Part of that plan includes the creation of an enforcement squad – made up of council staff, police and fire officers – with an "armoury" of powers to crack down on slum landlords.  The team will have an annual budget of £300,000 with funding guaranteed for two years.  And lawyers from Govanhill Law Centre, led by Lorraine Barrie, will also be closely involved. Operating from a base in Coplaw Street, it will be the first time all the agencies have been brought together.

Lorraine said: "This new strategy is fantastic. What will really help is if we get the public involved and work on information they give us so we can target problem areas."  The new hit squad will track down unregistered landlords and enforce environmental health laws. Currently, any landlord running a house of multiple occupation without a licence can be fined up to £5,000. As part of the new measures, the maximum fine will next year rise to £20,000.

The Housing Bill currently going through Parliament is intended to strengthen powers for councils to ensure owners look after their property. The Government will review the current landlord registration system later this year, with the aim of helping councils ensure all private landlords sign up.  Lorraine added: "The new measures will give us a powerful armoury and help us take the power back from people who are breaking the law." 

The full story from the Evening Times (which is running a series of reports from Govanhill all of this week) is available online here.

GLC supports Scottish pre-action legal requirement in eviction cases

GLC supports the Scottish Governent's proposal of a pre-action requirement (PAR) for eviction cases in the social rented sector; although the elephant in the room is why not extend this approach to private sector evictions too?

We believe this approach could significantly reduce the number of tenants evicted due to rent arrears in the social rented sector. A PAR has been suggested in a recent Scottish Government consulation paper. Such an approach would require all social landlords to deal with the problem of arrears effectively at an earlier stage. It would also help ensure that court action was only raised as a last resort.

GLC believes the Housing (Scotland) Act 2001 could be amended to ensure that compliance with a PAR prior to raising an eviction action was necessary in order to ensure that proceedings were competent in the same way that service of a valid notice of proceedings is required at present. Failure on a social landlord’s part to comply with the PAR would therefore be a defence to the action on competency grounds.

GLC believes it is important, from a public policy point of view that social tenants are afforded the same protection as homeowners. The introduction or a PAR would bring the protection of social rented tenants in line with the protection being introduced for homeowners in the Home Owner and Debtor Protection (Scotland) Act 2010.

However, GLC is concerned that the Scottish Government's approach could give rise to unintended consequences, unless appropriate safeguards were put in place.  For example, we are concerned that the PAR could be seen as evidence that it is reasonable to evict in terms of section 16 of the Housing (Scotland) Act 2001. GLC is concerned that social landlords could argue that as they have complied with the PAR, and that as their tenants still had arrears, it would be 'reasonable' to evict. We believe that it is important that full consideration is still given to the requirements of section 16.

Although we hope the introduction of a pre-action requirement will reduce the number of cases raised in court we think care must be taken to ensure that the result is not an automatic assumption that all the cases that end up in court must be ones where nothing can be done to assist the tenant and that eviction will be reasonable in these cases.

We also think it is important that landlords continue to work with the tenant to solve the problem of the arrears, even after court action is raised. Our experience is that once the case has been raised in court some landlords become focused on obtaining a decree and are not as willing to negotiate repayment arrangements with tenants. We are concerned that the pre-action requirement may be seen as landlords as all they are required to do to assist a tenant. Instead we believe it should be seen as a minimum level of assistance that must be given before an action can competently be raised. Landlords should still be encourage to engage with tenants and work towards preventing eviction even after court action has been raised.

GLC's full response, led by Lindsay Paterson, Solicitor, to the Scottish Government's consultation is available online here.