Widespread support for Scottish Government to act to protect Scots from payday loan and high interest lenders

A very wide range of organisations met yesterday in the Scottish Parliament at Kez Dugdale MSP's Debtbusters meeting to discuss how we can protect Scots from the usury practices of payday lenders and high interest credit providers. In attendance were MSPs, councillors, and representatives from the Accountant in Bankruptcy, the Scottish Trades Union Congress, credit unions, Citizens Advice, the Church of Scotland, welfare rights advisors, the Law Society of Scotland, Carrington Dean insolvency practitoners, and Money Advice Scotland.

Attendees heard an update on the campaign work of Kez Dugdale MSP and Stella Creasy MP on attempts to protect consumers from the exploitative practices of payday lenders in Scotland and the UK. The Scottish campaign was backed by the Leader of the Scottish Labour Party, Johann Lamont MSP who addressed the meeting, along with Margo MacDonald MSP, a fierce critic of usury lenders.

Govan Law Centre's Principal Solicitor, Mike Dailly, spoke to GLC's paper on Fast track Debt Arrangement Scheme to provide more flexible respite and a better escape route for Scots entrapped in toxic payday loans. A clear outcome from the meeting was the Scottish Government had to act, and we needed a multifaceted approach including:

• amending and improving the Debt Arrangement Scheme to better tackle the consumer detriment from payday loans (particularly so that interest and charges can be frozen from the very outset, whereas at present this can only happen on approval of a debt payment plan);
• a Scottish public 'wealth warning' campaign about payday loans, and much better financial education in Scotland, targeted at the payday loan demographic;
• the promotion of responsible credit union lending, with local government support through all tools available, and Scottish Government backing for a 'guaranteed loan fund' to enable credit unions to compete with payday lenders in the public interest.

GLC's Mike Dailly said: "Two and half thousands year ago the Romans capped interest rates at around 8.3%. It's hard to believe we've allowed toxic payday loans to flourish in 21st century Britain, with citizens bring charged up to 5,000% APR. Many states in America have banned these products, and in 2007 Congress introduced a law to ban payday loans for military personnel because it was seen as a national security issue.  We believe it is a national financial health issue in Scotland". 

"Often the result of such expensive indebtedness is enforced poverty, personal hardship and threatened homelessness as clients cannot pay their rent or mortgage or buy household groceries as payday lenders hoover money and charges from their bank accounts each month.  While the Scottish Parliament cannot ban payday lending we do have the devolved power to protect our citizens from exploitation by using debt laws innovatively". 

A full report report from the meeting has being prepared by Kez Dugdale's office, together with the next steps for the Scottish campaign, which Govan Law Centre fully supports.

Scottish Parliament: consensus for change at the Fair Access to the Legal Profession event

The student-led Campaign for Fair Access to the Legal Profession's (CFALP) event in the Scottish Parliament witnessed a remarkable consensus for progressive change from SNP, Labour and Lib-Dem MSPs, members of the Scottish legal profession, university representatives, civic society groups and law students tonight (23 October 2012).

The event hosted by the SNP's Edinburgh Central MSP, Marco Biagi heard from two fourth year law students who were now faced with the harsh prospect of being priced out of the Diploma (PEAT 1) after the Cabinet Secretary for Education, Mike Russell, moved their funding goal posts and any hope of being able to afford to complete the mandatory PEAT 1.  The voice of law students shortly to be excluded from Scotland's legal profession because of an unfair change in the funding arrangements was met with overwhelming support in a packed Committee Room 6 in the Scottish Parliament.

The event also included speeches from CFALP's campaign co-ordinator, Tim Haddow, NUS Scotland President, Robin Parker, and GLC's Principal Solicitor, Mike Dailly, who said:

"Scottish law students are not asking for preferential treatment - all they want is the right to borrow the same amount of student loan support that other vocational students can borrow. Architect students can borrow additional student loans for up to six years, while medical and dental students can borrow for their fifth year of study.  Postgraduate trainee teachers also have access to student maintenance loans. Why not law students?"

"There is no logic in the current policy of the Scottish Government.  It is regressive, unfair and against the aspirations that the Scottish Government has for an inclusive and successful Scotland. I hope the Scottish Government will reconsider".

Mike's full contribution is available online here.  

The debate session also heard contributions from Scottish Labour's Sarah Boyack MSP (who advised that Mike Russell MSP had now declined an invitation to convene a summit of all affected and interested parties in Scotland), the Scottish Greens' Alison Johnstone MSP, the Lib-Dems Liam McArthur MSP, Law Society of Scotland President Austin Lafferty and Dr Nick McKerrell of Glasgow Caledonian University. 

No-one disagreed that urgent action was required to prevent law students from less well off backgrounds being excluded from PEAT 1 by reason of socio-economic circumstances. 

UK 'bedroom tax': GLC calls for Scottish solutions to prevent homelessness and human misery for tens of thousands

GLC is calling on the Scottish Government to set up an additional, special fund in Scotland to mitigate the impact of next April's 'bedroom tax' where tenants of councils and housing associations will face cuts of 14 to 25% in their housing benefit where they are deemed to have an extra bedroom or more.

In an address to a public meeting of tenants in Glasgow's *Pearce Institute, GLC's Principal Solicitor Mike Dailly also called upon Scottish local authorities and the Scottish Government to set up 'Homelessness Prevention Funds' where tenants can borrow small loans interest free to stave of homelessness.  Such schemes have already been successful in some parts of England.


He also called upon the Scottish Government to support an amendment to the Housing (Scotland) Act 2001 to prevent social landlords relying upon rent arrears accrued through the bedroom tax being founded upon in court actions for eviction – such debts could be pursued through other civil debt recovery routes. Such a measure could be implemented on a transitional basis to ensure Scottish tenants had sufficient time to explore all options, given it was physically impossible for all tenants to downsize due the lack of alternative accommodation in the social rented sector.

Mike said: "Where are Scottish tenants expected to go? The private rented sector has already expanded and the Scottish Government has helped this by allowing homelessness duties to be met by them. But private landlords when interviewed about their planned responses to housing benefit cuts have not said they will increase supply by building more houses; rather they will sub-divide existing houses, often former council houses”.

“It is incredible to think that the UK Government is going back to the future – recreating the conditions for the emergence of high cost slum housing – by driving people into smaller and more cramped homes as they tax the low paid and poor. The return of the ‘single end’. Victorian values recreating Victorian housing conditions”.

The text of Mike’s talk is available online here (opens as a PDF) * on the evening of Thursday 18 October 2012.

* UPDATE - the next Glasgow meeting on housing benefit cuts will take place in the Pearce Institute, Govan Road, Glasgow at 7pm on 27 November 2012. All welcome. Confirmed speakers include Johann Lamont MSP, Leader of the Scottish Labour Party, Dave Moxham, Deputy General Secretary of the STUC, Mike Dailly, GLC, and John Flanagan, Chair of Govan Housing Association, with further MSPs and councillors tbc. Organised by tenants and residents associations in Govan and Linthouse. 

GLC to participate in free Scottish mortgage repossession conferences

GLC's Principal Solicitor will be speaking at a free conference focussing on recent legislative and case law changes in Scottish mortgage repossession law, in Glasgow on 3 December 2012.

The event is being hosted and sponsored by the Carrington Dean Group. Mike will provide a review of recent Scottish case law, with a focus on statutory pre-action requirements and the issue of legal costs and charges in repossession cases. Other confirmed speakers include, Citizen Advice Scotland, Irwin Mitchell Solicitors and Tom McEntegart, managing director of TLT Solicitors. The conference will include an afternoon panel debate session chaired by advocate and Scottish Legal Action Group chairman, Robert Sutherland.

The conference will be held in the Laprohaig Theatre, Teacher’s Building, Glasgow on the December 3, 2012. A shorter seminar will be held in the Ramada Encore Hotel in Inverness on December 6. Anyone interested should contact alanmcintosh@carringtondean.com in the first instance. Both events are free to advisers and solicitors working in the industry.

Lenders new PAR arguments rejected in NRAM, Santander & Nationwide v. Doyle and 4 others

New legal arguments by Aberdein Considine & Co., solicitors on behalf of three UK lenders have been rejected in a Scottish judgement from Sheriff Deutsch at Glasgow Sheriff Court. The judgment pertains to five separate mortgage repossession actions which were heard together earlier this year, with GLC's Principal Solicitor acting for all five defenders.

The 'Doyle judgment' provides helpful discussion on what lenders need to do to satisfy the 2010 Pre-Action Requirements (PAR) Order, with examples of three cases which failed to meet the 'minimum standard' required under the 2010 Order, and two cases which met the statutory test.

The Pursuers' solicitors unsuccessful challenged the ratio in Northern Rock (Asset Management) Plc v. Millar 2012 SLT (Sh Ct) 58, but had also set forward a number of new legal arguments which had not been considered in Millar. A number of new propositions were advanced, including: that the Interpretation Act 1978 did not apply; 'default' was truly under standard condition 9(1)(b); there should be a flexible time for PAR compliance; and that there was no mandatory requirement to comply with regulation 2 of the 2010 Order. All of these arguments were rejected by the court.

The Pursuers' solicitors were able to show that there had been actual compliance with the PAR in two out of the five cases, and accordingly these were continued to determine further procedure, while three actions were dismissed as incompetent. The full judgment is available here (online PDF).

Aberdein Considine refuse to give copies of pre-action mortgage documents in Scottish repossession cases

Govan Law Centre (GLC) is concerned to note a change in practice by one of the panel firms of solicitors who represent lenders in Scottish mortgage repossession actions. Aberdein Considine and Co., Solicitors have advised us that they will no longer provide copies of formal mortgage correspondence sent to customers before court proceedings were raised. This change in practice will adversely affect many of our clients in future.

We are required to check such correspondence in order to properly advise our clients of their legal rights.  Not all customers retain all such documentation, particularly where they are under financial pressure or have health or other problems. All other lender’s firms in Scotland currently provide defenders' advisors with copies of pre-litigation correspondence when requested, which is often available in electronic form and can be readily provided by e-mail.

GLC is concerned to note that Aberdein Considine and Co., Solicitors will no longer provide us with copies of formal pre-litigation letters send by their clients. The Financial Services Authority's MCOB rules requires authorised firms to deal fairly with any customer who is arrears of his or her mortgage (R13.3.1).  This extends to agents acting on behalf of firms. Firms are also expected to liaise with a customer’s advisor regarding payment or sale shortfalls.  

GLC doesnot believe that the policy approach of Aberdein Considine and Co., is in the interests of lenders' customers and appears to be at odds with the FSA’s Principles of Business (Principle 6).Accordingly, GLC intends to formally take these policy issues up with lenders in the first instance. 

Are UK payday lenders breaching EU irresponsible lending rules?

Are UK payday lenders breaching EU rules on irresponsible lending and if so what does this mean for consumers?  Govan Law Centre publishes a brief thought paper by Mike Dailly examining the 2010 Consumer Credit (EU Directive) Regulations introduction of section 55A and 55B to the Consumer Credit Act 1974. 

GLC and our partners have seen increasing examples of how the need for small, short term loans are being ruthlessly exploited by payday lenders to the detriment of our clients and communities. Households have become entrapped in impossible cycles of indebtedness with monthly default, roll over and eye watering usury interest rate charges.

Often the result of such expensive indebtedness is enforced poverty, personal hardship and threatened homelessness as clients cannot pay their rent or mortgage or buy household groceries as payday lenders hoover money and charges from their bank accounts each month. GLC believes this is unfair, unethical, and against the public interest.

GLC is in the process of actively challenging the right of payday lenders to recover their fees and charges on behalf of our clients and will share any developments in due course.