Court rules Interpretation & Legislative Reform (Scotland) Act 2010 does not apply to Scottish PAR, as repossession action dismissed as incompetent

Sheriff Reid at Glasgow Sheriff Court has ruled that the Interpretation and Legislative Reform (Scotland Act 2010 (ILR(S) Act 2010) does not apply to The Applications by Creditors (Pre-Action Requirements) (Scotland) Order 2010 (SSI 2010/317 - the 'PAR')) in finding that a lender had raised incompetent mortgage repossession proceedings which did not comply with the Scottish PAR, and fell to be dismissed.

In a very thoughtful and complex judgment in the case of FirstPlus Financial Group plc v. Pervez, Sheriff Reid explains how the term 'default' as it appears in the PAR must bear the same meaning as it does in the relevant primary legislation - the Conveyaning and Feudal Reform (Scotland) Act 1970 and the Heritable Securities (Scotland) Act 1894. This was necessary in terms of section 11 of the Interpretation Act 1978.

In so doing, the court preferred the construction of Sheriff Deutsch in the cases of NRAM, Santander, and Nationwide Building Society v. Doyle and four others (cases where GLC acted for all defenders) and not the approach that Sheriff Bicket took at Hamilton Sheriff Court in the case of Accord Mortgages v. Dickson, which GLC believes was wrongly decided in relation to Sheriff Bicket holding that the ILR(S) Act 2010 applied to the PAR which led to him not following the decisions of NRAM v. Millar and RBS plc v. McConnell (cases where GLC acted for all defenders).

The judgment in Pervez examines many other important issues in relation to Scottish repossession law, and clarifies the proper statutory construction that lenders should apply to the PAR. The case of Pervez represented a strategic attempt by Optima Legal - a top 100 UK firm - to challenge the ratio of Sheriff Deutsch's judgment in NRAM v Millar, which had been appealed to the Inner House by NRAM but then subsequently dismissed with expenses in favour of the defender.

The pursuer in the case of Pervez was represented by Mr Gannon of Optima Legal (Glasgow), and the Mr Pervez was represented by GLC's Principal Solicitor, Mike Dailly. FirstPlus Financial Group plc
is a subsidiary company of Barclays Bank plc.

Glasgow mortgage repossession action dismissed for failing to comply with Consumer Credit Act

A sheriff at Glasgow Sheriff Court has dismissed a mortgage repossession action concerning two 'second charge' secured loans for failing to comply with sections 87-88 of the Consumer Credit Act 1974 (CCA) and the Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983 as amended.

In the case of Citifinancial Europe plc v. Rice, Sheriff Deutsch pronounced a judgment which found that the section 87 default notice served under the CCA was defective and incompetent  because it failed to properly identify the loan agreements, the parties to the agreements, and failed to provide clear specification of the matters complained of.

The court distinguished the present case from American Express v. Brandon, where a defect in a default notice was overlooked as de minimus and non-prejudicial. While such arguments were possible in Sheriff Deutsch's opinion, in the present case the errors were 'fundamental' and the action for possession fell to be dismissed.

The pursuers were represented by Aberdein Considine & Co., Solicitors (Gordon), while the defender was represented by Govan Law Centre (Dailly).

Time to tackle shark practices of debt companies and their Scottish solicitors says GLC

Govan Law Centre (GLC) is concerned that the OFT's Debt Collection Guidance is being routinely ignored in Scotland not only by UK debt purchasing companies but more worryingly by certain firms of Scottish solicitors who undertake debt collection as one of the primary activities of business. 

Besides causing unnecessary human misery, unfair, oppressive, and disproportionate business practices are resulting in vulnerable Scottish homeowners being threatened with homelessness as creditors use inhibitions for tiny debts. The practice results in creditors being able to scupper Scottish Government mortgage to rent transactions, where families facing homelessness can have their house purchased by a social landlord. 

Although, the OFT expects solicitors firms who undertake debt collection work as one of their primary activities of business to obtain a 'Category F' consumer credit licence, most Scottish debt collection firms of solicitors operate under the Law Society of Scotland's 'group consumer credit licence'.  GLC believes this results in a lack of effective regulation of Scottish law firms undertaking debt collection work because the Law Society of Scotland does not specifically regulate such work, and therefore, this work appears to be largely unregulated in practice.

GLC's Mike Dailly said:

"To give an illustration of the problem, we have a case in Glasgow where it has taken us many months to defend a repossession action and broker a complex mortgage to rent transaction, which is now being thwarted by a Scottish firm of solicitors acting on behalf of an English debt purchasing company for a debt of £810.  Last month the company was prepared to accept repayment at £5 per week, but since obtaining an inhibition it wants all of the money as a lump sum".

"Our client is on incapacity benefit and has offered £100 plus £5 per week but the company's solicitors advise their client says no. We believe this Scottish law firm and company have engaged in aggressive, oppressive, and unfair practices contrary to the OFT's expected standards for consumer debt recovery, and contrary to section 25 of the 1974 Consumer Credit Act".

"Govan Law Centre is considering all legal remedies available to our clients against such companies and their Scottish solicitors - including where appropriate 'naming and shaming' - however, it is quite clear there is a major regulatory role here for the Law Society of Scotland which needs to be addressed, a need for the OFT to intervene, and ultimately a pressing need for the Scottish Government to review the ability of their own Mortgage to Rent scheme to be de-railed by unsecured creditors with relatively tiny debts through the inappropriate use of inhibitions".

Second repossession wave fear

A second wave of home repossessions is expected to hit Scotland, it was claimed yesterday, after figures showed a drop in the number of people across the UK who have lost their houses.

Campaigners and housing experts warned of a "perfect storm" gathering ahead, as unemployment continues to rise and a possible end to low interest rates could result in higher mortgage payments for homeowners, pushing more into financial difficulties.

Full story in Saturday's The Herald.

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Full scale of disastrous lending disclosed

Northern Rock has disclosed that 12,100 borrowers with the controversial Together mortgage - which allowed buyers to borrow 125% on the value of their home – have fallen into arrears.

The numbers are feared to rise even further as a result of rising unemployment. Industry figures for across the UK show 1,000 families a week are being evicted from their homes.

The bank, which was nationalised in February, also admitted problems with other home loans, saying the total number in arrears had risen to 3.92 per cent, from 3.67 per cent at the end of March and 2.92 per cent at the end of last year.

With around 565,000 borrowers across the UK, this means one in 25 are failing to meet their monthly mortgage payments. Nearly two in five borrowers are in negative equity, meaning they cannot sell their homes to pay off the loan.

The full report is available in today's Telegraph.

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Home Owners' Support Fund

The Herald (Monday, 29 June 2009) reports that the Scottish Government's Home Owners' Support Fund while helping 120 households since January 2009 to the present date, has only helped 1 household since the new Fund came online on 16 March 2009. In addition, almost half of the applications made since March 2009 were returned to advisors as 'incomplete'.

Two weeks ago, GLC and partners published the 'Help is at Hand?' survey report of 25 Scottish advice agencies (available as a PDF here). We revealed that 81% of respondents thought the new rules had made the Fund much harder to access; in particular the maximum 'local property' limits were prohibitive, and too many hurdles were being placed before households who would have otherwise qualified for help under the Mortgage to Rent Scheme pre-16 March 2009.

The Scottish Government has said it will keep the Fund under 'review', with a consideration of its operation taking place sometime in August 2009. Regrettably, the failure to address the undoubted flaws and weaknesses in the new rules immediately can only result in more Scottish households losing their homes unnecessarily.

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