Decree for repossession refused in Glasgow civil trial and expenses awarded against lender

Decree for the ejection of an East End Glasgow woman from her property and the repossession of her home was refused at Glasgow Sheriff Court yesterday following an evidential hearing (known as a 'proof' in Scots civil law).

Most of the defender's mortgage was being now paid by the Department of Works and Pensions albiet there was a small shortfall and the lender, Platform Funding Ltd (an intermediary lender of the Co-operative Bank plc) argued that it did not believe the mortgagor could sustain her mortgage.

Platform Funding Ltd argued in court that the defender had not personally made any payments to her mortgage since 2010 and that as the action had been in court for two years they were entitled to decree for possession.

After hearing the evidence in the case and adjourning to consider the matter, and legal submissions, Sheriff Gilchrist refused the lender's request for decree notwithstanding it would take six and half years for the defender to repay her mortgage arrears.

The court followed the landmark English Court of Appeal decision in Cheltenham and Gloucester Buliding Society v. Norgan [1996] 1 All ER 449, which was persuasive authority in Scotland to the proposition that the starting point for determining a 'reasonable period' to clear arrears was the remaining term of the mortgage, which in this case was 9.5 years.

The court awarded ordinary cause level Sheriff Court expenses against Platform Funding Ltd for the cost of the proof, and suspended the lender's enforcement powers and continued the cause for six months to monitor payments to arrears. 

The defender was represented by Govan Law Centre's Mike Dailly, and the pursuer was represented by Ms Malone of Morisons LLP Solicitors.

Cuts to Home Owners' Support Scheme will create needless homelessness across Scotland

Govan Law Centre is very concerned to learn that the Scottish Government will reduce its funding to the very successful Home Owners' Support Fund (HOSF, which includes the Mortgage to Rent Scheme) by a massive 46% or £8.5m from April 1 2012, for the year 2012/13.

The HOSF had funding of £18.5m in 2011/12, but without any apparent public consultation the Scottish Government has decided to slash this budget to £10m for the financial year 2012/13.

GLC's Principal Solicitor Mike Dailly said:
"The Mortgage to Rent Scheme has been a great Scottish success story where demand massively outstrips supply. Often it is the only safety net for vulnerable homeowners facing repossession and homelessness, and without access to it, we are deeply concerned that many Scots are going to become homeless needlessly. Homelessness is a traumatic and terrifying prospect for families, and we should be extending this fantastic scheme in these tough times not cutting it. We hope the Scottish Government will think again on this cut".

"The Scottish Government had made access to the scheme much harder by tightening the eligibility rules in March 2009 and from next month those rules will be tightened once again - especially for bankrupt applicants. Govan Law Centre believes the Home Owner Support Fund is a huge Scottish success story which enables families to keep their homes by becoming a tenant instead of an owner. The scheme needs to be made more available to vulnerable Scots as a core part of Scotland's prevention of homelessness and housing policy and strategy. It is tried and tested. It works".

"Cutting the scheme's funding by almost 50% is the equivalent of taking a life ring from a drowning man or women".

Note:
The Mortgage to Rent (now part of the HOSF) scheme was introduced in Scotland in February 2003: http://www.scotland.gov.uk/Resource/Doc/254517/0075356.pdf

The equivalent Mortgage Rescue Scheme was introduced in June 2008 in Wales and January 2009 in England: http://www.housingrepossessions.co.uk/mortgage-rescue-scheme.html

Details of the HOSF are available here: www.scotland.gov.uk/hosf

Unfair bank charges update from GLC

GLC has settled a claim in full for the refund for overdraft charges with Santander UK plc. The claim was settled extra-judicially after proceedings had been raised utlising new legal and factual arguments.

Some of these arguments (but not all) are scheduled to be tested in the cases of Reid v. Clydesdale Bank plc, and Sharp v. Bank of Scotland plc. 

A debate will take at Glasgow Sheriff Court on 2 April 2012 in the case of Reid v. Clydesdale Bank plc, with GLC's Mike Dailly appearing for the pursuer, and Clydesdale's in-house legal team and counsel appearing for the defender.

The case of Sharp v. Bank of Scotland awaits a fresh hearing date.

GLC rings alarm over growing mis-selling of consumer credit products across the UK

With around £9bn of Payment Protection Insurance (PPI) mis-sold to UK consumers the issue of the mis-selling of financial products is big consumer news; yet the potential for the mis-selling of consumer credit products - particulary pay day loans and second charge mortgages regulated under the Consumer Credit Act - is relatively new and unchartered waters.

Govan Law Centre believes alarm bells should be ringing over the growing potential for mass mis-selling in the UK consumer credit market, with the growth of aggressive pay day lending and the ongoing mis-selling of expensive home secured loans. Changes introduced by the 2006 Consumer Credit Act have opened new gateways for consumer redress in law and through the independent Financial Ombudsman Service.

GLC todays publishes a 'think piece' paper which discusses the scope and possibility for consumer redress in relation to mis-sold and unfair consumer credit products in the UK. The paper is available here. Thoughts and comments are welcome and can be made below.

GLC secure unsecured loan write-off using CCA

In RBS plc v. Ahmed, a creditor sought to recover payment under a unsecured loan agreement for a sum just under £2,500, together with its legal expenses, which would have been on the undefended summary cause scale, at Glasgow Sheriff Court.

GLC had defended the action upon the basis the statement of claim was lacking in specification, and was irrelevant on a number of grounds, including failing to indicate whether a default notice under section 87 of the Consumer Credit Act 1974 (CCA) had been properly served prior to proceedings being raised.

RBS agreed to dismiss the action with expenses at 10% of the sum sued in favour of the defender, together with an undertaking to write off the debt under the loan agreement. The case serves to illustrate the importance of advisers always checking court documents for payment, as opposed to taking the debt and charges as stated as being necessarily due at the level claimed, or being lawfully due.

Further hearing in Scottish repossession test cases on pre-action requirements

The court has appointed parties be heard further in the Scottish repossession test cases of RBS plc v. McConnell and NRAM plc v. Millar next week. Sheriff AF Deutsch has given parties an opportunity to be heard on a new point in relation to the Interpretation Act 1978.

Since the Scottish Government's Home Owner and Debtor Protection (Scotland) Act 2010, a lender must now give certain information to a debtor upon entering into 'default' before a repossession action is raised in court. This is known as the 'pre-action requirement' and failure to comply with this requirement can render the court action incompetent.

Many lenders and law firms in Scotland have interpreted 'default' to mean merely a failure to pay sums due under a mortgage, whereas Govan Law Centre has argued that 'default' is a technical term which means the failure to comply with a calling-up notice.

The cases of RBS plc v. McConnell and NRAM plc v. Millar look set to provide clarity on this point. Many repossession actions across Scotland have been continued or sisted (stayed) pending the court's judgment in these cases.

UK consumers should use statutory rights to reduce interest on credit agreements

Financially vulnerable consumers across the UK taken to court for defaulting on high interest credit - including 'second charge' mortgages - are unaware of powerful statutory rights which can help, according to Glasgow's Govan Law Centre. 

Section 136 of the Consumer Credit Act 1974 (CCA) permits the court to amend 'any agreement or security' in making a time order under section 129 of the Act as it considers just, having regard to the means of the debtor.  That includes the right to ask the court to reduce the rate of interest within a consumer credit agreement.

Most consumers are completely unaware of these statutory rights, which are seldom used, which have the scope to help make unmanageable, spiralling debts, manageable and affordable. Govan Law Centre's Mike Dailly said:

"The reason we believe section 136 of the Consumer Credit Act is so important right now is because of the disparity between interest rates in inter-bank lending and the wholesale market, and what UK consumers are being charged in many credit agreements. The Bank of England's base interest rate is 0.5% and the standard variable rates of most UK banks are around 2.5% at present. Yet many consumers will have second mortgages (regulated under the CCA) with interest running at 11 or 12%, or unsecured loan and credit agreements running at 18 to 30% APR".

"To give a typical example, a client facing repossession through default of a second charge mortgage borrowed £96k at 11.2% APR, resulting in monthly interest payments of £873. The client is eligble for some DWP help with housing costs while in receipt of benefits, but there is a major shortfall. If her rate of interest was 2.5% the differential in monthly payments would be a whopping £674 per month. Accordingly, consumers in financial difficulty should be asking the court to reduce or freeze the rate of interest on credit agreements to a fairer level so they can meet their financial obligations".

Consumers can make an application under sections 129 and 136 on the 'time to pay' form that comes with court papers, or as part of any legal defence to proceedings raised by a creditor. Always obtain independent legal advice from a community law centre or other local advice agency or firm of solicitors.