Scottish action on payday loans: update

GLC has been invited to present its Discussion Paper on proposals to help financially vulnerable Scots cope with predatory payday lending practices at a roundtable discussion in the Scottish Parliament next month.

The event is being hosted by Kezia Dugdale MSP, Shadow Youth Employment Minister on Wednesday 24 October 2012, and will bring together a wide range of national consumer, civil society and advice bodies.

GLC believes the Scottish Government can introduce a Fast Track Debt Arrangement Scheme targeted at payday loans under existing powers in the Debt Arrangement and Attachment (Scotland) Act 2002 as amended.

New fast track debt arrangement scheme for usury rate payday loans?

There has been an exponential growth in the UK payday loan market, with an increasing incidence of our clients in Scotland being unable to pay their rent, mortgage or utility bills due to indebtedness to exploitative payday loans. With payday loans having equvialent APRs of 3,000 to 5,000% - clearly usury, unethical and unfair - Govan Law Centre (GLC) believes the Scottish Government and Parliament must look to a solution in the public and consumer interests.

The Minister for Debt and Insolvency in Scotland, Fergus Ewing MSP, has accepted there is a problem with payday lending and has stated his belief that greater regulation is needed by Westminster. Yet, there is much the Scottish Parliament could do to help Scots struggling to meet the unfair and unsustainable costs of high interest credit.

GLC is publishing a Discussion Paper, which proposes the creation of a new sub-category of the Debt Arrangement Scheme (DAS), which could be designed to provide a fair but flexible form of debt relief for high interest credit only.  This would mean that instead of all debts being repaid as part of a Debt Payment Programme (DPP), the debtor would have an option of repaying payday loans in a 'mini-DAS' on a fast track basis.

Such a 'fast track' scheme could target usury rate loans by ensuring the principal sum(s) were repaid fairly within 24 months, with high interest and roll-over charges being suspended and written off following a successful repayment of the debt. Such a scheme could provide essential respite to consumers in Scotland trapped in a cycle of payday loans, enabling other priority debts to be paid, and helping citizens to take control of their financial position.  We would welcome your thoughts on this proposal: GLC Discussion Paper on a new Fast Track DAS for usury rate loans in Scotland.

Finally, we believe that the Scottish Ministers already have power from sections 7 and 7A of the Debt Arrangement and Attachment (Scotland) Act 2002 to introduce a Fast Track DAS for payday loans right now, without the need for primary legislation or undue delay.

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.

Recruitment opportunity at Govan Law Centre

The Govan Law Centre Trust is seeking a Qualified Solicitor with good civil court and preferably employment tribunal experience. Experience in social security, housing, employment, equalities and administrative law would be an advantage.

The successful candidate will work within our Govanhill Law Centre (GhLC) office. GhLC is a branch office of Govan Law Centre based in Glasgow's Govanhill and serves the unmet legal needs of the wider local community, with a focus on enforcing the rights of minority ethnic communities and in particularly the Roma community. The post will involve working in partnership with a number of agencies, in particular in relation to the work with the Roma community.

Please send CV and covering letter to: Mike Dailly, Principal Solicitor at Govan Law Centre, 18-20 Orkney Street, Glasgow, G51 2BX or m @ govanlc.com. Closing date 4pm, Friday 24 August 2012. No recruitment agencies necessary thank-you. Govan Law Centre is a Registered Scottish Charity SC030193. http://www.govanlc.com/

Five nominations for GLC at Law Awards of Scotland

Govan Law Centre has received five nominations in four categories at the 2012 Law Awards of Scotland. The nominations were revealed at the Corinthian Club in Glasgow last night. GLC was nominated in the following categories:

* Law Firm of the Year (under 40 fee earners)
* Corporate Social Responsibility Firm of the Year
* Trainee Solicitor of the Year (Christine McKellar and Laura Simpson)
* Solicitor of the Year (Mike Dailly)

Govan Law Centre is delighted that its excellent team and achievements, as a campaigning community law centre, have been recognised by such a distinguished panel of independent judges.

The winners of the 2012 Law Awards of Scotland will be announced at a ceremony to be held in the Radisson Blu Hotel in Glasgow on 13 September.

Consumer challenges facing the UK's insurance industry

A link to GLC's Principal Solicitor's speech to the UK Industry Summit on Consumer Insurance Law and Regulation in London on Tuesday, 17 July 2012. Mike was speaking on behalf of the FSCP at the Infoline event, and discussed the Consumer Insurance (Disclosure and Representations) Act 2012, forthcoming law reform, the Revision to the EU Insurance Mediation Directive and various challenges the industry faced to deliver better quality, value for money and outcomes for UK consumers of insurance products.

Farepak: will the insolvency practitioner gravy train ever stop?

Over 100,000 victims of the Farepak Christmas club, which collapsed in 2006, will now receive almost 50 pence in the pound, primarily thanks to a charitable fund (17.5 pence) and a new £8m ex gratia payment from LloydsTSB (19 pence).

The work of the insolvency practitioners, BDO LLP, netted 13 pence in the pound yet their fees and outlays cost 19 pence in the pound; £8.2m - in other words they charged 60 pence to recover 40 pence.

The OFT's market study into this industry uncovered market failure in 2010. Big secured creditors, like banks, were able to exert some control over corporate insolvency practitioners (IP) fees and outlays. Yet, the OFT found in 40% of cases where unsecured small creditors were involved there was little or no oversight of IP fees and charges.

GLC's Mike Dailly speaks to BBC Radio 4's Money Box on the apparent licence that IPs have to print money, with little or no effective regulation from the UK Insolvency Service. In GLC's experience a similar problem exists in relation to IP fees and charges in the personal insolvency market.

GLC would like to see the OFT's recommendations - including an independent complaints body with real legal teeth to review IP fees and charges, and the power to impose fines - implemented.

The Insolvency Service consultation on these issue last year produced major industry opposition for any real change. Hardly surprising, when the present system represents the lightest touch of regulation for one of the most expensive and well paid industries in the world. An industry that frequently costs considerably more than it generates in recovered income.