Debt Action Forum



Debt Action Forum

Minutes of Meeting 1 April 2009

2.30pm, St Andrews House, Edinburgh

Present:

Gillian Thompson Accountant in Bankruptcy

George Way Law Society of Scotland

Ann Condick ICAS

Susan McPhee Citizens Advice Scotland

Yvonne Gallacher Money Advice Scotland

Lindsay Montgomery Scottish Legal Aid Board

Anne Feeney Confederation of Scottish Local Authorities

Andrew Rudge Royal Bank of Scotland

Adrian Stalker Advocate

George Gretton The Scottish Law Commission

Paul D Brown Legal Service Agency

David Forrester Finance and Leasing Association

In Attendance:

Sharon Bell Accountant in Bankruptcy

Simon Roberts Accountant in Bankruptcy

John St Clair Solicitors Constitutional and Civil Law

Division

Apologies:

Fergus Ewing MSP Minister for Community Safety

Karen Titulaer Committee of Scottish Clearing Bankers,

represented by Andrew Rudge

Frank Johnstone Finance and Leasing Association,

represented by David Forrester

Welcome and Introductions

1. All members were thanked for their attendance by Gillian Thompson.

2. These opening remarks were followed by Gillian stating the desired outcome of this meeting, which is to edge closer to finalising the interim report. It was further restated that the interim report is due by the next meeting, 22 April. The final report is due by the end of June.

3. Lindsay Montgomery pointed out the importance of aligning the DAF with the Repossession Group and the Gill Review so that that there would be no conflicting messages in the respective reports. He also expressed a wish for an additional meeting of the DAF group.

1. ACTION POINT: AiB to email group with possible dates in May for an additional DAF meeting.

Adoption of Minutes and Action Points

4. Ann Condick noted that in the minutes of the previous meeting, points 23 and 27 could in more detail describe the views expressed by Ann. These being that it is important that (1) if property is excluded from diligence debtors may be encouraged to buy more expensive homes, (2) the debtor is able to demonstrate that he/she has actively sought advice and also (3) that if the problems of apparent insolvency were addressed there would be no need for additional gateways.

2. ACTION POINT: Ann Condick to send Sharon Bell an email detailing the missing statements in point 23 and 27 of the minutes of the previous meeting.

5. With the exception mentioned at point 4, the minutes of the previous meeting were adopted by all attendees.

Action Points

6. An update of the Action Points was given.

7. As part of the discussion on Action Point 1/5 it was noted that a meeting with lenders took place on 31 March. The meeting discussed protocols, the Council of Mortgage Lenders guidance and bank accounts for bankrupts. It was noted that the BBA would involve the AiB in discussions with themselves and the Insolvency Service regarding the bank account issue.

8. Yvonne Gallacher expressed the views that it is also important to demonstrate support for mortgage to rent, support for tenants, and that consumers are being given a welcoming approach.

Tenants

9. The position of tenants was discussed by the Forum. The view was expressed by Gillian Thompson that more could be done for tenants. The situation of the tenant and the Mortgage Rights Act should be further considered.

10. The need and the importance of interacting also with letting agencies was emphasised.

11. Adrian Stalker agreed that the Repossessions group would consider the position of the tenant at the next Repossessions Sub-Group meeting.

3. ACTION POINT: George Gretton and Adrian Stalker to produce a paper on the current position of the law surrounding the tenant for the Repossession Group and DAF. The paper to include; (1) what are the rights of the tenant (2) how are they applied and (3) implication of this to all sides.

Presentation on Debt Solutions by AiB

12. A presentation was made to the group by Simon Roberts of AiB.

4. ACTION POINT: AiB to email the group an electronic copy of the presentation.

13. All agreed that £3,000 for a debtor’s car was acceptable.

14. All agreed to the action proposed for Unmet need 1, Entry to bankruptcy for home owners with negative equity.

15. With regard to Unmet need 2, Ann Condick disagreed with the proposal to introduce Fast Track Trust Deeds because (1) they were not necessary if the issues around apparent insolvency were addressed and (2) that there would be an increased cost to the public purse.

16. Gillian Thompson noted that Fast Track Trust Deeds are not really “fast track” – a new name is needed.

17. The meeting noted these concerns and agreed to consider the proposal further in the light of the Trust Deed Report.

5. ACTION POINT: AiB to disseminate draft Trust Deed Report to provide the members of the DAF with more detailed information.

18. Susan McPhee expressed concerns as to independence of advice given through the proposed advisory role of the AiB. John St Clair assured the DAF that the framework for independent advice would be put into place. Gillian Thompson further reassured the group that the role would only include an ability to steer clients in the right direction and that no extra funding would be necessary.

19. Lindsay Montgomery questioned whether the advisory role would impose a duty of care on the AiB. John St Clair again responded that there is already a general responsibility within the AiB to employ appropriately qualified staff.

20. The proposal for the removal of Gazetting requirements was agreed by all Forum members.

21. The proposal for extension of restrictions on delinquent bankrupts was agreed by all Forum members.

22. The proposed extended period, from 3-5 years, for contributions, was opposed by Anne Feeney and Susan McPhee. Simon Roberts advised that this proposal was linked to George Gretton’s proposals for dealing with assets and a shift from assets to contributions may be in the debtor’s interest.

Legislative Options Paper

23. George Gretton gave a presentation on the proposals for increased protection for owner occupied property against actions taken by unsecured creditors. The main thrust of the proposal being that Trustees in Trust Deeds should be able to exclude the family home from the same, providing the creditors agree, but also that a certain amount of equity in the family home should be protected from bankruptcy and other diligences.

24. George added that the proposals for Trust Deeds can be separated out from the remainder of the proposals contained in the paper, due to the existing security measure of creditor approval and questioned whether other assets should also be excludable.

25. The meeting agreed to the proposal to allow protected trust deeds to exclude property with creditor consent.

26. Simon Roberts added that 60% of all Trust Deeds contained no heritable property. Simon further pointed out that it is a problem that a minority of creditors can prevent a Trust Deed from being protected. The meeting agreed that the voting rules should not operate to allow a minority creditor to wreck proposals which are acceptable to the creditors as a whole.

27. Gillian Thompson expressed that the additional proposals contained in the paper needed wider consultation. As the paper had been issued just prior to the last meeting it was still to be discussed with the Minister. Gillian also made the group aware that this would not necessarily mean a delay since the proposals could be fitted in to the legislative slot assigned to Land Attachment later this year.

28. It was indicated by both David Forrester of the Finance and Leasing Association and Andrew Rudge of the Royal Bank of Scotland, that consultation within their respective areas would be necessary before they could agree to the proposals. All other Forum members agreed to the proposal for Trust Deeds to go ahead and that the remainder of George’s proposals needed consultation.

29. The meeting further discussed the proposal that a certain amount of equity be protected from bankruptcy and other diligences, and the suggested “carve out” for (1) council tax and (2) tradesmen creditors who can demonstrate that work has been carried out, but not been paid for, at the property which enhances or preserves the value of the property.

30. Gillian Thompson asserted the First Minister’s position with regard to the exclusion of the family home and the prevention of unnecessary homelessness, must be determined.

31. George Way considered that there should be a cost-benefit calculation to determine whether the sale of a family home was justifiable. George also noted that the “serial debtor” must be addressed. The system proposed must include a valuation and adjudication by a Sheriff as to value of the property. This is crucial in order for the debt industry to accept the proposal.

32. Andrew Rudge noted that the proposal could seriously impact on future unsecured lending and the cost of the same. Andrew also noted that if short term lending dries up this could prolong the recession.

33. Ann Condick noted her agreement with George Way and Andrew Rudge and further stated that an impact assessment for creditors would be necessary and that the unsecured lenders were to a large extend not represented at the DAF. Ann also suggested a comparison should be made with the English IVA to establish how equity in property was treated.

34. Paul Brown noted his support for the proposal and also pointed out that the cost to the family losing their home and the cost of the public purse was very high compared to the gain of a creditor. He also observed that it was necessary for the future of credit to be different from the kind of arrangements which have contributed to the current situation. The perceived impact on creditor behaviour may be a price worth paying for a more proportionate system.

35. Susan McPhee pointed out that creditors using the threat of Land Attachment can, on introduction, become a big problem. Susan informed the group that Charging Orders had increased significantly in England.

36. Yvonne Gallacher supported the proposal that consultation was necessary.

37. John St Clair stated that the current debate must be informed by the prospect of an appalling recession, and we should err in favour of keeping people in their houses.

38. George Gretton felt that there was general agreement that there must be some cost-benefit analysis underpinning the right to sell a debtor’s home though there was room to argue about the specific threshold.

Access to Advice Meeting Feedback

39. Lindsey Montgomery referred the group to the paper enclosed in this meeting’s folder. An action list is due for the next DAF meeting 22 April.

Debt Collection and Debt Purchase

40. A paper on Debt Collection and Debt Purpose was presented by Yvonne Gallacher. She noted that there are signs of increased levels of debt purchasing, that debtors have limited knowledge of about what was happening to their debts and that protection for debtors in this area is limited – for example, rules on “breathing space” only apply if the debtor is still paying.

41. Gillian Thompson noted that the paper would be passed on to the OFT

Repossessions Sub-Group Feedback

42. Adrian Stalker advised the group that a draft report from the Repossessions Sub-Group should be available by the next DAF meeting, 22 April. Adrian further noted that the group had addressed requirements for a protocol and were considering that all repossessions should call in court.

43. George Way noted that the cost of the court actions and the costs to the debtor should be addressed.

Any Other Business

44. It was noted that a paper on the National Debtline had been circulated in hard copy at the meeting.

45. It was suggested that an additional meeting of the DAF be organised in May, see Action point 1.

Date of Next Meeting 22 April 2009

Maud Lithgow for Diane Dunn

Debt Action Forum Secretariat

1 April 2009

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