In recent years there have been many calls for reform of Scottish debt products, most notably the protected Scottish Trust Deed and Debt Arrangement Scheme. The Trust Deed was first introduced in the mid 1980′s as a solution for those with a disposable income who qualified for insolvency, whereas the Debt Arrangement Scheme was introduced in 2006 by the Scottish government as a scheme for those who could afford to contribute to their debts but needed time to pay them off slowly.
Post 2008 credit crunch in the UK many sought guidance on debt solutions as the banks stop lending and interest rates sky-rocketed. With 20,000 Scots declaring Bankruptcy (Sequestration) in 2011 the market shift had brought attention from marketing companies and mis selling or manipulation of information, only focusing on the pros and neglecting to inform of the cons has lead to distress by many officials.
For the majority of debt advisory companies and organisations, the Office of Fair Trading monitor and regulate activity, though due to receiving more and more complaints from consumers and industry bodies the powers of the OFT will be transferred to the FCSA in April 2014. These changes are intended to address issues of misconduct.
In Scotland the AIB oversee a number of Insolvency firms directly and do monitor activity in the local market to a degree, there have been calls recently to actually have the AIB monitor the market in Scotland as a whole, this may option we expect may be looked into further if Scotland becomes independent in 2014.
Trust Deed Practices
Scottish Trust Deeds have been marketed by many introducer firms who acquire large fees for generating leads for insolvency firms and this means that marketing companies and lead generators have become increasingly active within the industry attracted by large fees from competing firms. Trust Deed fees have been the main focus for reform action relating to the AIB and Scottish Government.
Government Backed Debt Arrangement Scheme
The Debt Arrangement Scheme otherwise known and marketed as ‘DAS’ was introduced by the Scottish Government in order to reclaim more money for creditors and allow Scottish residents to pay back their debts without mounting interest and charges. The DAS is increasing quarter on quarter and is proving a valuable option for home owners in particular as the home and any other valuable assets will not be taken into account when entering the scheme.
The other solutions such as Bankruptcy or ‘Sequestration‘ as it’s known in Scotland and LILA (a route into bankruptcy for those with a low income) are still available but the fee for entering these solutions has risen 100% from being just £100 to £200 in 2013 which makes it increasingly more difficult for those who require a bankruptcy order to enter into insolvency.
These reforms for the most part being positive still leave a lot to be desired in the market and petitions and campaigning within the industry in Scotland is on going.