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What’s Going Wrong?

10 January 2019 Written by Stephen Cowan Category: Blog
A number of news items have appeared in the press recently and other news sources focusing on rising levels of unsured debt and what can only be described as “debt misery”.
 
For example, “The BBC” has reported (7 January) that “UK household debt hits new peak”.  Quoting from the TUC, household debt in the UK has reached a staggering £428bn.  Excluding mortgages, average debt per household rose sharply in 2018 to a new peak of £15,385.  This represents an increase of nearly £900 in a year.  The TUC lays the blame on government austerity and years of wage stagnation.  Notwithstanding that the Bank of England has said that growth in consumer credit has been gradually slowing since 2016, the TUC arrived at its figure for unsecured debt by adding bank overdrafts, personal loans, store cards, payday loans and outstanding credit card debts.  Student loans were also included.
 
Michael Sheen and Debt
A more myopic picture was painted by the “Mirror” which reports that Michael Sheen has joined them to “battle (the) devastating impact debt has on poor”.  The Hollywood media star has taken a special interest in what may be described as “debt poverty” which is more than a passing interest.  He is actively involved in meeting members of the public who have been adversely affected by payday loans, short-term loans and rent-to-buy outlets.  This has culminated in his forming the “End High Cost Credit Alliance”.  He has stated that members of the public in greatest need of help are getting the most unfair deals.  What Sheen wants to achieve is to restore the balance which currently is weighted in favour of lenders, particularly, those providing credit at high interest.  This can be achieved by ensuring that there are fairer credit providers who have the resources to take in thousands of new clients and provide them with more affordable loans.
 
It is probably patronising to say that Sheen’s efforts are positive, and it goes without saying that he should be saluted for the enormous amount of “good work” which he is doing.
 
However, to replace the type of high cost lender which he is focusing on will be difficult.  This does not mean that his efforts are being wasted.  But one has to recognise that increasing regulations by the Financial Conduct Authority means that a great many of the prior “excesses” in the market should no longer exist.  High cost credit is tolerated simply because the creditor’s risk is greater.  Also with some credit unions being touted as alternative lenders recently becoming insolvent it does seem that these institutions are not the answer.  The problem is, of course, that if high cost credit providers are no longer in the market then people will revert to using loan sharks.  This will have devastating consequences. 
 
“Bullying Bailiffs”
Perhaps of greater concern is an article in “the Sun” newspaper headlined “DEBT TERROR Bullying bailiffs flouting laws designed to stop them terrorising debt-ridden families.  This is because victims don’t know how to complain.  Apparently only a small number of complaints have been registered against bailiffs in the last few years (56 in the last four years) despite many reports of their aggressive practices.  Apparently, the problem is being taken so seriously that a labour MP is backing calls for an independent regulator to enforce the rules and has won time for a commons debate on the subject.  The article continues with examples of the behaviour of unscrupulous bailiffs.
 
The Scottish Position
It is at this juncture that I have to declare my particular “Scottish” credentials.  As readers may be aware, all Scottish decrees (judgments) are enforced by Sheriff Officers.  Independent of the court they are answerable to the Sheriff Principal to whom complaints can be made.  The Society of Messengers-at-Arms and Sheriff Officers’ website has clear links to their “Code of Practice” and “Complaints Procedure”.  Whilst I do appreciate that a debtor may not relish a visit from an officer who is, after all, enforcing a decree, I have never come across a complaint from a member of the public as to the way in which an officer has conducted themselves.  In addition, over the last number of years, the Scottish Parliament has enacted a substantial amount of legislation which has modernised judgment enforcement north of the border.  If we were to encapsulate the basic principles of Scottish judgment enforcement (generically known as “diligence”) it is that those who are able to pay their debts should do so and that the legislation should facilitate this.  However, those who cannot pay their debts should be addressed more sympathetically.  This is why current legislation provides for many exemptions from enforcement to ensure individuals are not penalised by the judicial system.
 
What’s Gone Wrong?
So what’s gone wrong and why the interest in debt poverty?  Probably it’s a reaction to the times we live in.  There has been an increase in the cost of living with wages stagnating.  Putting it succinctly, many people are short of money and slip into a never ending cycle of debt.  And with the possibility of a disorderly “Brexit” having the potential of increasing prices the problems can only get worse.  Sadly there is no magic wand.  High interest lenders are probably here to stay, albeit they will be subject to greater scrutiny by the FCA.  It’s important that loan sharks do not become a viable alternative with the devastating consequences not bearing contemplation.
 
For further infomation please contact Stephen Cowan on 0141 572 4251.

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