As the Scottish Government continue its Help out of the Hole campaign raising awareness of the Debt Arrangement Scheme, some providers of the Scheme are behaving like wolves in sheep’s clothing, plunging debtors further into the hole of debt.
Ever since its launch the Scottish Government have taken a “broad church” approach to the Debt Arrangement Scheme, accepting there is a place in the market for private sector providers of it. This has been so successful that the 3 main providers of the Debt Arrangement Scheme are now all private sector firms, albeit it can also be accessed free through Citizen Advice Bureaux and local authorities.
To offset the risk that this would result in some debtors paying for services that they couldn’t afford, Regulation 12(2) of the Debt Arrangement Scheme (Scotland) Regulations 2011 requires fee chargers to advise debtors that services are available free and where those services are locally.
In practice where a debtor disputes this has been done, the Debt Arrangement Scheme Administrator requires written proof showing such advice has been given. Where it hasn’t, all fees have to be repaid to the debtor.
However, it would appear Scottish Government protection of debtors is not going far enough.
Some firms are now including clauses that mean should the debtor leave their Debt Payment Programmes (DPPs) or transfer them to other providers, all fees that would have been due during the programme becoming instantly payable. Alternatively, other firms it is believed, instead of charging monthly fees, charge a one off high fee, but then allow the debtors to repay it by monthly instalments, to the same effect.
This means in reality there are likely to be cases where a debtor’s circumstances change and they are no longer able to pay their DPP. Their DAS provider, the very person supposed to be helping them, then serves an all sums due notice, further indebting them.
It also means where debtors wish to transfer to another provider, because their fees are cheaper, they are obstructed from doing so with the fear they will incur further debts.
It is impossible to say whether such clauses are unfair under consumer contract regulations without examining the individual clauses, but clearly standard term contracts that bind debtors into paying for services that may last years, at times when they may be distressed and vulnerable, are reprehensible. This is more so the case where such contracts prevent competition in the market and the ability of debtors to switch to obtain better services for both themselves and their creditors.
I am aware of cases where such contracts have been used and where the DAS provider has turned into a raging bull, conducting themselves in a manner you would expect of debt collectors. This includes employing the threat of pursuing the debtor to prevent them from switching to other remedies or providers.
The Scottish Government is currently progressing regulations through the Scottish Parliament to change the way Trustee’s in Protected Trust Deeds charge their fees; I would urge the Minister Fergus Ewing to consider similar regulations in relation to the Debt Arrangement Scheme and for the DAS Administrator, Rosemary Winter Scott, to consider whether such providers are fit to do so.