Repossessions are a necessary last resort but every homeowner should be treated with fairness and dignity. That is the conclusion of many industry experts calling for urgent action to protect Scottish households struggling with mortgage arrears. It is clear that the law places Scots homeowners at a disadvantage. In England and Wales, pre-action protocols required lenders to exhaust reasonable alternatives to repossession before resorting to the courts, but under Scots law there is nothing to prevent aggressive lenders using court action, or the threat of it, before exploring other options. Such actions have left many families, some on income support, facing legal bills of at least £1000, in addition to other debts. How can this even begin to be considered fair.
At the time, Deputy First Minister Nicola Sturgeon insisted that homeowners were no more vulnerable to repossession in Scotland than anywhere else. How wrong can a politician be, and yesterday the Scottish Government finally made a dramatic U-turn by proposing legislation to align Scotland with the rest of the UK. Meanwhile, in excess of 500 actions for repossession have been raised in Glasgow alone. .
While previously rejecting calls for reform, Ms Sturgeon boasted that Scotland was ahead in helping hard-pressed homeowners through the government’s Home Owners’ Support Fund. It now appears that changes introduced in March this year render the scheme very difficult to access. These changes should be reconsidered.
Many households struggling to stay in their homes also face other debts. This applies particularly to those who secured debts against their homes. When the easy credit culture collided with the credit crunch, painful fall-out was inevitable. Drowning in Debt, a report published yesterday by Citizens Advice Scotland, indicates the scale of the crisis. While those with the means are paying off consumer debts, an increasing number face unmanageable escalating debt as a result of the “perfect storm” of falling incomes, rising prices, aggressive creditors and fewer sources of affordable credit.
The typical debt now brought to an advice bureau is around £12,500 and the average number of debts per client is rising, as borrowers strive to keep their heads above water by playing off one debt against another. Debt breeds debt, and many of those now being sucked in are newly redundant white-collar workers, unused to dealing with creditors or the social security system. The report finds mounting evidence of harassment from creditors and tactics previously associated with loan sharks. This is taking a toll on the mental and physical health of those in debt, many of whom are going without essentials such as food and heat to pay what they owe.
The increasing number seeking help from the Citizens Advice Scotland is partly the reflection of an increasing preparedness to seek help, but many are leaving it too late and have spiralling, unpayable debt by the time they see a counsellor. This must change. More focused consumer education in schools might help future generations to budget more effectively, though there will always be a requirement for affordable, transparent and properly governed credit.
In the meantime, Citizens Advice Scotland must receive regular sustainable funding to underpin its expanding debt counselling role in addition to its other work, which otherwise risks being neglected. A public information campaign should warn customers to beware of telephone-based scams purporting to offer debt resolution for a fee. And the £100 fee charged for the government’s Low Income Low Assets (Lila) route to bankruptcy must be reconsidered. There is a bitter irony about a borrower struggling to save in order to declare themselves insolvent. If a bystander encountered a drowning man in a fast-flowing river, would it be acceptable to demand £100 to pull him out?
The credit wizard says your mortgage and secured debts must always be the first creditors that you pay. Credit cards and loans always and without exeption come second. Charitable organisations like CAB and CCCS offer an invaluable help to those who are struggleing, however proffessional and reputable debt advice companies do exist, many of these offer their first consultation free of charge and can usually conduct a telephone based assessment of your situation straight away.
The credit wizard offers this service through its sister site the debt management company or you can call us on 0845 643 2954 for your free consultation.
Tags: debt scotland, scottish debt
