Govan Law Centre report raises concerns about personal insolvency solutions

Many consumers in Scotland enter into personal insolvency solutions believing that they will resolve their financial difficulties and secure much needed light at the end of a dark tunnel of unmanageable debt.

The aim is to take back control, repay debts as best as possible, and provide financial rehabilitation and a fresh start for those who have generally been through life crises. In many cases insolvency solutions work reasonably well, but there are far too many cases where things go horribly wrong. In our experience, both consumers and creditors lose out.

Govan Law Centre (GLC) was concerned with the high incidence of poor outcomes for extremely vulnerable consumers, which is why we appointed Alan McIntosh to head up the first ever pilot Personal Insolvency Law Unit in Scotland. The project has so far been self-funded by GLC on a pilot basis in order to properly assess the scope, and need, for a dedicated and free specialist service in Scotland.

Our Personal Insolvency Law Unit has been ingathering evidence from casework in Scotland since the summer, and we have now published our interim findings.

We provide evidence of widespread mis-selling of protected trust deeds across Scotland. A failure of regulation in Scotland’s personal insolvency market is costing Scottish consumers millions of pounds for virtually no real service.

Our report, written by the unit’s project manager, provides compelling evidence that there is an overwhelming need for a dedicated free specialist service; a service that can provide both second tier support to frontline advice agencies but also undertake complex and contentious casework for consumers. Our report evidences a number of important market and systemic failures, including a high level of failed protected trust deeds and the failure to protect a consumer’s home from repossession.

The Scottish government needs to reconsider protection for debtor’s homes, and review the licensing and regulatory framework for those who sell trust deeds in Scotland. This is a devolved matter.