THE recent Analysis article from Citizen Advice Scotland (CAS) on Protected Trust Deeds (PTDs) was in my view poorly informed ("Debt solution needs controls to protect vulnerable people", The Herald, February 7).
It echoed recent comments made by CAS alleging that the 19 per cent increase in PTDs in the third quarter of 2019 was fuelled by misselling, whilst ignoring an 18 per cent increase in the Scottish Government's Debt Arrangement Scheme (DAS).
In fact, PTDs are the largest of all formal debt solutions used in Scotland and more people become debt-free through them than any other solution. There are legitimate concerns regarding them that are shared across the debt advice sector. However, misunderstandings as to how PTDs work persists.
The article suggested a PTD is no longer appropriate when someone's circumstances change and they cannot pay. This is not true. The consumer should still receive relief from their debts. Clients instead should be encouraged to co-operate with trustees to avoid failure and where representation is required, for that to be made to the trustee to ensure it doesn’t fail.
The article also suggested PTDs are only suitable for people without assets. This is wrong. PTDs are suitable for people who cannot repay their debts within a reasonable period of time and often have assets they don't want to lose in bankruptcy.
PTDs can be more generous than bankruptcy in how assets are dealt with, and can mitigate the worst effects of bankruptcy law with the consent of creditors.
In terms of realising the hope of becoming debt-free, PTDs are more successful than the DAS, with failure rates now 15 per cent compared to 40 per cent for the DAS and 30 per cent for English Individual Voluntary Arrangements.
PTDs should only fail when there is non-co-operation, not when someone cannot pay. DAS, however, does fail when people cannot pay and we don’t know enough about that. The law is clear, creditors can reapply interest and charges, and as some never stop applying it, it's safe to presume some do. To say everything goes to reducing the debt, therefore even when it fails, is not true.
Holyrood's economy committee was provided with little evidence of misselling, and instead relied on anecdotal stories, like the one featured in the article by CAS, which illustrate what happens in a minority of cases.
The private sector has a huge role in providing solutions for people in debt. Unfortunately, this was not appreciated by the economy committee and used by some as an opportunity to attack that sector. However, the private sector is central to the Scottish Government’s strategy for dealing with problem debt. This is why it increased the fees it charges in DAS from eight per cent to 20 per cent last November.
Scotland needs a broad-church approach to tackling problem debts.
Alan McIntosh, Money Advice Blogger, Glasgow G52.
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