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CAS sounds alarm over mis-selling of debt solutions

Increasing numbers of people may be being sold debt solutions that don’t work for their circumstances, Citizens Advice Scotland (CAS) warned today.

The charity made the claim in response to the latest quarterly figures out today from Accountant in Bankruptcy which show a 19.4% increase in the number of Protected Trust Deeds (PTDs) in Scotland compared to the same period last year.
PTDs are a form of insolvency, similar to bankruptcy, which commits the debtor to an agreed payment schedule in return for a substantial write off debt and protection from creditors. Like bankruptcy they are not suitable for all people as they impact on credit ratings and any assets the debtor owns. If the PTD cannot be completed then it fails and the debtor is back at square one with their debts.

CAS has seen evidence of this type of solution being mis-sold to people, and earlier this month called for greater regulation of the market in a written submission to the Insolvency Service.

Responding to today’s AiB figures, CAS Financial Health spokesperson Myles Fitt said:
“The growth in the use of Protected Trust Deeds have been relentless in the last year and it should set alarm bells ringing.
“PTDs are one option of many for people in debt. They are an appropriate solution for some people, but not all. Indeed our network regularly sees people who have been mis-sold PTDs that weren’t suitable for their circumstances and made them worse off than when they began.
“The continuing growth in the numbers of PTDs suggests that people are not getting the best free, impartial advice for their situation, presenting all the options available to them.
“We believe that the PTD market needs to be brought under much stricter regulation by the Financial Conduct Authority and the Accountant in Bankruptcy.
“People who are in debt can get free, impartial and confidential advice from the Citizens Advice network. Our advisers will always consider the client’s unique circumstances and will advise the most appropriate debt management solution for them.”

CAS’ recent submission to the Insolvency service includes the following case study examples (NB These are all anonymous and not available for interview but represent many other such cases seen by the CAB network).

A West of Scotland CAB reports a client signed a PTD in November 2015 for debts totalling £6,813. Contributions of £125 a month for 48 months were agreed upon. This meant she would repay £6,000, leaving very little after covering the trustee’s outlays of £5,101. Given that the client could have repaid the debts in full with that level of contribution and a little more time, the PTD was effectively mis-sold to the client. The PTD then failed as she could no longer afford it; by this time she had paid £2,743 towards it. She has been told that this only covered the trustee’s fees. Effectively she has lost all of the money she paid in with nothing to show for it.
A North of Scotland CAB reports a client answered an advert, was advised that a PTD would be a good debt remedy for her, and signed up for one which was then protected. She told the company arranging it about her circumstances, and was told there would be no further problems if she kept up the agreed payments of £100 a month for 4 years. She did not have a face-to-face interview at any time. She signed the papers alone, with no witness, and returned them to the IP by post. She now realises that her husband is jointly and severally liable for almost all of their debts so the PTD is not going to solve anything other than her liability.
An East of Scotland CAB reports a client is currently in a PTD which she entered into in January 2017 and agreed to pay £100.00 per month. At the outset she thought the student loan would be included, but found out it could not be after she had already signed the papers. As it is not, she now suffers from a wages arrestment of £56 per month, which is to pay off other debts of £886. The wages arrestment means she can no longer afford the PTD contributions. The trustee is now pursuing her for these and threatening a further wages arrestment.
An East of Scotland CAB reports a client initially turned to a PTD because of action being threatened for her student loan. She was not told that it could not be included. The Student Loans Company then instigated an earnings arrestment which meant that she could not then afford the PTD payment. The client felt pressurised into signing. The paperwork does not specifically say that the student loan was excluded or that the client was advised to this effect. It says, “all” debts must be included, with no further clarification.