Citizens Advice Scotland (CAS) has welcomed the opening of a parliamentary inquiry into Protected Trust Deeds (PTDs) and is encouraging people with experience of them to share their views.
Protected Trust Deeds are a type of insolvency, similar to bankruptcy, which commits the debtor to an agreed payment schedule in return for a substantial write-off of debt and protection from creditors.
Like bankruptcy they are not suitable for everyone as they impact on credit ratings and any assets the debtor owns.
The charity is concerned is that people do not always get the advice about all their options before entering into a protected trust deed.
CAS Financial Health spokesperson Myles Fitt said: ‘This is a welcome move from the committee. The Citizens Advice network in Scotland helps hundreds of thousands of people each year and debt is one of the biggest issues we see.
“We are concerned that the protected trust deed market is concentrated in the hands of a few firms and they are often “sold” as a debt solution through lead generating firms, who do not give advice on other debt options.
“Our advisers see people who have entered into protected trust deeds which are unsuitable for them and which leave them out of pocket and worse off than when they started.
“We think that the lead generators should come under FCA regulation and be required to give impartial advice on all the debt options available to a consumer.
“We would encourage anyone with experience of protected trust deeds and lead generators who have cold called them to submit their views to MSPs.”
Recent examples of the kinds of difficulties experienced by people who enter into protected trust deeds include:
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.