Monday, 15 December 2014

Back to the future? Scottish private sector tenancy reforms would leave tenants in a worse position than those in 1980

Govan Law Centre (GLC) has expressed dismay that the Scottish Government's proposed private sector tenancy reforms are considerably more regressive for tenants than the then Conservative Government’s introduction of the short assured tenancy in Scotland some 34 years ago.

The Government's proposals are set out in its document, 'Consultation on a new tenancy for the private sector'. The proposals appear progressive at first glance, with the suggestion of abolishing the 'no-fault ground' for eviction in short assured tenancies, however, when one reads further it becomes apparent the provision of greater security of tenure for tenants is wholly illusory as the Scottish Government set out eight new mandatory grounds of eviction that would enable landlords to choose to evict on the flimsiest of reasons.

In GLC's response to the consultation response we argue that the mandatory repossession grounds undermine the entire policy exercise:

In relation to rent arrears, the proposed ground 6 (three months’ arrears of rent) is in direct conflict with the will of the Scottish Parliament in legislating in the Homelessness etc., (Scotland) Act 2003 to provide a reasonableness defence for the current three months arrears of rent (ground 8, schedule 5, Housing (Scotland) Act 1988). Where is the evidence now that this defence should be repealed in relation to rent arrears which may be due to housing benefit errors or delays."

"The proposed new mandatory grounds 1 to 3 are couched in very weak language: the use of the word ‘want’ sets the bar very low. For example, it would not be necessary to provide evidence that a house was being marketed for sale, or that the mortgage lender had required a sale to repay the lending secured over the property.  Instead, all that would be required to evict a tenant in the private sector is that the landlord ‘wanted’ to move back in, or sell, or that their lender wanted to sell. In other words, there would be no need to establish an actual sale was taking place or that the landlord really did need to and was moving back into the property".

"Ground 4 is even more open to exploitation by landlords to the detriment of tenants: all that a landlord need say is that he or she intended to ‘refurbish’ to evict a tenant/family. What is ‘refurbish’? It might never materialise, or indeed it could be as little as painting a wall or installing a new sink. Why should this be a mandatory ground of eviction?"

"Ground 7 makes provision for a mandatory ground of repossession for ‘anti-social behaviour’. If the anti-social behaviour was a symptom of an illness or behaviour that had since been modified why should the tenant be subject to mandatory repossession? The requirement on the court to consider reasonableness is an essential requirement to ensure fairness and justice."

"Ground 8 enables a mandatory ground of eviction where the tenant has otherwise breached the tenancy agreement. Without the common sense protection of a defence of ‘reasonableness’ will tenants be evicted for the most minor contractual breaches?

Finally, we note PRS evictions will no longer be dealt with by the Sheriff Court and instead will be dealt with by the First Tier PRS Tribunal. This change in policy (for reasons of cost savings) does concern us because losing the roof over your head is such an important issue that it should be dealt with by an experienced and more senior judge.  We also question how can PRS Tribunals be seen to be genuinely impartial when their chairs are often part-time judges employed or engaged by landlords in private practice to undertake eviction actions?"

Monday, 1 December 2014

Govan Law Centre welcomes FCA clamp down on payday loan 'brokers'

Govan Law Centre (GLC) has welcomed the Financial Conduct Authority's (FCA) new consumer credit rules for payday loan credit brokers as an essential measure to tackle the exploitation of consumers from a new breed of credit brokers  (the new rules will form part of the CONC rulebook with effect from 2 January 2015).

Customers across the UK looking for a payday loan online are regularly duped into thinking the company they are giving all of their personal information to is a payday loan company, when in fact it is a 'broker' who will typically charge a fee of £50 to £100 for passing on the customer's details to multiple third parties, who then often impose charges themselves.

GLC's Principal Solicitor, Mike Dailly said: "We believe payday loan brokers have been ripping people off for far too long in the UK. They mislead consumers into thinking they are the loan provider when in fact all they do is pass on data to the detriment of people who are then subjected to a series of unexpected charges taken from their bank account without informed consent, often from multiple third parties. We are confident the rules will protect most consumers - as once customers know the broker is proposing to charge them the equivalent of money for old rope, they will avoid these exploitative middlemen". 
Since July this year the Royal Bank of Scotland has reported that payday loan brokers have attempted to take money out of their customers accounts more than 1 million times - with 25,000 being successful - netting £1.1m, as against £60m if all attempts had been successful - for RBS/Natwest customers alone.  
The new FCA rules will ban credit brokers from charging fees to customers, and from requesting customers’ payment details for that purpose, unless they comply with new requirements ensuring that customers are given clear information about who they are dealing with, what fee will be payable, and when and how the fee will be payable.                                                 
The FCA’s concerns relate to:
  • a lack of transparency, resulting in consumers often not realising they are dealing with a broker rather than a lender;
  • fees being taken without informed consent, for example where terms and conditions are hidden or misleading;
  • consumers being misled as to the purpose of giving their payment details;
  • firms passing on consumers’ details, including their payment details, without informed consent, to other firms who also take a fee; and
  • consumers facing difficulty in identifying the firm that has taken a fee, and in obtaining a refund from the firm or a response to their complaint.
Thew new rules will also require credit brokers to:
  • include their legal name, not just their trading name, in all advertising and other communications with customers;
  • state prominently in all advertising that they are a credit broker and not a lender; and
  • report quarterly to the FCA listing their website domain names, if they charge fees to customers.
Consumers will also have a 14-day right of cancellation where credit broking contracts are entered into as distance contracts, for example online.
Over 40 per cent of consumer credit complaints received by the FCA relate to credit brokers, 80 per cent of which relate to firms who charge upfront fees. The FCA has also received relevant intelligence from consumer groups and others who are seeing increasing complaints from people who have had money taken from their accounts unexpectedly and often by more than one broker.
The FCA is investigating a number of credit broking firms; seven firms have been stopped from taking on new business and, to date, three further cases have been referred for enforcement action.