Legal News

THE MENTAL HEALTH MORATORIUM
AN IMPORTANT NEW MEASURE IN DEBT RESOVERY IN SCOTLAND

YUILL+KYLE

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The Bankruptcy and Diligence (Scotland) Bill was passed by the Scottish Parliament on 6 June 2024. It is not yet known when it will come into force, but an important milestone has been passed. The Bill brings into force an important new measure in debt recovery in Scotland, namely the introduction of a Mental Health Moratorium.

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HOLDING CYBERCRIMINALS ACCOUNTABLE
MOOIJ -V- PERSONS UNKNOWN

HILL DICKINSON

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In the ever-evolving landscape of cyberspace, legal disputes can arise where the identity of the alleged wrongdoers are shrouded in anonymity. These disputes present unique challenges for the traditional legal frameworks, particularly determining accountability.

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END OF A CHAPTER?
CONSIDERING WIND-DOWN PLANS

GRANT THORNTON

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The FCA’s focus on the content and quality of wind-down plans (WDPs) continues, most recently with the regulator creating a new webpage in March 2024 advising firms how to prepare effective WDPs. All firms are expected to have a WDP in place to enable a firm to cease its regulated activities with minimal adverse impact on its customers, counterparties and the wider markets. The new webpage advises firms on the required components of a WDP. This includes identifying the steps and resources a firm will need to wind-down its business, especially in a situation where resources are limited, and evaluating the...

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STAYING OUT OF HOT WATER
THE FCA’S CONTINUED FOCUS ON FINANCIAL PROMOTIONS: WHAT FIRMS NEED TO DO

WALKER MORRIS

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There can be no doubt that the Financial Conduct Authority (FCA) sees financial promotions as a potential high-risk area for consumer harm. They are the proverbial 'front shop': the way in which customers become aware of different ways to finance a product. The FCA is already starting to flex its muscles on financial promotions. Firms should therefore act now to ensure they are not on the receiving end of any supervision or enforcement visits.

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BANK’S LIABILITYFOR CUSTOMER FRAUD
SUPREME COURT GIVES ITS DECISION

YUILL + KYLE

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The Supreme Court has given its eagerly awaited decision in the case of Philipps against Barclays Bank UK PLC. The litigation involved an “authorised push payment" (APP) fraud.

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LITIGATION FUNDING
POST-PACCAR LEGISLATION TO BE INTRODUCED

HILL DICKINSON

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The government has recently announced that it will introduce legislation to reverse the Supreme Court decision in PACCAR Inc & Ors v Competition Appeal Tribunal & Ors [2023] UKSC 28. The PACCAR decision reverberated throughout the litigation funding industry when it was handed down, as it held that litigation funding agreements (LFAs) where the funder is to receive a percentage of the damages should be properly classified as agreements falling within the statutory definition of damages-based agreements (DBAs). As such, LFAs were required to satisfy the statutory conditions for DBAs under the DBA Regulations 2013 failing which they would be unenforceable. Many...

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KING V BLACK HORSE LTD
IT’S POSSIBLE TO USE A VEHICLE AFTER REJECTING IT

WALKER MORRIS

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There is often a difficult question where consumers under hire purchase or conditional sale agreements continue to use a vehicle after rejecting it. On 31 January 2024, the Court of Session allowed the consumer's appeal in King v Black Horse Limited & Another [2024] CSIH 3 and decided it is possible for a consumer to continue to use the vehicle after rejecting it.

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WHO GUARDS THE GUARDIANS?
TACKLINE SCAMMERS IMPERSONATING THE REGULATOR

YUILL + KYLE

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We are no doubt all alarmed to learn that the FCA is under attack from scammers who are impersonating the Authority. This is perhaps no surprise when one considers that last year it was reported that in the UK a staggering 41 million people were targeted by bogus calls, texts and emails. According to the bank industry group, UK Finance, this equates to £2,300 per minute or £1.2 billion lost to fraud.

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UNDERSTANDING CP23/21
FCA CONSULTATION PAPER: CONSUMER CREDIT – PRODUCT SALES DATA REPORTING

WALKER MORRIS

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In September 2023, the Financial Conduct Authority (FCA) published a consultation paper ("CP23/21") entitled, "Consumer Credit – Product Sales Data Reporting". Under this consultation, the FCA "seeks views on our proposal to introduce three new Product Sales Data (PSD) returns into Chapter 16 of the Supervision manual (SUP 16)." It adds that the returns "will allow us to collect further data about the consumer credit market from providers of consumer credit products".

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FCA CALLS ON INSURERS TO TAKE ACTION
FAIR VALUE DATA PUBLISHED

AUXILLIAS

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Motor insurers selling GAP policies will find the recent FCA study and publication particularly significant. In a letter to insurers, the FCA warned, more action was needed to guarantee positive consumer outcomes, especially considering new Consumer Duty.

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NEWS FROM SCOTLAND
SOME NEW CHANGES AND SOME TIDYING UP OF THE OLD

YUILL + KYLE

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The Bankruptcy and Diligence (Scotland) Bill introduces a number of measures which modify current diligence (judgment enforcement) measures, to either improve them or clarify some of their provisions. However, perhaps of greatest impact to the credit industry will be the introduction of a mental health moratorium on debt recovery action should an individual have a mental illness.

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CO-MANUFACTURING – CONSUMER DUTY
CO-MANUFACTURING UNDER THE CONSUMER DUTY

AUXILLIAS

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In this article we provide an overview of co-manufacturing under Consumer Duty and some of the primary considerations for consumer credit firms.

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BREACH OF CONTRACT
WHAT IS A MATERIAL BREACH?

WALKER MORRIS

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Whether a breach of contract is ‘material’ (or ‘substantial’ – in this context, the terms are generally interchangeable) can be difficult to ascertain. But the answer can have a major impact on the consequences flowing from such a breach. The issue crops up often in commercial disputes. In this briefing, we explain how the approach adopted by the courts can offer practical assistance for contract negotiators and commercial parties.

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KEEPING UP WITH THE TIMES
THE IMPENDING REVIEW OF THE CONSUMER CREDIT ACT

GATELEY LEGAL

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“Modernise, modernise, modernise!” seems to be the Government agenda for reform of the Consumer Credit Act 1974 (CCA). It is widely agreed that the existing regime is outdated, complex and restrictive for both lenders and consumers alike and reform is needed to bring in legislation that is forward thinking and in line with the operation of today’s financial services market. Since the CCA’s implementation over 50 years ago, we have seen significant changes in consumer habits, such as the introduction of buy now pay later credit, the creation of new payment technologies and a surge in online ordering. The market has long complained that the current rules are no longer fit for purpose and need to be dragged into the modern world of ApplePay, Klarna and Amazon delivery.

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A STEP TOO FAR
SHERIFF APPEAL COURT: ALAN KING V BLACK HORSE + PARKS (AYR)

BRODIES

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The Sheriff Appeal Court (SAC) recently considered whether a hirer under a hire purchase agreement was entitled to rely upon his rejection of a motor vehicle when he had continued to use the vehicle after rejecting it.

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EXPERIENCING TECHNICAL DIFFICULTIES…
A CONSEQUENCE OF THE RISE IN ONLINE BANKING FOR CREDITORS IN SCOTLAND?

YUILL + KYLE

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Many readers will be aware that a Bank arrestment is a commonly used enforcement tool in Scotland post the granting of a Decree (Judgement) for payment. It allows a creditor to secure any funds (over and above the statutory protected minimum balance) in a debtor or customer’s bank account and can be a valuable recovery option if the timing is right. Service is carried out by Sheriff Officers in person, generally at a local branch of the relevant Bank.

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AN AXE TO GRIND?
SAFETYNET CREDIT V IMPAKT CLAIMS

AUXILLIAS

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You may recall the claims management regulator was a unit of the Ministry of Justice and it regulated companies providing claims management services to England and Wales. Its regulatory responsibilities – which lie within the FCA Handbook under Conduct of Business sourcebook – passed over to the Financial Conduct Authority (FCA) on 1 April 2019, and this was recently tested in the case of SafetyNet v Impakt. SOURCEBOOK RULES The sourcebook rules dictate that before a claim is pursued against a firm on behalf of a customer, the claims management company (CMC) must take reasonable steps to investigate the existence and merits...

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TRIMMING THE FAT…
REFORM OF THE CONSUMER CREDIT ACT: A REVOLUTION?

Addleshaw Goddard LLP

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This year marks what could be a major revolution in UK consumer credit law, with HM Treasury (HMT) in June announcing planned reforms to the Consumer Credit Act (CCA). The CCA regulates all credit cards, personal loans and retail asset finance. The Government will move retained provisions in the CCA from statute to sit instead under the framework of the Financial Conduct Authority (FCA). Firms and consumers alike should keep an eye on these developments. For firms, depending on how the regime takes shape, changes will likely be needed to their systems, front and back books, agreements, servicing arrangements and policies.

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FOR CONSIDERATION
REVIEW OF SCOTTISH JUDGMENT (DILIGENCE) ENFORCEMENT

Yuill + Kyle

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The Scottish Government’s ministerial forward to Scotland’s stage two diligence review cites a number of factors for its necessity including the pandemic and cost-of-living crisis. Those with problem debt, including those with mental health issues, need greater support. There are also helpful suggestions to make some of the current enforcement options more effective for creditors. Following the consultation, a stage three review will take place.

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A BUMPY FLIGHT?
LEGALLY REPRESENTED CLAIMS: THE PERILS OF PAYING DIRECT

Hill Dickinson LLP

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Iain Campbell explains the unwelcome implications of a recent decision in the UK supreme court.

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LAYING THE GROUNDWORK
THE PATH TO THE CONSUMER DUTY

Kingsley Napley LLP

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In its 2022 – 2025 strategy paper, the FCA stated that “by acting earlier and more assertively we will prevent harm and intervene before problems become systemic”. Consumer protection is at the heart of this and the FCA’s increasingly assertive supervisory approach is likely to put significant pressure on retail lenders and other firms operating in the consumer credit sector.

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THE ART AND THE SCIENCE
PART 36 OFFERS EXPLAINED

Gateley Legal

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Litigation is expensive for everyone involved. It’s unsurprising, then, that the Civil Procedure Rules (“CPR”), which underpin litigation in England and Wales, contain extensive provisions encouraging and facilitating settlement, both before and after proceedings are issued. One such provision is the unique and self-contained settlement procedure contained in CPR Part 36. Settlement offers made pursuant to this Part are, inventively, called “Part 36 offers”.

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MOVING TO THE CLOUD
HORIZON SCANNING FOR FINANCIAL SERVICES FIRMS

Walker Morris LLP

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Use of cloud technology in streamlining processes and enhancing the customer journey in the sale and maintenance of financial services products offers businesses obvious benefits, with the Bank of England (BoE) stating that “using the cloud allows businesses to work in a more agile way…from file sharing to managing fraud”.

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EARNING ARRESTMENT
IT’S DONE DIFFERENTLY IN SCOTLAND

Brodies LLP

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This series looks at the enforcement options available to creditors to recover sums due by a debtor in Scotland. In a previous edition we looked at Inhibition which is similar to a Charging Order in England. In this edition, we now turn to look at how Earnings Arrestment operates in Scotland.

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FAIR AND SQUARE?
REGULATED AND EXEMPT LOAN AGREEMENTS

Hill Dickinson

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Liverpool, the location of the 2022 CCTA conference, is also the backdrop for a recent decision on the boundary between regulated and exempt agreements, and on the ‘unfair relationship’ question.

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INHIBITION
IT’S DONE DIFFERENTLY IN SCOTLAND

Brodies LLP

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In the context of debt recovery litigation, the obtaining of a decree (judgment) should not be an end in itself and this is particularly true in relation to volume debt recovery litigation. The purpose of a court decree is to enable the creditor to obtain payment from his debtor of the sums of principal, interest and expenses (legal costs) due in terms of the decree. To achieve payment, either in full, or by instalments over a period of time, it is important that the creditor has a clear and defined strategy in relation to, firstly, the selection of accounts for litigation, to ensure that they are appropriate to be litigated on and, secondly, the enforcement of decrees to maximise the prospects of repayment.

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A LANDMARK JUDGMENT
LLOYD VERSUS GOOGLE LLC

Hill Dickinson

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The dispute involved former director of consumer watchdog ‘Which?’, Mr Lloyd against Google LLC alleging breach of duties as data controller under the Data Protection Act 1998 (DPA). Mr Lloyd alleged that Google had been secretly tracking online activity of millions of iPhone users and had used the data for commercial purposes without the users’ knowledge/consent. He sought to bring the claim acting as representative for all individuals affected. Compensation of £750 was sought in respect of each individual, which would result in a total damages order of £3 billion if successful.

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SIGNIFICANT CHALLENGES AHEAD
REVIEW OF THE PRE-ACTION PROTOCOLS

Restons Solicitors

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The start of 2022 sees the continuation of the Civil Justice Council review of the pre-action protocols (PAP), which may result in changes to the process. While some would be welcomed, others may present significant challenges to the debt collections industry. There are four key areas which are being looked at for debt claims; however, one key message should absolutely remain the same and that is to encourage engagement between the debtor and creditor (or their appointed representative). Increased engagement helps to reduce the number of claims being initiated through what is already a creaking justice system. The original debt PAP unfortunately did not have that desired effect.

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CROSSING THE WATERS
HOW TO FUND YOUR BUSINESS

Walker Morris

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Lending money is what you do. Swapping your lender hat for a borrower one requires careful consideration. Navigating the various funding options available with the specialist lenders in the market is about finding the best fit for your business. And what about raising funds via issuing shares? The following sets out the pros and cons of common funding options for consumer finance businesses.

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DIVERSITY AND INCLUSION
A REGULATORY ISSUE

Addleshaw Goddard

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Diversity is by its nature diverse. When the Financial Conduct Authority (FCA) talks about diversity in financial services firms, it is referring to a broad range of backgrounds and characteristics which apply to a firms' work force and leadership, as well as the customers it serves. Through several speeches and papers published over the last year or so, the FCA has clearly indicated that diversity and inclusion are priority considerations and will remain so in the coming years.

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UPSETTING THE APPLE CART
DEBT DEFERMENT: CCA/FSMA IMPLICATIONS

Locke Lord

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The Court of Appeal in CFL Finance v Laser Trust (2021) decided that the Consumer Credit Act 1974 (“CCA”) can apply to a settlement agreement, where payment of a debt by an “individual” is deferred, even if the CCA did not apply to the debt prior to the settlement, as in this case, where a loan of £3 million had been made to a company, guaranteed by Mr Gertner.

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SETTLING THE MEANING OF CREDIT
CFL FINANCE LTD V GERTNER

Gateley

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Until very recently it was considered common ground that terms embodied in a settlement agreement or Tomlin Order, by which parties settle a dispute, are not subject to the CCA. However, the recent Court of Appeal case of CFL Finance Ltd v Gertner raises the possibility that some settlement agreements and/or schedules to Tomlin Orders entered into between funders and individuals might be regulated by the CCA.

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A HIDDEN COST?
COMMISSION CLAIMS AND THE DECISION IN WOOD AND PENGELLY

Walker Morris

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We are seeing a growing number of claims by borrowers concerning alleged undisclosed commission payments by lenders to brokers/agents/introducers. If the borrower was not aware that commission would be paid at all, such payments may be classed as 'secret commission'. If they were aware that commission may be payable but not of the amounts, such payments may be classed as 'half secret commission'. In both scenarios, the broker and lender may face claims from the borrower.

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A TAX ON BUSINESS?
THE DOUBLE WHAMMY OF THE CIVIL COURTS

Equivo

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Those using the civil courts to recover debt have faced a double whammy during 2021. Firstly, the government’s response, in March 2021, to its consultation on aligning fees for paper based and online claims, was that online discounts had fulfilled their role in persuading major users to move online and it was now unfair to distinguish between those who continued to issue on paper and those who issued online.

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UNDISCLOSED COMMISSION
A SOURCE OF RELIEF?

Locke Lord

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The failure by a broker to disclose to a borrower that the lender will be paying commission to the broker can in certain circumstances enable the borrower to unwind the loan, without having to pay interest and the lender having to pay the commission to the broker. In March 2021, the Court of Appeal lowered the bar for borrowers seeking such relief.

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PLEASE MIND THE GAP
BROKER OVERSIGHT

Addleshaw Goddard

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Lenders' being subject to regulatory obligations for oversighting their credit brokers are nothing new – the OFT "Credit brokers and intermediaries guidance" in 2011 set out the expectation for lenders to take responsibility for the actions or omissions of their brokers and take reasonable steps to satisfy themselves that business associates (including brokers) weren't engaging in unfair business practices or acting unlawfully. Since the FCA became responsible for regulating consumer credit in April 2014, lenders have had obligations under CONC to oversight their brokers and ensure they have the correct permissions.

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HOOPS AND HURDLES
UPDATE FOR CREDITORS

Gateley

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Over the last two years we have seen the government make a huge shift towards helping debtors manage their finances and their mental wellbeing.  While this is fantastic for debtors, creditors are forced to jump through more hoops and over more hurdles to bring the cash in. This article covers a few of the changes and what creditors must do to stay compliant.

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LEES V. LLOYDS
COURT DISMISSES REPETITIVE DATA SUBJECT ACCESS REQUESTS

Gateley

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In the case, Lees v. Lloyds, the data subject, Mr Lees (the claimant) issued a claim against Lloyds Bank Plc (Lloyds) for failing to provide an adequate response to various Data Subject Access Requests (DSARs) in breach of the Data Protection Act 2018 (DPA 1998) and General Data Protection Regulation (GDPR).

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RESPONDING TO DATA BREACH CLAIMS
A COMMON SENSE APPROACH

Walker Morris LLP

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In the run-up to GDPR, the focus was on the fines that data protection regulators can impose for infringements. Another issue that has become increasingly significant is that of data breach claims, compensation and costly group litigation. Under GDPR and the Data Protection Act 2018, individuals can claim through the courts for compensation for "material" (i.e. financial) and/or "non-material" damage, including distress and loss of control over their personal data.

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FORBEARANCE
TOO MUCH OF A GOOD THING?

Brodies

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The Financial Conduct Authority (FCA) warned consumers in its Mortgages and Coronavirus: Information for Consumers Guidance of 27 January 2021 that: "If a repossession on your home is stopped and you don’t keep up with payments, the total amount you owe will increase. This is because interest will continue to be charged (plus any fees and charges you may owe according to your lender’s tariff of charges). This means you are likely to get less back later if your property is repossessed and then sold by your lender. If property prices fall in the time between now and when your property is sold, you might get less back, or even nothing, if your property is sold for less than you owe."

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A NEW SHERIFF IN TOWN?
CONSUMER SCOTLAND ACT 2020

Brodies LLP

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Consumer Scotland Act 2020: A New Sheriff in Town? The Consumer Scotland Act 2020 was passed by the Scottish Parliament on 6 May 2020 and received Royal Assent on 9 June 2020. The Act provides for the creation of a new consumer body to be called ‘Consumer Scotland’ which the Scottish Government intends to be ‘an unashamed champion for consumer interests and rights’ in Scotland. Business Minister, Jamie Hepburn, commented that: “Consumer Scotland will be a dedicated champion for everyone across Scotland, focused on investigating consumer harm and developing solutions to tackle it.” The Act may not yet be on the radar of businesses operating in the business to consumer sector in Scotland, but it probably should be.

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A DIGITAL DREAM
DOING BUSINESS AT A DISTANCE

Shoosmiths

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Recently published figures show that the battle for new customers is tilting in favour of financial services businesses prepared to engage with their customers at a distance. One particular and instantly recognisable lender attracted most account switchers for the first time as ‘customers desert high street rivals’,

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SCHOOL’S OUT
A REAL WORLD LESSON IN PUBLIC SECTOR LEASING

Gateley Legal

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The beauty of the leasing industry is that almost anything can be leased to almost anyone (subject to satisfactory credit checks). Need to finance a helicopter, sixteen dumbbells, a Volkswagen, and a deep fat fryer? Sure. There’s a finance house out there willing to talk numbers. Sole trader/limited company/partnership/plc? Not a problem. The leasing industry operates across the regulated and unregulated sectors and welcomes all. Well, almost.

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