Industry News

DRO eligibility criteria proposed changes 03/03/10

The Government has announced plans to change the eligibility criteria for a DRO (Debt Relief Order) so that people with small pension pots can apply for this low cost debt solution. Insolvency practitioners have complained that the current eligibility criteria excludes those individuals who have built up a small pension of over £300. A recent CAB survey showed 96% of people were excluded because of their pension and of those 78% had a pension pot of under £5k. DRO's were introduced as a low cost alternative to bankruptcy aimed at those with debts less than £15k, assets of less than £300 (up to £1k if they owned a car) and less than £50 surplus income a month.

The Government will consult on these proposed changes shortly.

OFT publishes section 77-79 guidance 01/02/10

The OFT has disagreed with the courts on the issue in its draft guidance for the industry on sections 77-79 of the Consumer Credit Act 1974. These sections allow consumers to request information about their credit agreements. They said that;

lenders and collectors must not threaten legal action if they've failed to fulfil debtor requests for information plus
creditors and debt buyers must notify debtors that they're not allowed to enforce

The review was prompted by the OFT because of concerns that debtors were getting confused and misled into thinking that the sections could be used as a loophole to get their debts written off. The sections do allow a consumer to request a true copy of their agreement but the OFT agrees with the High Court in that it doesn't need to a photocopy or exact copy of the original. If the creditor fails to provide the info, the debt is unenforceable however the OFT state that this doesn't mean the debt is written off. Lenders can then pass the account to a 3rd party to collect and inform the credit reference agencies of the arrears.

The guidance from the OFT is to clarify the legal position and their view on standards expected of the industry. Also to make consumers aware that they may be at risk should they look to use these sections to avoid paying legitimately owed debts.

Delay in Enforcement fees consultation 25/01/10

The Ministry of Justice's consultation on enforcement fees is now not expected to be out until after the general election. There are two parts to the document, the fees element is thought to be completed but the draft regulations on the taking control of goods need further consideration. Although this affects the start of the consultation process it is still the intention to publicly consult in 2010 and implement the changes in April 2012.

Government retreat on Statute of Limitations 08/12/09

The Government recently backed down on proposed changes to the Civil Law Reform Bill much to the relief of the credit industry.

The draft bill had proposed reforms to reduce the period in which civil debts can be collected from 6 years to 3 years. This could have seen businesses forced to write off millions of pounds of debt. The ICM believes that the strong lobbying of those in the credit industry has greatly influenced this decision.

Civil Procedure Rules - 49th update 03/08/09

Effective from April 6th 2009, a new practice direction on pre action conduct has been introduced with the aim of enabling parties to exchange information in order to try and settle an issue without the need to start court action. Please read on for more detail and the changes required in response to the new direction.

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