Local Government Committee, 12 Jan 2000

Meeting date: Wednesday, January 12, 2000

Official Report 209KB pdf

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Abolition of Poindings and Warrant Sales Bill

The next item is the Abolition of Poindings and Warrant Sales Bill. I welcome Alan Adams of Glasgow City Council protective services. The procedure is that after you give a presentation, I will open the meeting up for questions. I will sum up at the end.

Good morning. I suspect that members will have copies of the letter that I sent to the clerks some weeks ago. As I mentioned to the committee clerk in a recent telephone conversation, there is not much that I can add to the text of that letter, but as an introduction I will remind members of my background. I work in the consumer and trading standards division of Glasgow City Council protective services. The division has a statutory responsibility to enforce a wide range of consumer protection and fair trading legislation, which more and more we try to do in partnership with legitimate trade in the city.

As a non-statutory service, we deliver a number of advisory services, for which I have responsibility. They include consumer advice, through a consumer advice centre, and money advice and debt counselling services through our main office and a number of community projects that we supervise. The money advice service began a few years ago. It grew out of the consumer advice service that we had run for some time, but also drew on our experience of the enforcement of the Consumer Credit Act 1974, which was our statutory responsibility. An amalgamation of our expertise in consumer credit matters and in counselling helped us to provide a debt counselling and money advice service.

In view of remarks that were made at previous meetings, I should make it clear that I am not representing the views or policies of Glasgow City Council in any way. The short note of evidence that I have provided is based on our officers' experience with their clients. Most of the clients who come to us for assistance are neither feckless nor reckless. They had been managing their affairs fine until unforeseen circumstances such as the loss of a job or overtime, or a partner leaving them with multiple debts. As most of our clients want to pay whatever they have to pay, we have a large area of common ground with creditors and other agencies. Our role is to put clients' financial affairs in order and, by doing so, help to put their lives back in order as well.

Our experience—and I draw on 20 years' experience of mixing with and managing money advisers—suggests that poindings and warrant sales do no good at all. Statistics indicate that very few poindings are followed up by warrant sales, which is certainly our experience. Scores of poindings have been carried out, but I can count the number of warrant sales that have been carried out on the fingers of both hands.

Our clients' experience indicates that poindings are invariably used to frighten debtors who are already greatly stressed by their situation. I notice in this morning's press that, at yesterday's Justice and Home Affairs Committee meeting, someone suggested that poindings and warrant sales were a means of unlocking sums of money. Our clients do not have large sums of money that can be magically unlocked by a poinding or a warrant sale. The threat of such measures causes only greater distress to people who are in difficulty.

Because most of our debtors have very few assets, poindings generally value goods at sums that in no way cover the outstanding debt and most of them will meet only the sheriff officer's fees. Our experience suggests that poindings and warrant sales are aimed at the poorer end of society. In general, only goods that are necessary for the running of the household are poinded. For example, televisions and video recorders are often the only means of information, news and entertainment for the family, particularly the children.

I have brought one or two case studies with me. Do you want me to run through them, or would it be more appropriate to ask whether members have questions at this stage?

Perhaps when we are asking questions, you might use the case studies as examples.

Right.

The majority of poindings that are carried out arise from council tax arrears. We feel that that is no way for council tax to be repaid. As I said earlier, people who are subject to poindings and warrant sales do not have large sums of money that such measures can magically release.

There is a danger that people will be pushed into the hands of legal and illegal moneylenders to find the money to meet their debts. Most of our clients fall into the "can't pay" rather than the "won't pay" category and come to us because they want to sort out their affairs. I am happy to say that we can do that in most cases by arriving at a payment arrangement that satisfies both the creditor and the debtor.

Commercial creditors could do more to avoid putting their debtors at the sharp end of a poinding or warrant sale. If the creditors who deal with the disadvantaged sector of the population were to underwrite their business more correctly—if I can use that word—such situations might not arise with the same frequency. For example, some mail order companies seem to use the poinding and warrant sale mechanism of civil diligence in the hope that they can poind the goods that have been sold through their catalogues and recoup some of their money. However, such measures cause only distress to the folks who are already in difficulty.

As I state in the final part of my letter, the director general of the Office of Fair Trading might be interested in information that showed that companies were underwriting their credit business in a way that resulted in an unduly high number of poindings and warrant sales. Members might be aware that everyone involved in the provision of credit has to be licensed by the Office of Fair Trading. However, before a licence is granted, the director general has to be satisfied that the applicant is fit to hold it; furthermore, he has to be satisfied that the licensee is fit to continue to do so during the currency of the licensing period. He can take into account whether the creditor's activities are lawful, which gives him wide discretion in determining whether creditors are fit to hold a consumer credit licence. The director general might be interested in information that we—or other agencies that are involved in this area of work—have on this issue.

Thank you very much. Before I open up the session to the rest of the committee, I want to ask a couple of questions.

Submissions that we have received from people on both sides of the argument, and from neutral parties, suggest basically what you have said: it is more a case of "can't pay" than "won't pay" that ends up in a poinding or warrant sale.

In fact, it is a case of "can't pay and would like to".

Furthermore, the general public do not seem to be aware of a system on the basis of a summary warrant whereby a person can go back to court and offer to pay off a debt by a certain amount every week or through regular lump sums. Do you have any thoughts about that?

Your other comment about using the benefit system to pay off debt was interesting. Fuel debt and electricity bills could be paid directly from benefits, if the client so wished. Could you expand on the idea of collecting debt through benefit, with the agreement of the client? When would it be appropriate to do that? Benefit is an interesting word—the money they get from the Government is hardly a benefit.

Do you agree that we are not getting across to the general public the fact that there are means to pay off debts before reaching a situation of poinding and a warrant sale?

Sadly, most people who come to us come too late. That is the common experience of agencies involved in money advice and debt counselling. People come to seek advice because the crisis has already happened. It is very difficult for clients to come to us and tell us that they have failed. However, the fact that they have come means that we can do something with them; usually we can resolve the problems.

It would require a deal of publicity on the part of the local authority and other agencies to advise the public that there are services to assist them. It would also help if more money was available to fund debt counselling services. In the local authority in which I work, budgets are shrinking and we have difficulty in retaining our staff. We know that there is a huge, unmet demand for money advice and debt counselling services. That is clear from the rise of fee-paying debt counselling and money advice services that advertise in the weekly press.

I am afraid I do not have extensive knowledge of the benefits system, but I take your point that any deduction from benefit must involve the agreement of the debtor. I can only imagine that any deduction from benefit would make a small, but significant, contribution to outstanding debt, particularly in relation to council tax.

Many people have argued for warrant sales rather as others do for the atomic bomb: one would never use it, but it is useful to have. If warrant sales were scrubbed—accepting the argument that those who will not pay are still a minority—would there be a need for a stick to compel people to pay?

I am not sure that I like the word "stick", although I know what you mean. Mechanisms to enforce payment are fine when folks have the wherewithal to make payment. It may be that in the area of commercial debt there should be mechanisms to redress the balance between creditor and debtor. I can only reiterate that, in our experience, this system has no effect.

I was very interested in what you said about the Office of Fair Trading. I think that banks and all sorts of other people who lend money act in a totally immoral and wicked manner by making it far too easy for people who should not borrow money to do so. Could we try to make lenders act more responsibly, whether it is the Bank of Scotland or a wee man in a wee office in Muirhouse?

I think that that issue needs to be addressed and I have been talking recently to the media about the ease with which credit is available in the high street. However, I do not think that that problem is the same as the one that we are talking about. Although instant credit is available in a number of high street stores, a bank card or a credit card must first be produced. That means that the people who are given that credit are of a certain financial standing. Most of the people with whom we deal do not have bank cards. They get credit from the local moneylender or a mail order catalogue. We can deal with moneylenders, legal and otherwise, through the mechanisms of the Consumer Credit Act 1974, but there might have to be a decision taken on the ease with which credit can be obtained.

Councils have a statutory right to collect debt. It seems to me that it is the threat of the warrant sale, rather than the poinding, that makes people pay. Nobody seems to have come up with a humane yet effective replacement for the process. Have you any ideas? You seemed to suggest that some commercial debtors use poindings and warrant sales almost as a first step in debt collection: people receive goods, do not pay and are immediately poinded. If that is the case, I would be interested in examining that further from a legal point of view.

Other mechanisms exist by which debt can be collected but they are sometimes not used. Experience has shown us that someone in financial trouble will place a summons from the sheriff court behind the clock on the mantelpiece along with the other bills. It will be ignored because the person feels that they cannot do anything about it. Our job is to get to those people before the summons arrives. We can negotiate with creditors to arrange a repayment programme that will satisfy both parties and will avoid the need to go to court along with the expense and the distress that that causes. We need to intercede at an earlier date than we are able to in most cases.

It seems to me that information about that should be given to people when they first make a contract with the creditor. People should be made aware as early as possible that they can contact someone if they get into trouble.

The information does not appear on the contract, but there is a requirement under the Consumer Credit Act that a statutory notice must appear on any default notices that are sent out. The notice states that advice can be obtained from a local citizens advice bureau or a local trading standards department. However, I suspect that people see the notice simply as another bit of the form.

It will be in terribly small print, I imagine.

There is a requirement that it should be legible and of the same size print as the other text.

But all the text is small.

It is also formal. Most people will not know about their local trading standards department.

Would it be possible for a court to notify your organisation or a citizens advice bureau when it sends out a notice? I take your point that most people ignore the well-meant notice telling people to speak to trading standards. If the court were to send a duplicate to you, would that work, or would you sink under the burden?

We would sink. We explored with the clerk's office of the sheriff court the possibility of sending out information with the summons, but that is not possible because the summons has to appear on its own in a brown envelope; they are not allowed to put any extraneous material in with it. That might have been a useful way of getting the message across. Please do not suggest that the sheriff courts send us copies of all the summonses.

I am very interested in what you had to say about catalogue companies and the way in which people get credit from them. It is almost as if the less money people have, the more expensive the credit they get. They also get pursued for a smaller amount of debt. As the mother of two young children, the idea of anybody taking my video recorder fills me with dread. Families without resources are losing the very thing without which they cannot entertain their children.

You seem to be saying that we have a very punitive system in which people with nothing are pursued for small amounts of debt, so that there is a stick that can be used against people who can pay and will ultimately do so. There is plenty of evidence that people with huge amounts of debt are very imaginative about dispersing their property so as to avoid repaying it. Would it be right to say that your work shows that the kind of debt recovery with which you are dealing, involving the poorest folk, is disproportionately harsh, and that people who accumulate larger amounts of debt on goods that have cost them proportionately less have a variety of ways of avoiding the difficult process that you describe?

Yes. That is exactly the situation.

Would it be right to say that there is no correlation between threatening those who will not pay and treating those who cannot pay harshly?

No distinction is made between the two when the civil diligence mechanisms come into play.

But there must be in the statistics.

We are using the same tool—the same weapon, the same stick—to beat both parties. With one it may work, but with the other it certainly does not.

I agree with everything that Johann Lamont has said. The innovative ways in which those who can but will not pay get rid of their money make it difficult to establish whether in fact they have the money. It is very difficult, for example, to find out how much someone has in their bank account. The idea of having poindings and warrant sales for those who can pay but will not and not having them for those who genuinely cannot pay and find themselves in deep trouble is difficult to implement, is it not?

It certainly is.

If we are going to move forward with this bill, we will need to establish that the process does not affect people with big debt who can pay. Ultimately, this is not the process by which money is got from them, as they are rarely in the circumstances in which it applies.

That may well be the case, but those folks are not coming to us.

It is the threat of poinding and warrant sale that makes the people who can pay eventually pay up. That takes me back to my original point: unless we have something that is as "threatening" as the poinding and warrant sale for those who can pay, it will be difficult to collect that debt.

You may be right, but the threat is perceived as very real. That may be a wrong perception on the part of someone who has nothing, as there is nothing that can be poinded and sold, but the threat is there just the same. The sword of Damocles is still hanging over people.

However, people who can pay but will not have things that can be poinded. The problem is getting to them.

Yes.

It is almost an upside-down argument. In its memorandum, which you may not have seen, the Executive stated that the board of Customs and Excise obtained summary warrants for more than 30,000 items of debt, but there were only 36 sales. That means that the ultimate measure was taken in only one case in 1,000.

You mentioned the idea that money should be recovered through benefit, that there should be a financial cut-off point of around £300, below which level of debt goods could not be poinded or subject to warrant sale, and that, given the scare tactics, poindings and warrant sales could be retained for larger sums of money. Can you give us examples of other countries that have more humane methods of pursuing debts?

What do you think will be the impact of making credit less available to poor people? The prospect of poor people resorting to loan sharks is a matter for serious concern. The last thing we want in abolishing what we consider to be a barbarous piece of legislation is to make the situation worse by forcing people to borrow from loan sharks because no one else will lend them money. Do you have any comments on those points?

I have forgotten what the first point was.

The first point was about a cut-off point.

Our experience indicates that it would make no difference. Folks who have nothing sometimes owe large sums of money and sometimes owe small sums. The effect of poindings and warrant sales is exactly the same—it has no effect.

That is clear.

There may be other considerations where commercial lenders are involved. At some level, it becomes commercially prudent simply to write off the debt and many commercial organisations do that. However, we cannot do that with council tax.

I do not have any information about the systems of debt recovery that are used in other countries, but I would be happy to search for it if members would be interested.

The third point was about the poor always paying more. Some years ago, the Scottish Consumer Council published a report that indicated that the poor always pay more; they certainly do in this regard. The problem of people being driven into the hands of other, less scrupulous, lenders is a very real one. People may be pushed into borrowing money from family members or from the local collected credit agent, who calls every Thursday anyway for money for other things. In desperation, they may even be pushed into the hands of the local loan shark or illegal moneylender. We know that that happens. If family members can help out, that is fine, but it does not resolve the problem of people being forced to resort to legal moneylenders—the collected credit trade—or to illegal moneylenders or loan sharks.

Often, the role of credit unions is mentioned in discussions about credit and the poor. Credit unions are fine and our council and others in Scotland want to promote and support them. They go a long way towards resolving the savings and credit problems of those who are on low incomes; they fill a gap. However, most of the people with whom we deal do not have the money to make an initial deposit with a credit union. A credit union is like a battery; one can get something out of it only if one puts something in. The credit union solution would therefore not necessarily be appropriate in this case.

The other day, I was talking to someone who is interested in credit unions and we discussed the need to change the attitude of people who are in financial difficulties. Most credit unions now operate children's savings clubs, which are run either through schools or through the credit union offices. Those savings clubs seek to change the culture of youngsters so that when they go out into the world on their own they will have a slightly different attitude towards the need to save for the future. That may go some way towards changing the culture and the problems that we deal with every day.

If you do not think that there should be a cut-off for the amount borrowed, what about household income? If the present legislation were not to be abolished completely, should there be a cut-off so that, if a family's income is below a certain level, the legislation will not be applied?

The family income does not come into play in poindings and warrant sales.

But do you think that it should, especially as the poorest people are the ones who suffer?

Yes, which brings us back to the point that I made earlier: family income could be brought into the equation only if advisers can be brought in to consider the problem before the legal processes start.

Our successes arise as a result of our being in the small claims court or the summary court with debtors so that we can place before the sheriff the schedule of the debtor's means and outgoings in order to arrive at a fair payment for the creditor. Of course, that obviates the need for poindings and warrant sales. However, that requires us to be involved at an earlier stage of the problem than is generally the case.

Given that—whether we like it or not—an element of threat will always be necessary for some people some of the time, who are not all well intentioned, and given that poinding seems to be a threat that works in some circumstances but that clearly does not work when people have nothing, can you think of a substitute threat, which does not have the same punitive effect on the people who are least able to pay?

I suspect that minds greater than mine have been thinking about that for some time but have not come up with anything. Neither have I.

Can you give us a summary of what the minds greater than yours have come up with?

Not really.

Thank you very much, Mr Adams, and I apologise again for keeping you waiting. You have been very helpful.

Thank you.

Right, comrades—[Laughter.] The next speaker is Madge Adams from Braendam Link. Welcome to the committee, and again I apologise that, because we are running a bit behind time, you have had to wait. I hope that what went before was interesting to you. I saw you nodding your head a few times, so you were obviously agreeing with some of what we were saying.

The procedure will be that, after you have spoken to us for a few minutes, I will open up the meeting for questions on points that committee members want to pursue.

Good morning. My name is Madge Adams and I am the home visitor with the Glasgow Braendam Link. The link works with families who are living in poverty. It is committed to bringing about change in the structure of society, so that the voice of the poor is listened to and the issues of the poor are addressed. I am very privileged to be here this morning representing the families with whom I work.

We are currently responsible for supporting 150 families throughout Glasgow—people who are living in some of the most deprived areas of the city. The families who come to us are initially referred to the Braendam family house in Stirling. The referrals are mainly from social work, and the families go to the house for short-term respite from a variety of personal, social and/or domestic issues. We come in at the end of the respite period and offer on-going support to the families.

The Glasgow Braendam Link supports Tommy Sheridan's bill on the abolition of poindings and warrant sales. The evidence that I will present is based on my personal involvement, having supported and worked with families who have had the misfortune to go through the experience of poindings and warrant sales.

One family member who suffers from various physical and psychological conditions had sheriff officers arrive at her house and poind the following items because of an outstanding £600 council tax bill: £5 for a coffee table; £15 for a microwave oven; £5 for a wall unit; £5 for a black and white portable television; £3 for a nest of tables; £10 for a hi-fi. The value that was placed on the poinded items amounted to £43. The fee for the sheriff officers was £61.25, which increased the debt of the family member.

If the sheriff officers had taken the time to speak to the woman and gather information, they would have found out that, like the majority of our families, she was in receipt of state benefit—arrangements could have been made to have payments made to the creditors directly from her income support. The woman appealed successfully at the sheriff court against the poinding on the ground of undue harshness. Arrangements were then put in place for deductions to be made from her benefit to recover the debt, although at another unnecessary cost.

Another family member, who was also on benefit, was recently widowed and suffered from nervous debility and asthma. She was confronted by sheriff officers at tea time in the presence of her children aged five and 12. Officers were there to poind the furniture. When they asked her whether she could make weekly payments, she stated that all she could afford was a couple of pounds. After their visit, she received correspondence advising that weekly payments of £10 had to be made, and threatening further legal action if the payments were not maintained, yet the woman had said clearly that all she could afford was a couple of pounds. She has been unable to meet the payments, and an appeal against the amount of the weekly repayments is pending.

So far, I have mentioned only the financial implications of poindings. However, other issues must be considered—the emotional and psychological impact of poindings. In the first case that I mentioned, the poinded items contributed to the woman's security and comfort and gave her a sense of identity, which are necessary for her day-to-day quality of life. The television and hi-fi were her only sources of entertainment and the coffee table was used as a dining table from which to eat. Her microwave was an essential item, not a luxury, because the woman has mobility problems and cannot stand over a cooker. Those items were all necessary because of her health.

Both families were clearly traumatised by the experience and admit to feeling humiliated, frightened, harassed and powerless. They claim that the experience added more stress and hardship on top of existing problems. The pittance that was put on their worldly possessions reinforces for some the belief that they count for nothing. Can you imagine what that must feel like?

I would like to finish by quoting Father Joseph Wresinski, founder of Aid in Total Distress Fourth World, with which Glasgow Braendam Link is affiliated. Father Joseph said:

"Whenever men and women are condemned to live in poverty, human rights are violated. To come together to ensure that these rights be respected is our solemn duty."

Thank you for that contribution. Before I open up the meeting to questions, I would like to raise two issues that arose from something that I asked a previous speaker. You have experience of debt being repaid through stopping state benefits at source.

I am not saying that that is the answer. I do not know what the answer is. All I know is that people are traumatised and frightened. When push comes to shove, people want to pay. As Alan Adams mentioned, people go to moneylenders and put themselves into further debt.

Would you agree that the information that people can pay something up every week, or that there may be the facility to pay so much every so often, does not get to them quickly and clearly enough?

The information is not clear enough. Many of our families also have problems reading and writing. I do not know how to ensure that the information gets to people. We encourage people to use citizens advice bureaux, Money Advice and welfare rights officers.

You mentioned CAB and Money Advice. In your opinion, how big is the gap in what is presently on offer and what should be on offer—for example, in the cases that you outlined?

There might be a four to six week waiting period for an appointment to see someone at the CAB, depending on the office. That adds further stress. A person may know that court proceedings have been put in motion, but they cannot stop it if they do not get an appointment. We encourage our families to contact their local councillor. There are not enough resources available to meet the needs of the families.

To take on board Colin Campbell's point about the alternatives, the beefing up of CAB, Money Advice and local government services is closely linked to what we are talking about today.

It is important to make more resources available.

The better use of welfare rights officers in local authorities is also necessary.

That service is very limited.

Yes, there are not as many welfare rights officers as there used to be.

A councillor who has experience of people with problems paying their council tax told me that one difficulty is that, when the recovery of the debt goes out of the hands of the council, things become less flexible and there is less ability to negotiate. Is that your experience? You described a case in which an unreasonable demand was made for a payment that the woman had already said that she could not pay. We could require that, once the matter goes to a debt recovery agency, there should be an obligation on that agency to be more flexible and willing to meet someone with difficulties to arrange a reasonable repayment. What you say shows the importance of getting help and advice when the matter is still at a stage at which people can be more reasonable.

You talked about the difficulties for families who have this experience. Has any work been done on the impact that it might have on children? Some authorities have argued that—on the basis of best value—there is no point in pursuing warrant sales, because they cost more than they recover. The experience of warrant sales can put pressure on all the agencies, as youngsters are not able to go to school and families find it much more difficult to keep things together; the agencies must offer crisis support because the children and families are under pressure and cannot maintain their normal lives.

We must also consider the message that that gives to the children.

You must have experience of youngsters who take all the worry and anxiety on themselves.

Yes, I do. We work with more than 150 families. Another issue is that youngsters cannot have the designer gear that some of their friends have. That is because the majority of our families are on state benefit.

That also explains why families take on catalogue debt—it is often because of the pressure put on children. I know of youngsters who were bullied and would not come to school because they did not have the right gear. That sounds silly, but it is a real experience for children. Families can get themselves into serious debt because of it.

Councillors and council officials argue that, in pursuing council debt for non-payment of council tax or poll tax, they bend over backwards to ensure that the payment is only £2 if that is all that the person can afford. That is the picture that they paint.

However, there is also commercial debt of the kind that Johann Lamont referred to—mail order companies, shops and so on. Do commercial companies pursue debt differently? Are they inclined to be more active in pushing people down the road of poinding and warrant sales? Do you agree with what councils and councillors tell me that they rarely go down that road but try to come to an accommodation and to help as soon as the debt appears in the system?

I cannot comment on what you say about catalogue companies, as the majority of our families do not have access to catalogues. They might have access to Provident, perhaps, or to Crazy George's, where they pay back more than a third of the original cost in interest. Most of our families are pursued for council tax debts.

Do you agree with the defence that councils use when they say, "We rarely go as far as poinding and warrant sales. Before things go out to sheriff officers, we are in dialogue with people. There is a payment system?"

No, I would not agree with that.

That is interesting.

You talked about council tax arrears, but are many of your families being pursued for poll tax arrears?

Yes.

Do you think that poll tax arrears should be written off in Scotland, as they have been in England and Wales?

If you are asking me personally, my answer is yes, as I have seen the trauma that those debts have caused.

What proportion of the 150 families that you deal with have poll tax arrears?

I would say that more than half do.

Therefore, writing off those arrears, as has happened in England and Wales, would relieve a lot of debt.

Definitely.

As there are no further questions, I thank Madge Adams for attending the meeting—her evidence has been helpful and interesting. I am aware of the Braendam Link—I visited the organisation while wearing a different hat. We may call you to another meeting, Madge, if we think that we need more information from you.

As we will move on to housekeeping matters now, the official reporters may leave and have lunch.

Meeting continued in public until 12:20.