Bankruptcy and Diligence (Scotland) Bill: business and regulatory impact assessment

Consultation

Within Government

16. There has been full consultation across the Scottish Government. HMRC was a member of stakeholder-led working groups, and other relevant bodies were included in the public consultations. Additionally, the Scottish Courts and Tribunals Service was represented on the Diligence Working Group.

Public Consultation

Diligence Review

17. In 2015, AiB sought initial feedback from messengers-at-arms and sheriff officers on the effectiveness of current diligence provisions. This helped shape a diligence review undertaken by AiB in 2016 and formed the basis for a wider public consultation on diligence measures which closed in November 2016.

18. The Scottish Government then brought together a number of stakeholders, in 2018, to form a diligence working group. The group members were from a wide range of stakeholders with representatives from the insolvency profession, sheriff officers, the legal profession, courts, the banking sector, creditors and the debt advice sector. Their remit was to review and identify ways to improve the diligence landscape in Scotland to ensure that debt recovery mechanisms were fair and effective for the 21st century.

19. In March 2021, the Diligence Working Group issued a report with their recommendations to improve diligence. These recommendations have formed the basis for the diligence provisions within this Bill.

Wider Review

20. In April 2015, wide ranging bankruptcy reforms were introduced through the Bankruptcy and Debt Advice (Scotland) Act 2014. In 2019, the Scottish Government consulted with stakeholders to gauge how these reforms were working in practice. The Scottish Ministers then committed to undertake a wide-ranging policy review of Scotland's statutory debt solutions, specifically moratorium protection, bankruptcy, Protected Trust Deeds and the Debt Arrangement Scheme.

21. In response to the pandemic, the first stage of the review was to consider changes which could be immediately implemented. This culminated in those changes being introduced through the Bankruptcy (Miscellaneous Amendments) (Scotland) Regulations 2021.

22. The second stage of the review was undertaken by three stakeholder-led working groups formed from a wide body of sector specialists with expertise in debt advice and the operation of statutory debt solutions. The members included money advice professionals, insolvency professionals, creditor bodies and academics. The working groups considered any improvements which could be made to the existing statutory debt solutions.

23. One of the groups considered the recommendations made by the then Economy, Energy and Fair Work Committee who had conducted a short, focused inquiry on Protected Trust Deeds in January 2020. A number of the recommendations made were addressed operationally through the PTD protocol which came into force on 1 October 2021. The group considered the remaining recommendations and agreed that the protocol should be allowed to operate for a reasonable period to gauge its effectiveness.

24. In March 2022, each working group issued a report of their recommendations. The Scottish Government considered those recommendations and subsequently, on 12 August 2022, published a consultation, 'Scotland's Statutory Debt Solutions and Diligence: Policy Review Response', in response to the second stage of the review and the diligence review. The consultation closed on 7 October 2022.

25. At the close of the consultation a total of 46 responses were received, of which 13 were from individuals and 33 were from organisations. On 26 January 2023, the Scottish Government published a summary of responses report.

Other Consultation

26. Further consultation has been undertaken by the Scottish Parliament through the recent inquiry into low income and debt conducted by the Social Justice and Social Security Committee. This inquiry included testimonies, via focus groups, from people on low incomes who have experience of debt. There was also evidence taken at Committee sessions from debt advisers, public sector and third sector organisations, creditors, regulators and the AiB. The Committee's final report "Robbing Peter to pay Paul: Low income and the debt trap" included a recommendation urging the Scottish Government to implement the mental health moratorium.

Business

27. We have not held face-to-face discussions with individual businesses. However, the reviews of diligence and the statutory debt solutions have been stakeholder-led processes with each of the groups representing a broad spectrum of sector specialists and organisations who may be affected by this Bill including representatives from the creditor and business sector such as UK Finance, HMRC, ABCUL and TDX Group, and the public consultations were open to all those who wished to participate.