Consumer Law Update



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Consumer Rights Bill 2013


This Bill was published on 12th June 2013. It is expected to be become law and take effect some time in 2014. The Bill, if passed in its current form, will have a major impact on consumer rights, Unfair Contract Terms and investigatory and enforcement powers. The stated aim is to clarify rights on goods and services for consumers and businesses. The Bill will not apply to mortgages and certain other contracts.

The bill is split into 3 parts. Part 1 covers consumer contracts for goods, digital content and services.

The Bill adopts the definition of a “trader” from Consumer Rights Regulations as a person acting (personally or through an agent) for purposes relating to that person’s trade, business, craft or profession. The Bill also adopts the definition of a “consumer” as an individual acting for purposes wholly or mainly outside that individual’s trade, business, craft or profession. The onus is on the trader to prove this.

The Bill attempts to clarify existing law on satisfactory quality, narrating that goods should be fit for purpose, as described, conform to sample etc.

There is to be an assumption that goods are faulty if they do not conform to contract at any time within the first six months from delivery. The onus is on the trader to prove otherwise.

The Bill provides new right of “early rejection” provides consumers with a statutory right to reject goods within 30 days and seek a full refund. It also provides a right to repair or replacement within a reasonable time without causing significant inconvenience to the consumer. The trader will require to meet the costs involved. Where the consumer requests or agrees to a repair or replacement, the 30 day early rejection period stops running whilst the consumer waits for the goods to be repaired or replaced. Thereafter, the time limit for early rejection is calculated with reference to, either 7 days after the waiting period ends, or whatever the time limit for rejecting the original goods would have been plus the length of the waiting period, whichever date is later. Similar rights are created in relation to digital content.

Contracts for services must be carried out with reasonable care and skill, for a reasonable price and performed within a reasonable time. If the trader fails to do so the proposals are that the customer is entitled to require repeat performance (unless this is impossible).The trader must provide it within a reasonable time, without significant inconvenience and bear the cost. If the repair time is not reasonable or there is significant inconvenience, the consumer may be entitled to a price reduction.

The Bill also seeks to consolidate legislation in relation to Unfair Contract Terms. An unfair term causes significant imbalance to the detriment of the consumer. It is anticipated that there will be a movement to qualify the terms of this part of the Bill. Part 1 of Schedule 2 of the Act has a non exhaustive list of unfair terms. An Unfair term will not negate the contract, only the unfair term.

A provision has been inserted to have the courts consider the terms of a contract in any court action, even where the contract has not been disputed by the consumer. This is to follow recent decisions of the European court.

The final part of the Bill mainly provides for investigatory powers of “Enforcers”. These are detail in Schedule 5 of the act. In relation to collection, there is little significance.

Repossession Actions


There have been dramatic changes in repossession procedures in Scotland in recent years. These have been mainly driven by the Home Owner and Debtor Protection (Scotland) Act 2010 as well as the crucial decision of the UK Supreme Court in Bank of Scotland -v- Wilson (2010) UKSC 50.

The rights of home owners have been strengthened through the 2010 Act. Amongst other things this Act stipulates that all such cases will call in Court.

Pre-Action Requirements

Importantly Section 4 of the 2010 Act laid down “pre-action requirements” (PAR).

Under the PAR creditors must provide a home owner with clear information about:- (a) the terms of the security; (b) the amount due to the creditor under the security, including any arrears and any charges in respect of late payment, broken down so as to show i) the total amount of the arrears; (ii) the total outstanding amount due including any charges already incurred; (c) the nature and the level of any charges that may be incurred by virtue of the contract to which the security relates if the default is not remedied; and (d) any other obligation under the security in respect of which the debtor is in default.

The creditor must also make reasonable efforts to agree a repayment plan (with the creditor being able to evidence this). We require to show the court that the creditor:- (a) made reasonable attempts to contact the debtor to discuss the default; (b) provided the debtor with details of any proposals made by the creditor, set out in such a way as to allow the debtor to consider the proposal; (c) allowed he debtor reasonable time to consider any proposals made by the creditor; (d) notified the debtor within a reasonable time of any decision taken by the creditor to accept or reject a proposal made by the debtor and, where the creditor rejects such proposal, the creditor has provided reasons for rejecting the proposal in writing within 10 working days of notifying the debtor it is rejecting the proposal; (e) considered the affordability of any proposal for the debtor taking into account, where known to the creditor, the debtor’s personal and financial circumstances.

The creditor must not commence court proceedings for repossession of the debtors taking action to clear the arrears or outstanding loan balance within a reasonable time and the creditor must provide the debtor with information on how to obtain advice about their debt management problems.

Where the debtor has failed to comply with a condition of an agreement reached with the creditor in respect of any proposal and the debtor has not previously failed to comply with a condition of the agreement (a) the creditor has given the debtor notice in writing of its decision to make an application and the ground of the proposed application before making the application; (b) the creditor has not made an application before the expiry of 15 working days beginning with the date on which the debtor is deemed to have received the notice referred to at paragraph (a); (c) the default by the debtor in respect of which the application is intended to be made has not been remedied during that notice period.

The creditor has provided the debtor with information about sources of advice and assistance in relation to management of debt, including (a) where the security is regulated, any relevant information sheet published by the appropriate regulatory body (b) a local citizens advice bureau or other advice organisation; and (c) the housing department of the local authority in whose area the property which is subject to the security is situated

The creditor has encouraged the debtor to contact the local authority in whose area the security subjects are situated and the creditor has had regard to any guidance issued by the Scottish Ministers.

A creditor is only entitled to commence court action if they have complied with these requirements.

The creditor is required to provide evidence of PAR compliance in the Form 11C which should be lodged with the Court. If satisfactory documentation cannot be produced the action may be rendered incompetent in terms of the Act.

Calling up Notices

The other important recent change in repossession procedure came about as a result of the case Royal Bank of Scotland -v- Wilson (2010) UKSC 50. In November 2010 the Supreme Court determined that Calling Up Notices are required in all cases where creditors seek to instigate repossession for mortgage arrears. This means that prior to raising an action a document giving two months notice to the borrower to repay the whole sum outstanding, including arrears, must be served. The Court has held specifically that the creditor’s default letter in that case did not satisfy the requirements of the 1894 Act. Previously most creditors would raise court action on the basis of “Certificates of Default” which specified the amount of arrears accrued. The impact on proceedings pending at the time was substantial with many actions being dismissed as incompetent.

Recent cases in 2012 have focused on the question of when a creditor is required to comply with PAR in terms of the Application by Creditors (Pre-action Requirements) (Scotland) Order 2010.

The Court has found it is important therefore to consider when a debtor has entered “default”. The Court has ruled on these recent cases that “default” is the point where the Calling Up Notice has expired and not the point where the debtor first went into arrears. A creditor required to provide the PAR prescribed information should do so at the point of default which means after the two month period of the Calling Up Notice and prior to court proceedings being raised.

This decision gave to rise to a second wave of repossession cases that required to be dismissed on competency grounds. As discussed in our earlier telephone conversation it is part of the reason why there are less repossession actions taking place at this moment. (The other reason principally being that creditors do not wish to be left with a large portfolio of properties in the current housing market.)

It should further be mentioned that care should be given not on information about the levels of any charges which may be incurred by virtue of the contract to which the security relates. A bald statement stating to the debtors that they will be liable for “all costs in any arrears charged under the terms of your mortgage agreement that result from the default” has been held to be insufficient.

Once the pre-action requirements have been complied with then a court action can be proceeded with. Notice should be served on all interested parties “tenants, security holders, debtors etc.”

Action must be raised for eviction and sale to allow open possession to be taken of the property. When the case calls in Court the Sheriff must have regard to certain matters where a defence is stated. These matters include the reasons for the default, the likelihood of the debtor fulfilling their obligation on the security within a reasonable time, any action taken by the creditor to allow the debtor to fulfil these obligations, whether the debtor is taking part in a Debt Arrangement Scheme and whether the debtor and other residents will be able to source alternative accommodation on repossession.

Intimation of Assignation


This has long been a difficult issue for Debt Purchasers, Factors, etc in Scotland.

Assignation of the debt is completed with the implementation of an Assignation, Debt Sale agreement, etc. However, it has always been clear in Scots Law that the Assignation requires to be intimated to the debtor. The stumbling block has always been that, in terms of the Transmission of Moveable Property (Scotland) Act 1862, the debtor requires to acknowledge the intimation. Intimation also requires a copy of the Assignation or Debt Sale agreement to be provided. The law has not been updated since 1862. In modern times it is hard to see MP’s passing legislation which restricts consumer’s rights.

In practice intimation of an Assignation has been by way of a simple letter. In any court action where this defence arises, a redacted copy of the assignation has been produced and lodged. This constitutes Judicial Intimation and, although late, can cure any defect.

However, in the recent case of Christie Owen and Davies plc, t/a Christie & Co v Campbell the Extra Division took the view that “Intimate”…. “simply means to ‘make known”’. Accordingly by sending a letter together with a fee note and the agreement, and demanding payment “in accordance with the [agreement]”, the pursuers had properly intimated the assignation.

The Division, approving the treatment of the subject provided by Professor Wilson,13 suggests in obiter dicta that (a) informal intimation is competent and (b) even where the intimation is informal, no acknowledgement is required.