No gain, just pain in losing debt advice from legal aid

Wilf StevensonLord Wilf Stevenson of Balmacara speaks from Labour’s frontbench on debt-related matters in the LASPO Bill, and DCMS, higher education and trade matters in the House of Lords.


Under the proposals in the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Bill, all legal aid for debt issues, including advice, is excluded from the scope of legal aid – except in the extreme case where a person’s home is at risk.


Debt problems are, sadly, increasingly common, and unless dealt with promptly and effectively can have a major impact on individuals, families and communities. The average cost to the public and in lost economic output can be estimated at over £1000 per debt case, totalling about £1bn a year.


All debt problems are underpinned by complex contractual obligations. In the majority of cases such advice and support take place within a legal framework, which will involve issues of liability, consumer credit contracts, creditors' enforcement powers, statutory debt remedies and enforcement processes within the court system and beyond. When the bailiffs are at the doorstep seeking to seize someone’s goods and chattels, it’s a crisis. Yet, under the present proposals, they would not be eligible for legal aid to contest the original order or to challenge the way in which the order is being carried out.


And there is another dimension to this: most people who contact providers of debt advice have other issues, such as illness, employment problems or relationship problems, which have either caused the debt problem or contributed to it. It is this compounding effect which makes the withdrawal of legal aid for “all debt issues” such a simplistic proposal.


Withdrawing such legal aid will also effectively lead to the closure of the Debt Relief Order (DRO) system, operated by the Insolvency Service. DROs are a quicker and cheaper alternative to bankruptcy for those with no income and no assets. They can only be considered by application via an approved intermediary working for organisations which have to be approved by the Insolvency Service. “Approved Intermediaries” are experienced debt advisers, and the vast majority of them are based in Citizens Advice Bureaux around the country, and they are currently funded by legal aid. 


In 2011, there were nearly 29,000 debt relief orders made, of which 70% were processed by CAB Debt Advisers in their role as authorised intermediaries. CAB has made it clear that they will not be able to employ a sufficient number of approved intermediaries if legal aid is withdrawn.  


It’s a classic catch 22: you can only proceed with a DRO through an authorised intermediary approved by the Insolvency Service. If the legal aid funding is cut there will probably not be any Authorised Intermediaries, and the DRO scheme will be neutered.


Is this really what Ministers intend? This simply cannot be right.

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