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I thank everyone for coming along. I want to cover privacy and consumer issues around the protection of information.

The registers will put personal information such as the name and address of an individual assignor or pledge provider into the public domain. An assignation record will also contain the assignation document, which will contain the details of the assignation. In some cases, that might enable individual customers to be identified, and anyone will be able to search the registers if they pay the required fee.

The Government has acknowledged that there are privacy issues. Paragraph 107 of the policy memorandum suggests that the Scottish ministers might consider limiting some search options or keeping certain information confidential in particular contexts to protect privacy. In evidence that we have taken, consumer and money advice organisations have highlighted concerns that the registers might contain information that is prejudicial to the interests of consumers. For example, there are frequently disputes between individuals and creditors about the accuracy of the information that is held by credit reference agencies.

Advice Direct Scotland raised concerns that the information in the registers could be used to make it easier to take debt enforcement action or that it could be used by credit reference agencies in a way that had a negative impact on consumers. ADS also raised concerns that the registers could contain out-of-date information about the loans that had been taken out by an individual. It called for clear and effective processes to correct errors and settle disputes. It would be possible to use the process that is set out in sections 96 and 97 of the bill to force a correction of the register of statutory pledges. However, if a creditor disagreed, the dispute would go to court. There is no process set out in the bill for making corrections to the register of assignations.

I want to touch on those issues, which have been raised in evidence that we have heard from other contributors. The registers will contain significant amounts of personal information. What measures are planned to protect individuals’ privacy?

Thanks very much for coming along this morning. I want to touch on one area that we have discussed with other witnesses. It might not exactly be part of your portfolios, but it will be interesting to get your insights nonetheless.

The main area of controversy is how the bill will relate to consumers. The committee has heard concerns from witnesses that the bill could facilitate for consumers a high-cost lending market—basically, virtual pawnbroking—through the statutory pledge, with comparisons being made to the logbook loans that exist in England.

There is no definition of what a consumer is in consumer legislation, but I note that there are definitions covering sole traders in both the Consumer Credit Act 1974 and the Consumer Scotland Act 2020. That is because, when buying goods and services outside of their area of expertise, sole traders can be at risk of the same sort of information imbalance as individual citizens. Bearing in mind the issue of additional protections for sole traders, do you think that there is a risk that the reforms proposed in the bill will open up a high-cost lending market for consumers and sole traders, with loans secured on both household items and business items that might be critical to a sole trader? How likely is that?

A similar example might be in how insurance companies can check the Driver and Vehicle Licensing Agency’s database for people who have points on their licence and have not declared that in their insurance applications. That might involve a similar concern to the one that Advice Direct Scotland has raised, about information on the registers being used in a way that could be detrimental to individuals, not necessarily with their knowledge—for example, on debt enforcement by credit reference agencies. Have you considered how access to the registers can be controlled so that individuals have sovereignty over their information?

I thank Mr Fitt and Mr McIntosh for coming in and offering such helpful contributions so far. I am mindful of your overall position regarding consumers being removed from the proposed bill.

Concerns have been raised in written correspondence in relation to the enforcement implications in particular. Those concerns are around the fact that people could agree not to be subject to a court order to recover goods with the security attached, and around what arguments people would be able to offer in defence in court against a move against them by a creditor. Being mindful of those issues, are the processes in the bill sufficient to protect consumers? Do the enforcement issues present concerns?

I am interested in the position of the Faculty of Advocates. The advocates are against the idea of waiver-of-defence clauses because they believe that that would very quickly become established practice across all financial institutions, that transactions would become pro forma on that basis, and that that would diminish the rights of third parties. They say that that is weighing the protection of small businesses against the marketability of claims. Do you recognise that as a major risk? Might that become normal behaviour, thereby diminishing the ability of businesses to protect themselves against faulty products that they might have sought security against?

That is an important point. It also carries over to the point about sole traders. If you remove the means by which they can earn money to service the debt, you are compounding the problem, not solving it. There is no public interest in that happening.

That is very helpful.

The potential for licensing to provide a product to the Scottish market is interesting.

I am conscious that we are up against it time-wise, so I will be quick. I have some questions about enforcement issues, which are a major concern.

Mr Dailly has raised concerns about section 63, which entitles a creditor to serve a pledge enforcement notice on a debtor if payment has not been made; section 65, which enables an authorised person such as a sheriff officer to enter someone’s home to remove moveable goods subject to a statutory pledge; and section 66, which gives a creditor rights to sell someone’s moveable goods at public auction. The main concern is for consumers, but there is potentially concern for small businesses too, as the removal of a critical piece of machinery might shut them down. The bill does not necessarily contain the range of protections that are needed. Something as simple as one missed payment could trigger enforcement action.

Looking at how the bill balances protections against unjust enforcement with the need for the statutory pledge to remain attractive to business lenders, do you think that it strikes the right balance?

I want to build on the point that Mr Dailly made. On section 64, even if an individual consumer could agree with the creditor that a court order was not necessary, thereby bypassing the protections of a court, another respondent to the consultation has noted that,

“while a court order may be required before enforcement against a consumer, there were no obvious powers for a sheriff to rely on to provide protection.”

They add that

“Section 62(2)b) would allow enforcement against a pledged item if there has been a ‘failure to perform the secured obligation’”,

which is obviously wildly open to interpretation.

On the point about the Consumer Credit Act 1974, it does not seem clear that it contains protections in relation to specific enforcements.

Based on those points, where a consumer has breached the terms of a secured loan, it is not clear what argument they could use in court—if they even got to court—to persuade a sheriff to stop enforcement action. Do you have any views on how we can enhance that provision in the bill and what we could rely on in consumer protection legislation more generally that could be referenced in the bill as a safeguard?