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Thank you, convener, and good morning, members of the committee. I am at the committee to talk about the regulations on protected trust deeds. The regulations aim to take forward stakeholder recommendations that will make improvements to the current protected trust deed process. They are accompanied by further provisions that will help to ensure that the statutory debt solution is fit for purpose, and they provide the necessary support and protection to people who need to access debt relief through that solution.

There has been wide consultation on the changes in the regulations. The provisions that have came from stakeholder recommendations were included in the public consultation document “Scotland’s statutory debt solutions and diligence: policy review response”, and were broadly supported. Additionally, members of the protected trust deeds committee, which is a group of prominent stakeholders who are involved in protected trust deeds, have been consulted throughout the process of developing the regulations and we have worked with them to address their concerns.

The regulations aim to help the most vulnerable people in our society by streamlining the discharge process and allowing an individual to be discharged early from their PTD if there are extenuating circumstances that mean that they can, through no fault of their own, no longer make contributions. That will allow people to be clear of problem debt at the most challenging times in their lives.

Reflecting the existing voluntary PTD protocol in legislation will ensure that all PTDs work to that best practice, which will end the current two-tier system. Ninety-one per cent of the current live PTD case load works under the voluntary system, which proves that it works. The regulations will build on that to ensure that all individuals who are involved in PTDs benefit from the same protection, irrespective of the trustee organisation that is involved.

That includes giving an individual who is in a PTD extra security by ensuring that the trustee will seek the Accountant in Bankruptcy’s agreement before refusing discharge and that, when a dividend is payable, creditors are paid at an earlier date. The new provision to allow the AIB to act as a trustee of last resort will provide security in the event of the failure of a volume provider of PTDs, if no other firm has the capacity to take on its cases. That will provide to all who are involved reassurance that the case will not be left without a trustee and that the administration will be able to continue under AIB until a new trustee is appointed.

The increase in the supervision fee will assist the AIB in its aim of continuing to generate sufficient funds to cover costs from conducting its statutory duties. That should combat the agency’s forecast shortfall over the next few years resulting from the reduction in bankruptcy application fees, which is a policy that was implemented to help the most financially vulnerable people in our society and was done in response to the pandemic.

In conclusion, I believe that the regulations provide a great opportunity to streamline and improve the protected trust deeds process and to ensure that it is fit for purpose. They will provide the necessary support and protection to those who need to access debt relief through that solution, as well as making it work well for others who are affected by the rules. I am happy to take questions.

The issue comes down to the two-tier system. The process works well in the majority of cases, but not everyone has signed up to the voluntary code.

Yes. First of all, it is important to recognise that the fees have not been increased since 2012, I believe. Inflation over that period has been 36 per cent. It is significant that we are looking at just more than half the inflation increase over that period being clawed back through the fee increase. That will flow through and be picked up on the creditor side. We reckon that there is about a 3 per cent reduction in the amount of money that creditors will receive through the process as a consequence of that change.

I think that it is a fair increase. As I said, it represents barely half of inflation over the period. It reflects increased costs and allows the process to continue to function and be administered effectively.

The regulations have been worked through over a period of time with the expert committee and various players in the sector that come at the matter from different perspectives in order to ensure that problems have—as I hope—been ironed out. Are there any consequences in particular that you have concerns or thoughts about?

First, I suppose that you could flip that around and ask what is the problem with having that requirement in regulations if it is working and everyone is happy with it.

Secondly, there is an issue in that there is the potential for operation of a two-tier system because not everyone is signed up to the voluntary code. It is worth noting a recent legal case in which the sheriff was clear that the voluntary code does not have a statutory basis.

On the specific example that you have mentioned—colleagues might want to talk to this—the reality is that AIB engages extensively throughout the process. You and I would see only the cases that get to the application stage, but an awful lot more cases are, I expect, headed off at the pass—if I can use that term—during the conversations that AIB has in order to ensure that people are able to work within the process and that they do not have to take cases to the final stage. Do officials want to add anything?

Do you mean for debtors?

I do not have that information in front of me. I assume that it is not secret.

We have taken some advice and have consulted on that. The conclusion was that, at the moment, if people charge fees to provide that work, misselling is being effectively combated by the existing process. There was also a danger that there could be unintended consequences if accountants or other professionals are not able to bring forward cases or point people in the right direction. On balance, and having sounded the matter out with sector stakeholders, we felt that we did not need to put that particular requirement into the regulations.

The voluntary code was a step in the right direction. It brought in the requirements that were felt to be necessary, and which have since proved to be necessary: I think that we would all agree that the voluntary code has been working.

However, as I indicated in my opening remarks, we have a two-tier system and not all providers are operating under the voluntary code. The reason for the change is to ensure that the remaining challenge is dealt with and that the requirements in the voluntary code are brought into legislation so that everyone has to comply with them. Along with other measures that are in the provision, that provides security and comfort to those who are involved in the process.

The regulations should offer more protection. As I have said, putting the voluntary code on a statutory footing removes the two-tier system and the potential for people not to apply the voluntary code. The regulations give clarity on the process so that everybody will know what it is.

Tomorrow, we will deal in Parliament with the Bankruptcy and Diligence (Scotland) Bill. One of the provisions in that bill is on provision of a leaflet with information on the cooling-off period and so on, which is also helpful.

It is clear that the process that has been worked through was to bring in, through the consultation and through the expert panel, people who understand the process. As you have rightly identified, that includes debt advice charities and organisations and others. I hope that they will be able to reflect the perspectives and needs of debtors who will use the process.