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Why Scottish individuals should be wary of unregulated debt advice

Sharon McDougall - Updated - 8th May 2024 - 3 minutes to read

As part of Scotland’s Financial Health Service, Scottish people in debt are obliged to obtain advice from an approved money advisor prior to entering insolvency processes such as the Debt Arrangement Scheme (DAS) or a Scottish Trust Deed.

Cases have been reported in the press, however, where unregulated debt advisors are encouraging Scottish residents to enter the wrong procedure, taking advantage of a need for financial help for their own gain.

When should I use a licensed insolvency practitioner?

It’s vital to approach a regulated advisor, and for large debts over £5,000, licensed insolvency practitioners have the in-depth knowledge to offer detailed guidance on the best options for debtors.

The key element is that the practitioner should be ‘licensed’ as they are regulated by professional bodies, and must comply with government legislation. Scotland Debt Solutions works solely on behalf of residents of Scotland, and has been successfully helping Scottish people out of debt since 1989.

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What about smaller debts?

For anyone owing smaller amounts of money, generally below £5,000, debt charities and advisors in the free sector are a good option, but debtors need to be aware of recent cases where incorrect advice has been offered.

One such example is where individuals in debt have been guided towards Scottish Trust Deeds rather than using the government-backed Debt Arrangement Scheme (DAS). Although Scottish Trust Deeds are a valuable solution for many people experiencing serious debt issues, they attract higher fees than the Debt Arrangement Scheme.

Some unscrupulous and unregulated advisors offer Trust Deeds when a Debt Payment Plan under DAS would be more appropriate for the individual debtor, potentially putting their home at risk when it’s not necessary.

Debt still a problem in Scotland

Although the new regulations brought in by the Scottish government have been helpful in regulating the insolvency industry, debt remains a serious problem in Scotland. According to the StepChange Debt Charity, average personal debt levels in Scotland rose to £12,677 in 2016.

The charity also reports a drop in levels of disposable income, and with the rising cost of living, more people in Scotland are in danger of experiencing unmanageable debt.

Debt Arrangement Scheme or Protected Trust Deed?

Access to online advice is quick and easy these days, but debtors need to be aware that lots of websites that purport to be debt help companies are simply lead generation sites with no regulation or specific expertise.

For this reason, some people in debt are not being allowed to repay what they owe in full via DAS – a crucial issue which can seriously affect a lender’s viewpoint when it comes time to borrow money again in the future.

Furthermore, when Trust Deeds are promoted ahead of DAS, a debtor’s home could be put at risk for no reason. Although Trust Deeds are an excellent debt solution and invaluable for some people in debt, clearly the implications are more serious particularly where the debtor’s home is concerned.

Finding an approved money advisor in Scotland

The Insider reports that “protected trust deeds increased last year in 24 out of 32 Scottish local authorities whereas the rate of DAS was half the previous financial year”² – a worrying statistic that should make Scottish residents wary of seeking guidance from unregulated advisors.

Lots of websites purport to be debt help companies. They appear to be genuine at first glance, but as we’ve mentioned, some are effectively just lead generation sites with no regulation or expertise. They may carry out a degree of due diligence, and then simply refer clients on to other ‘advisory’ firms.

Scotland Debt Solutions are approved money advisors in Scotland. We are licensed insolvency practitioners with many years of supplying reliable debt advice to Scottish residents, and can provide the guidance you need to escape debt. Call today to arrange a same-day meeting – we have five offices around Scotland and offer a free initial appointment.

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Sharon McDougall Square

Sharon McDougall


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