Diligence against Earnings
1 April 2008

Part 9 of the 2007 Act that dealt with provisions on Diligence against Earnings was brought into force on 1 April 2008. The principle diligence changed is earnings arrestment but changes also apply to current maintenance arrestments and conjoined arrestment orders. The significant changes are noted below.

Debt Advice and Information Package (DAIP)

The creditor must provide a DAIP to the debtor within 12 weeks of an earnings arrestment being served. The Act places the obligation on the creditor to provide the DAIP. No specific method of service is mentioned and it is assumed it can be sent by ordinary post. AMA will undertake to provide debtors with the DAIP on behalf of clients. Unless otherwise instructed we will serve a DAIP with a charge at no additional cost.

Employers Duty to Provide Information

It has been a requirement for sheriff officers to intimate a copy of an earnings arrestment to a debtor and the Act makes it clear that the officer must take all reasonably practicable steps to intimate a copy to the debtor. To further ensure that the debtor receives a copy there is now also an obligation on the employer to intimate a copy of the schedule as soon as reasonably practicable. The employer must also inform the debtor of the date on which the first deduction will be made and what sum will be deducted. This obligation on the employer should mean that that debtors do not find out that deductions are being made from their earnings only when they receive their payslip

Employers must also intimate certain information to creditors (or the Sheriff Clerk) in conjoined arrestment orders). That information is

  • How the debtor is paid (e.g. weekly/monthly)
  • When the first deduction will be made
  • How much that deduction will be

Employers have to send this same information to creditors by 6 April each year unless the earnings arrestment has terminated in the meantime. Application can be made to the court if the information is not provided by the employer whereby the employer will be ordered to disclose the information or be found in contempt of court. It is anticipated that any issues around information being supplied by employers will be resolved informally without the necessity of court involvement.

One significant innovation is that employers are required to disclose the new employer of any employee leaving their employment. Again application can be made to the court to order disclosure if necessary.

Creditors Duty to Provide Information

During the passage of the Bill, sharing of information was identified by the Scottish Executive as a useful tool in the smooth running of earnings arrestments. Duties were also imposed on creditors to provide information to employers. The following information has to be sent to employers by 6 April each year.

  • The sum outstanding
  • The amounts and dates of any payments.

This should certainly assist in ensuring that employers are working with the correct balances.

Where Alex M Adamson are acting in a collection capacity we will provide these intimations to employers on behalf of clients at no additional cost.

Debtors Duty to Supply Information

When a debtor leaves one place of employment not only must his previous employer notify the creditor of the name and address of the new employer, exactly the same obligation is imposed on the debtor. This is a welcome addition to the rights of creditors.

Holiday Pay

Some dubiety existed among employers as to how holiday pay should be calculated. This particularly impacted on the weekly paid. The dilemna arose where say 3 weeks pay was paid in one payment. Some employers took the view that because it was paid as one payment the calculation should be made by making the deduction applicable to the total amount paid in the table for weekly pay. This resulted in a much higher level of deduction than the alternative method of calculation. That alternative was to divide the total pay by the number of weeks (say 3 in the example), calculate the deduction from the weekly table and multiply by 3. The Scottish Executive took the view that the latter approach was preferred and the 2007 Act now makes it clear that is how deductions should be made from holiday pay.

Simultaneous Operation of Earnings Arrestments and Current Maintenance Arrestments

Under the original 1987 Act where an earnings arrestment and current maintenance arrestment were operating simultaneously, the earnings arrestment was applied first and the current maintenance applied to the balance. If there was insufficient balance to pay the full amount of the current maintenance arrestment as it would leave the debtor with the minimum level of earnings stated in the Act then only the amount in excess of that minimum balance was paid to the current maintenance arrester. This was considered unfair to the maintenance arrester as this meant that higher arrears of maintenance were accruing that had to be dealt with by earnings arrestment. Accordingly the 2007 Act provides that where there is insufficient free income to meet both arrestments the amount to be paid to each is calculated proportionally. The formula is contained in the new section 58(2)of the Debtors (Scotland) Act 1987. This will of course mean that arrears will still accrue in current maintenance arrestments but the amounts will be smaller.