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Interesting story over on Kyero.
http://news.kyero.com/2010/12/02/spanish-bank-to-fast-track-claim-on-couples-uk-property/
It will be interesting to see how this pans out or if it is just a scare tactic by the bank.
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Whilst I sympathise with this couple and others if their UK home is snatched as payment of debt abroad, worldwide debts are there to be had, people must have been aware that this could happen. I would have fought it, or cunningly sold quickly to hide the money from the sale of UK home, or put the UK home in childrens/trusted relatives’ names, not entirely kosher but would have seen off the deby chasers.
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Why is it wrong for the bank to try and recover it’s debt? If the means of recovery is lawful in both countries then to protect it’s interests the bank has no choice. This couple have assets and owe money. The geographical position of those assets is not relevant. If you owe you pay. You cannot simply walk away from lawful responsibilities in the modern global world.
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What I don’t get from this story, as I said in my original post, is if it is really going to happen or if this is just scare tactics ‘pour encourager les autres’.
It is fiendishly difficult and expensive to enforce unsecured civil debt in the UK as it is. The system is very much weighted in favour of the creditor. Add to that the fact that this is a Spanish debt with all the additional costs and complexities involved and I very much doubt it would be cost effective to chase this debt if it is anything less than €200k.
There must be thousands of British citizens who have walked away from such debts in Spain. There is a good reason why we haven’t seen more of these stories. In the vast majority of cases, it simply isn’t worth the bank’s while chasing the debt.
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There is a very simple legal device in the UK to place unsecured debts such as credit cards on the equity balance of a debtors property. Its usually done when the owner has a mortgage with the same bank as the unsecured debt but it’s not exclusive.
I am not a legal expert but perhaps the Spanish bank is using the same procedure. This way their costs will be much less. -
For my sins Logan, a long time ago I used to work in credit control. Believe me, whatever the rulebook says, it is not easy at all to apply a charge on an unsecured debt against someone’s property. The fact that this debt has been accrued in another juristiction just adds huge layers of complexity.
In a case such as this, any competent lawyer or debt advice specialist could run rings around the bank. As much as anything else the bank would have to prove to the satisfaction of an English court that it had exhausted all reasonable means to recover the debt in the state where it was accrued.
The banks know this which is why they hardly ever take action. There needs to be a huge sum of money involved to make it worthwhile. Even then it can be a waste of time. Take the case of Westminster City Council against Dame Shirley Porter as an example.
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Maybe this is how it’s being done:
http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1083487199&type=RESOURCES -
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shakeel, again I don’t understand you. 😕
There are ways to avoid debts being chased if people put their house in order in both UK and abroad, sometimes frowned upon, hence the ‘kosher’ comment, you have to be cleverer than the potential chasers who are quite at liberty to chase worldwide debts.
I’ve known people in Ireland being chased for Spanish debts, some of whom are in a state because now they’re having to try and remortgage their Irish properties to make payments on a Spanish property they don’t want. They may have been naive and too kosher to avoid their problems.
Totally agree with logan’s comments. I think most Banks would chase such large debts if they could but only if they can uncover assets etc abroad 😉
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Angie,
People are being chased in Ireland, yes. It is a completely different legal system and much tougher on creditors than the one in England.
It is a basic premis of English civil law that , unless security is proffered in advance such as with a house for a mortgage, the creditor will be protected by the courts. Yes there are basic collection and enforcement tools but they are expensive to deploy and quite often toothless.
I recall dealing with one case, this must have been 25 years ago now to put it in context, where a guy in the UK owed his bank £35k (Equivalent to about £83k in todays money). Open and shut case, overdraft, loans and credit card. The court entered the judgement against him, he pleaded poverty. In the end he was ordered to pay £1 per month to settle the debt. It would have taken him almost 3000 years to pay the debt off.
There was then nothing whatsoever that the bank could do. Leaving aside the thousands they had spent taking him to court, it was then costing them £5 per time to process the incoming payment. When he stopped paying after a few months time they simply gave up.
Now it is all very well to hold a moral stance on such non-payment. You can of course point to all the tools that are supposedly available to creditors. The reality at the coal face is that it is an expensive and often fruitless task to chase unsecured debts through the court system in England. The underpinning logic is that lenders should be aware of this and thus be cautious about what they lend and to whom. As we have seen in recent years, logic and banking seem to have diverged.
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Things have moved on in 25 years brianc. Here’s how they do it now:
http://www.uezcard.com/articles/052008/banks-turning-unsecured-debt-secured.html
In the threads first post the Spanish bank should be able to use the same procedure once given judgement.
http://www.hmcourts-service.gov.uk/infoabout/enforcement/charging/index.htm
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In the threads first post the Spanish bank should be able to use the same procedure once given judgement.
That, logan, or at least the last three words, is the crux of the argument. A debt of this size, say +/- £100k, would have to be processed through a high court rather than the county courts used for the small claims procedure. It requires much higher standards of compliance and evidence and it is thus much difficult and costly to obtain judgement.
Were I advising this couple (I must stress I never have done such a thing, I was on the other side of the fence) I’d begin by arguing that the process of reclaiming the debt in Spain has not been fully carried out. That this should be done before any British court gets involved. I have no doubt whatsoever that this argument would hold sway.
The house would first need to be repossessed, something we all know takes years in Spain and a judgement for the outstanding balance entered against them in the Spanish court. They would then have an opportunity to agree payment terms with the Spanish court, a process, I understand, that is usually quite lenient with creditors. If they stuck to that, the lender could do no more.
Let’s just say this process has been exhausted. That the creditor has again defaulted and they have not attempted to set up a new schedule of payment through the courts. The lender could then indeed begin the process through the English courts. Realistically we are probably some 4-5 years down the line here before this begins.
As the creditor, before you can begin the process in England, you first have to dig up and then have official translations of all the relevant original loan and subsequent court documents. You could then retain English lawyers to launch a case. Let’s again say you are prepared to go through the expense this process and that you get a date set.
At this stage my advice to the creditors would be to argue that the lender acted unreasonably in the way they dealt with the creditors once they got into difficulty. This is something that would be expected in the English system where due process has to be followed. I would have copies of any letters or emails I had sent at the time. The bank would be required to demonstrate that they had answered any such requests reasonably. Even if they could produce such documentation, which I doubt, they would again have to go through the process of court approved translation, etc, etc.
If it finally looked like judgement was to be entered, I’d then advise the creditors to either sell or transfer any chargeable assets, such as a UK house, to relatives. Any cash from such a sale should be deposited offshore so that the bank couldn’t get its hands on it. We’re now some 6-7 years down the line. The creditor has spent tens of thousands chasing the debt and has nothing to show for it.
Now what I’m not saying is that a Spanish bank, or indeed a British bank operating in Spain, cannot get a judgement in the UK. It can be done. What I’m trying to say, as highlighted by the above example, is that it is a complex, time consuming and expensive procedure. Often with an unsatisfactory outcome for the lender. That is why such debts are rarely persued. That is why I believe the bank here is using scare tactics.
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It would seem feasible that under European law a debt in one European country can be pursued in another, but national laws in both countries still need to be obeyed, and it appears that there are major differences between Spanish and English laws in this respect.
Perhaps the Spanish banks are using this as a test case, quite an easy one for them considering the unfortunate couple’s circumstances. There must be thousands of similar cases where Brits have abandoned their Spanish homes when they can longer afford to pay the mortgage, but most of them will not be easily traced or have recoverable assets in the UK.
In case of the British home, it will need a test case in the High Court to establish a precedent, with an appeal to the European courts a real prospect. It will take years and cost tens of thousands.
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@Rocker wrote:
In case of the British home, it will need a test case in the High Court to establish a precedent, with an appeal to the European courts a real prospect. It will take years and cost tens of thousands.
Then for the future who would blame Spanish banks showing Brits the door when they apply for credit.
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@brianc_li wrote:
What I don’t get from this story, as I said in my original post, is if it is really going to happen or if this is just scare tactics ‘pour encourager les autres’.
It is fiendishly difficult and expensive to enforce unsecured civil debt in the UK as it is. The system is very much weighted in favour of the creditor. Add to that the fact that this is a Spanish debt with all the additional costs and complexities involved and I very much doubt it would be cost effective to chase this debt if it is anything less than €200k.
I Read about a UK citizen who left the UK leaving behind a 20K credit card debt. They caught up with him in Thailand. Sell the debt for 10% and the enforcer has a big incentive to pursue it.
I believe the number of charging orders (putting unsecured debt, such as credit card debt against a property) give in the UK is now over 100K per year. So its obviously not that difficult
http://www.citizensadvice.org.uk/index/pressoffice/press_index/press_20090625.htm
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Then for the future who would blame Spanish banks showing Brits the door when they apply for credit.
Nobody! Arguably they – plus their British, Irish and US counterparts in particular – should have been much more cautious with their lending in the past.
I’d like to think they have learnt their lesson this time around but given their history, I very much doubt it.
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Well, I can see both of your reasonings Brianc and logan and others too.
My posts were really how I would deal with such situations, basically to not own visibly in same name world-wide assets if I thought there was a chance of being chased for a debt, not saying this has happened.
However in answer to peterhun, I also agree that debts are sold off to more unscrupulous collectors, but, and I have done this for a couple of completely spurious claims for monies owed, I have seen off the debt collectors by attack and threatening them with the OFT, Police and trading standards, all gleaned from a google search on bad debt collectors. People write with their methods, as well as parking fines etc, and attack seems to work as they give up because it then costs them more money and hassle to pursue, there are easier debts to chase. Incidentally. many debts are sold off for as little as 10% of debt, and if the debt collector gets more he’s lucky. Many people panic but use the internet for advice.
Very large claims may be more difficult though to avoid.
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Peter,
I don’t think anybody is disputing that charging orders are now being quite widely used. They can’t however be used in the circumstances we have been discussing here.
As for the ‘enforcer’ collection method. Large, respectable companies have to be very careful indeed how they use them. Many moons ago I was involved in a case where a nationally known catalogue order firm had sold their obselete debts for 1p in the pound and washed their hands of the matter.
The, UK based, agency were not physically violent but their telephone manner was such that people felt intimidated. It was picked up by Rodger Cook and their name was plastered all over prime time TV. They, and other companies such as theirs, ceased the practice of selling debts.
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