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Government tackles interest law change

28 January 2008

The Scottish Government is seeking views on proposals to modernise the country's laws on interest on debt and damages.

Currently the rules on interest on debt and damages are inconsistent. With debts, interest does not begin to run until court proceedings are raised. The draft Interest (Scotland) Bill will create a statutory right to claim interest, to run from the time when a sum of money becomes due by one person to another.

The bill is based on the recommendations of the Scottish Law Commission published in 2006, but the consultation covers in addition the impact on employers of the cost implications of backdated pay.

The bill will create a right to claim interest where there are no existing terms or conditions. It will not apply to debts:

  • for which there is already an agreed rate of interest, such as credit card debt, commercial loans and the like;
  • for which there is already a statutory regime for interest;
  • where the payment represents a fine, penalty or tax due to a public authority, such as council tax;
  • where interest has been claimed under the Late Payment of Commercial Debts (Interest) Act 1998 (which deals with commercial contracts);
  • which the Scottish ministers have exempted by order from the bill (utility debts and rent arrears to public sector landlords).

Justice Secretary Kenny MacAskill said the bill would ensure that Scots law kept pace with society's expectations on how its business was conducted, and would further improve the rights of individuals and businesses in Scotland.

"I am keen to hear the views of anyone interested in this subject and would encourage them to respond to this consultation, particularly on the financial implications of the proposals."

The consultation, which runs until 4 April 2008, can be found at http://www.scotland.gov.uk/Publications/2008/01/15144204/0 .