This article was originally published in CCTA Magazine.
Many readers will be aware that a Bank arrestment is a commonly used enforcement tool in Scotland post the granting of a Decree (Judgment) for payment. It allows a creditor to secure any funds (over and above the statutory protected minimum balance) in a debtor or customer’s bank account and can be a valuable recovery option if the timing is right. Service is carried out by Sheriff Officers in-person, generally at a local branch of the relevant Bank.
The relevant Bank – and indeed any proposed party in whose hands it is intended to arrest funds – requires to be subject to the jurisdiction of the Scottish Courts and this was, previously, rarely a problem as the vast majority of Banks had branches in Scotland and jurisdiction could therefore be established.
However, with the rise of the so-called online challenger Banks, a perhaps unforeseen difficulty has come to light.
Such Banks provide all their facilities and services online and through apps on mobile phones and tablet devices. They have no requirement for physical branches. In the last decade or so, there has been a significant shift in how customers are using their Banks and many of the traditional High Street Banks are now reducing their branch presence, in recognition of this shift, and moving increasingly to an online service – no doubt cost reduction is also a factor. Most of the online Banks will have their registered offices outside of Scotland.
So what does this mean for creditors?
Given what’s been said above in relation to the requirement for a Bank in whose hands an arrestment is to be served to be subject to the jurisdiction of the Scottish Courts, this shift to online Banks is causing a problem. Where a debtor or customer banks with an online Bank and the registered office is not in Scotland, it would seem that it is not possible to serve a valid arrestment.
Section 2 of the Execution of Diligence (Scotland) Act 1926 prohibits serving an arrestment by post out with Scotland. This came into force a considerable time before online banking was even thought about and is therefore not fit for modern purposes.
I am aware that several Sheriff Officer firms are now taking steps to raise this issue with their professional body. A change will be required to legislation, and this will likely take some time to be implemented. It does, however, require to be addressed to ensure those pursuing debts in Scotland have the full range of enforcement options open to them.