20/06/2002 NOT EXEMPT REFORM OF DEBT RECOVERY PROCEDURES

Transcription

1 STIRLING COUNCIL THIS REPORT RELATES TO ITEM ON THE AGENDA RESOURCES COMMITTEE FINANCE AND INFORMATION SERVICES 20/06/2002 NOT EXEMPT REFORM OF DEBT RECOVERY PROCEDURES 1 PURPOSE 1.1 The purpose of this report is to advise the Committee of the Scottish Executive s proposals for reforming debt recovery procedures. 2 SUMMARY 2.1 This report is about debt recovery action which may be taken after all normal collection procedures have been exhausted. The report: Summarises the changes included in the Debt Arrangement and Attachment Bill The Bill will establish debt arrangement schemes and aims to enable the identification of, and recovery from, can pays/won t pays Summarises the Executive s consultation document Enforcement of Civil Obligations in Scotland and proposes responses to questions, in the consultation document, which relate to the pursual of Local Authority debts Seeks approval for the negotiation of the extension of the current Sheriff Officers contract for one year. 3 RECOMMENDATION(S) 3.1 It is recommended that the Committee: Notes the content of the Debt Arrangement and Attachment Bill 2002 which is now before the Scottish Parliament Considers the questions raised by the consultation document Enforcement of Civil Obligations in Scotland with regard to Local Authority debt recovery and the draft responses as set out in Appendix A.

2 3.1.3 Authorises the Director of Finance and Information Services to negotiate the extension of the current contract with the Sheriff Officers provided that the terms are no less favourable than those in the current contract. 4 CONSIDERATIONS 4.1 The Scottish Parliament has agreed that poindings and warrant sales will end no later than 31 December The Scottish Executive are committed to reforming the arrangements for the pursual of debt by that time. 4.2 The Debt Arrangement and Attachment Bill 2002 is now with the Scottish Parliament. Its main provisions are:- The abolition of poindings and warrant sales Provision for the establishment of debt arrangement schemes whereby individuals who have multiple debts/multiple creditors may arrange for their debts to be repaid according to a managed programme without the threat of one of the creditors taking enforcement action for an individual debt. As soon as a debt arrangement scheme is put in place, all recovery action by individual creditors will have to stop. - Each debt arrangement scheme will need to be signed by an Accredited Money Adviser who has assisted the debtor. A separate report on the Agenda relates to funding from the Scottish Executive to Local Authorities for the provision of money advice. - The provisions surrounding debt arrangement schemes are likely to be complicated and will be made in Regulations subsequent to the Bill. The details are part of a consultation exercise by the Scottish Executive which is referred to at paragraph 4.3 below. - The proposed debt arrangement schemes aim to deal with multiple debts. They are different from the individual local arrangements which are agreed between Exchequer Services and householders who need time to pay off individual debts such as Council Tax arrears. Provision for the attachment of moveable property kept outwith dwelling houses. This provision aims to help the recovery of non-domestic debts but it will allow the attachment of private cars/boats for domestic debts. Any attachment must be reported to the Sheriff within 14 days and thereafter arrangements may be made for the auction of the articles. Provision for the Sheriff to authorise an Exceptional Attachment Order of non-essential items kept in dwelling houses such as antiques or paintings. The Order would authorise the removal and auction of such attached items. 4.3 Consultation on Enforcement of Civil Obligations in Scotland The Executive have issued a consultation document which examines the Law of Diligence and the relevant procedures and proposals for reform to streamline the system of enforcement and to improve the way debt is managed. Diligence is the legal process of enforcing Court File Name: N:\DEMSUPP\NewDecisions\Resources\Reports\RS DebtRecovery.doc

3 Decrees for payment of money or enforcing Orders of the Civil Courts generally, including for performance or prevention of an act. Enforcement is carried out by Officers of Court that is Sheriff Officers or Messengers-At-Arms. The consultation paper is wide ranging and cross refers to the Debt Arrangement and Attachment Bill 2002 which contains the proposals for replacing the Diligence of poindings and warrant sales The main areas covered by the consultation document are:- A proposal that a Scottish Civil Enforcement Commission should be established to determine and oversee all matters relating to enforcement including granting commissions to Enforcement Officers; complaints and discipline. Updates to the Debtors (Scotland) Act 1987 particularly regarding time to pay directions granted by the Court. Proposals for a statutory debt arrangement scheme available nation-wide to all personal debtors (including small traders). (This is anticipated in the Debt Arrangement and Attachment Bill) Proposals to improve Earnings Arrestment Diligence. The question of whether Local Authorities should be able to apply for benefit deductions before obtaining Summary Warrant Appendix A to this report is an extract of the questions, in the consultation document, relating to the recovery of Local Authority debts, to which the Scottish Executive are seeking comments The Executive are inviting responses by 16 July 2002 and draft responses are shown in Appendix A for consideration by the Committee. 4.4 Appointment of Sheriff Officers Under the existing law, Sheriff Officers are required to carry out the Diligence involved in the recovery of Council Tax, Non-Domestic Rates and Sundry Account Debts It has been the Council s practice to put this service out to Tender every two years. The last Tender was for the financial years 2000/01 and 2001/ The Sheriff Officers contract is due for renewal, however given the imminent changes to Diligence procedures, it is recommended that the Director of Finance and Information Services be authorised to negotiate an extension to the current Sheriff Officer contract for one year rather than put out a fresh Tender at this stage. File Name: N:\DEMSUPP\NewDecisions\Resources\Reports\RS DebtRecovery.doc

4 5 POLICY IMPLICATIONS 5.1 The draft responses in Appendix A are consistent with the Council s Strategic Aims of Social Inclusion and quality services. 6 CONSULTATIONS 6.1 Head of Legal and Estate Services. 6.2 Advice Services. 7 RESOURCE IMPLICATIONS 7.1 To ensure that changes to debt recovery procedures do not adversely affect collection levels, it will be necessary to review Stirling Council s approach to debt recovery as further details become available. Resource implications will require to be assessed at that time. 8 BACKGROUND PAPERS 8.1 The Debt Arrangement and Attachment Bill The Scottish Executive s consultation document Enforcement of Civil Obligations in Scotland. 8.3 Report to Resources Committee of 20 September 2001 Consultation Paper from Scottish Executive A new approach to Debt Management. Author(s) Name Designation Tel No/Extension John Risk Head of Exchequer Services Approved by Name Designation Signature Bill Dickson Director of Finance and Information Services Date Reference File Name: N:\DEMSUPP\NewDecisions\Resources\Reports\RS DebtRecovery.doc

5 Appendix A The Scottish Executive s Consultation Document Enforcement of Civil Obligations in Scotland Issue Raised Relevant to the Recovery of Local Authority Debt Q3.1 Should there be a Scottish Civil Enforcement Commission to carry out enforcement functions Q3.6 Should informal debt collection activities be regulated in Scotland including mandatory codes for appropriate standards of care and conduct. Q4C4 Should the law be clarified to make it clear how a Summary Warrant wrongfully obtained should be challenged. Q4D1 Should a statutory debt arrangement scheme be introduced in Scotland. Q4D2 In general, do the Executive s proposals offer a good response for a modern accessible debt arrangement scheme. Q4D9 Should applicants have access to free money advice services for negotiation and preparation of debt arrangement scheme applications. Q4D10 Should Money Advisers and Payment Distribution Advisers be accredited in order to maintain high levels of service provision. Q4D11 Should the Scottish Civil Enforcement Commission be responsible for administrative approval of debt arrangement scheme (DAS) applications. Q4D17 Should enforcement be stopped once a debt arrangement scheme application has been granted. Q5C.8 Should information about arrestments against earnings be included within a general education programme about enforcement. Q5C.15 Should Local Authorities existing ability to apply for benefit deductions orders be adjusted to enable applications to be made prior to obtaining a Summary Warrant. Draft Response from Stirling Council The recommendation that a Scottish Civil Enforcement Commission operate as the sole body where all matters relating to enforcement are determined and overseen is agreed. Agreed. This will ensure structure and uniformity. In the interests of open government and accountability, it would be helpful to clarify the challenge procedure. Agreed but it is recognised that a statutory scheme is a very ambitious project and that many practical difficulties will need to be overcome for example in relation to involuntary debts such as Council Tax which arise annually. Agreed. It is essential that the Central Support Organisation for Money Advice, as proposed by the Scottish Executive, and additional front-line money advice be established to support the scheme. Agreed. This will ensure that those who need help get access to independent advice. Agreed. It is crucial that available advice is quality assured as proposed by the Scottish Executive through the Central Support Organisation for Money Advice. Agreed. This will give the DAS credibility. Agreed. The scheme can only work if enforcement stops. Agreed. It is important that debtors understand how debt recovery operates. Yes. There is a demand amongst benefit recipients to have the option of agreeing to voluntary deductions from their Benefit and this would avoid 10% penalty being added to their charges which is the position of the current arrangement. Doc:p\jrdocs2002\debtappendixa

6 Issue Raised Relevant to the Recovery of Local Authority Debt Q5D.2 In cases where a bank arrestment is served in relation to an account of a debtor who is already subject to an Earnings Arrestment or is in receipt of Social Security Benefits, should reform be introduced a) to introduce a statutory lower limit on the amount of money which could be attached by arrestment or b) should certain accounts be exempt from arrestment if used solely for the receipt of Social Security Benefits or c) should arrestment be prohibited where there are pre-existing earning arrestments and/or Social Security Benefits being received. Q5D3 Should the law relating to Actions of Furthcoming be reformed to provide for automatic release of property to a creditor following service of an arrestment in execution subject to a 28 day period for objection. Comments on the reforms proposed for Inhibition of Heritable Property and Land Attachment Q7.B.1 For provision of information of advice about the enforcement system: a) where are the greatest areas of need b) what types of information and advice should be made available and c) by what means should they be delivered. Q7C.1 Consultees are invited to comment on the proposal to further develop modern, easily understood and user friendly forms. Draft Response from Stirling Council It is agreed that there is a case for each option but there may well be problems of practicability for the banking system. There is also a strong case for Accounts that are used to hold monies to pay care needs being exempted (e.g. Direct Payments/Independent Living Fund) Agreed. Actions of Furthcoming (which are necessary to get arrested items handed over to creditors) are currently cumbersome legal processes. It is agreed that Inhibition should no longer confer a preference on the inhibiting creditor in respect of post Inhibition debts incurred by the debtor. If the right to inhibit is extended to a Summary Warrant, it should speed up the recovery of Local Authority debts from debtors with Heritable property. Similarly the proposal for Land Attachment would help recovery from debtors with heritable property. a) The greatest area of need is with individuals affected by enforcement and for the purposes of education and prevention. b) Information about the enforcement system and direct money advice to those affected. c) Enforcement advice should be coordinated by a Scottish Civil Enforcement Commission, as proposed by the Scottish Executive, and money advice should be provided by front-line Money Advisers with support from Central Support Organisation, as proposed by the Scottish Executive. In the interests of fairness and accessibility all forms should be user friendly and free of jargon. Information within forms about diligence is very important, together with contact points for direct information or advice. Doc:p\jrdocs2002\debtappendixa