BARNSLEY METROPOLITAN BOROUGH COUNCIL This matter is not a Key Decision within the Council s definition and has not been included in the relevant Forward Plan Report of the Director of Finance, Assets & Information Services. Redesign of the Council s Debt Recovery Function 1. Purpose of Report 1.1 The purpose of this report is to seek approval for the Council to broaden the options available to debt recovery; further enhancing collection rates of in year debt and recovery of previous years arrears. 2. Recommendations It is recommended that: 2.1 Approval is given for BMBC to develop the recovery function by adopting a more commercial approach to debt collection, including: Adopting a dynamic procurement framework which enables the simultaneous employment of multiple Enforcement Agents; Seeking County Court Judgements to recover Trade Debt; Securing bankruptcy petitions to recover all debt types; Obtaining Charging Orders to recover all debts types; and Committal to Prison. 3. Introduction 3.1 The newly created Finance Business Unit has brought together the Council s debt recovery functions with a view to rationalising and streamlining operations along with fundamentally re-designing the way the authority approaches debt recovery. 3.2 The consolidated debt recovery service includes: Council Tax; Business Rates; Housing Benefit Overpayments; and Trade Debt. 1
3.3 To ensure the Council adopts a more strategic and commercial approach for collecting and recovering debt, the Finance Business Unit has explored options for working differently and in particular adopting some practices more akin to those used in the private sector, ultimately driving improved collection of debt owed to the Council. 3.4 The Business Unit has explored all options available to the Council that could readily be used for recovery action. The idea being that the team has a recovery toolkit that can be used, once the standard process has been completed. The customer debt would be segmented, reviewed by the team and the most appropriate tool then applied. 4. Proposal and Justification 4.1 The Council currently operates a robust recovery process for debt collection, however once the initial stages have been explored and a debt is returned from the enforcement agent the Council is restricted in what further action it can take. This issue has then been compounded by repeat offenders who do not pay, year in year out. 4.2 The recovery process does vary across the type of function i.e. Council Tax, Business Rates, and Trade Debt due to legislation restrictions although they mainly follow similar steps. (please refer to appendix A) 4.3 Since Future Council the debt team have already strengthened the debt processes by: Reviewing all documentation that is sent to debtors, ensuring it is clear, concise and encourages the customer to pay; Introduction of weekly and fortnightly direct debit options for council tax payments; Allowing additional payment arrangements within the recovery stages therefore avoiding further enforcement action; Utilised the corporate solution for messaging, allowing text functionality to be used to engage with customers earlier in the debt process, preventing further debt recovery action; Working with Agilisys to review historic debt that has already been through our full debt process. This is proving successful; within the first 2 months the Council has been able to secure arrangements on 150k of debt that was unrecoverable; Engaged with other agencies such as Credit Union and CAB to signpost and support our most vulnerable customers who have extreme financial difficulties; and Improved the customers experience at court by creating a professional & private environment where we can help and support the debtor whilst in attendance. 2
4.4 The Benefits, Taxation and Income team work very closely with partner organisations to always consider the best course of action for individuals, for example: 4.5 Working with Dial and Age UK to ensure we are offering appropriate provision for clients with issues relating to accessibility and in the minority of cases, offering support through home visits via our fairer charging team; We have worked in partnership with the CAB for approximately 15 years. This includes a SLA that we have both agreed to ensure we are providing the best service possible for the customer. We have an extremely good working relationship and maintain this by having regular meetings with debt advisors and senior members. We are currently in the process of setting up secure mail to allow us to share information electronically, which will speed up our agreements process; We work with the Credit Union in relation to customer debt queries and have recently met with them with a view to developing this relationship further. 4.6 The Business Unit is proposing that in addition to the process referred to within Appendix A that as a final option the Council makes available use of further tools to ensure that we exhaust every opportunity available to recover monies owed to the council. Each option has been explored and detailed below: Enforcement Framework An independent review of the debt processes within the Council highlighted that we would benefit from procuring a dynamic framework for enforcement agents to allow a further degree of flexibility when collecting debt. The Local Authority currently only employs 1 enforcement agent, which is Rosendale s and 1 debt collection agent, Collectica. Although we have a good working relationship with these organisations we can see the benefits of engaging with more than one company. By doing this, it provides the local authority with more flexibility, the debtor is less aware of our processes and it provides competition amongst the enforcement agents therefore improving successful results. YPO have established a Dynamic Purchasing System for use by the public sector for debt collection services. The Dynamic Purchasing System is open to new suppliers throughout its duration and YPO will manage the process of advertising new opportunities and evaluating any new suppliers that wish to be admitted to the Framework. This provides flexibility to respond to changes in the supplier market place. The Council is currently undertaking a procurement exercise to employ multiple enforcement agents and debt collection agents and we envisage this to be in place by the end of the calendar year. 3
County Court Judgements (CCJ) for Trade Debt A County Court Judgment is the equivalent to a Liability Order for Council tax, by introducing this to the tool kit; it enables us to align trade debt to the same level recovery as Council Tax and Business Rates allowing us to take control of goods and attachment of earnings. This would be appropriate with some cases where a debt collection agency has been unsuccessful. A CCJ can be registered against an individual if they fail to pay money that is owed. It sets out how much money is owed and how the money should be repaid within a set timeframe If an individual s gets a CCJ or a high court judgment, it will stay on the Register of Judgments, Orders and Fines for 6 years and we believe this encourage payments. Banks and loan companies use this information to decide whether to provide credit or loans, so our actions could potentially affect the debtor. If they pay the full amount within a month the judgment is removed from the register. If they are paid after a month, the record of the judgment can be marked as satisfied in the register. Bankruptcy & Charging Orders Once a debtor has been through the full enforcement process further options are available to the council, these include bankruptcy or charging orders: Bankruptcy The Council can also look at making a debtor bankrupt; in doing this all proceedings to enforce payment are stopped. This method would once again be chosen for the appropriate charge payers where we are aware that the debtor has suitable or substantial capital within their estate. The Council has 2 options available: Council Tax through Wilkin Chapman and Business Rates through Greenhalgh Kerr. Both companies offer a specialist bespoke services for local authorities and they would work and manage the process on our behalf. Other local authorities, including Rotherham have already embedded this course of action and it has proven very successful. 4
This process includes securing a bankruptcy petition and negotiation with the debtor. This avenue would be lengthy and the debt would not be recovered immediately, but with the right cases, could have a major impact for the remainder of the Council s debt cases. Charging Orders Charging orders can be the most appropriate method of enforcement. This process would be managed in conjunction with a third party (Wilkin Chapman) and this would include transferring a Liability Order to the County Court, which would allow the Council to obtain a Charging Order. Collection of the debt is then secured against an asset / property and the Council could potentially force a sale of the Debtors property. Committal to Prison When all other options of recovery have been exhausted, the Business Unit are proposing to use committal to prison, this method would not be used lightly and cases will be chosen carefully. We have been advised to use relatively new debts i.e. no older than 2 years old to allow the debtor to be able to collate the relevant income and expenditure evidence for the means enquiry. As part of this process the Business Unit would introduce Debt Surgeries which would be pre committal and provide the charge payer one further chance to engage with the Council. It should be noted that for cases to be escalated to this stage, the Council would have attempted to contact and engage in discussions with the charge payer approximately 12 times before it reaches this stage of the process. Although the debt team would try to cross reference an individual with other records held within the Council including the Adults Social Care database, there is still potential that individuals with vulnerability issues could be subject to this process. As a billing authority we are able to encourage charge payers to pay their council tax through the method of committals. This course of action has previously been used within the authority but not regularly or efficiently. Given the changes that have been implemented over the last 6 months, the business unit now feels the introduction of this process will strengthen our recovery action. The purpose of a committal hearing is to satisfy the courts that the debtor has not paid their liability and once satisfied, to understand why the charge payer has not paid. The committal proceeding is that in the presence of the court, an application is made for committal to prison. The debtor must provide evidence of income and expenditure to enable a full means enquiry to decide whether the charge payer is willfully refusing or has not paid as a result of culpable neglect. The importance of a committal proceeding cannot be understated as the outcome could result in an individual being sent to prison for up to a maximum of 3 months. 5
This process would be managed internally by the Councils Debt Team. Communication of the Councils New Approach If members are in agreement with the recommendations outlined within this report, it is proposed that the Business Unit work with the communications team to develop appropriate press releases and advertise the newly adopted debt strategy through social media. In doing this we hope to demonstrate to our customers within Barnsley who are currently paying their council bills (approximately 95%) that the Council is serious about collecting the debt owed. It is anticipated that this method will prompt individuals to work with the authority and avoid further escalation within the debt process. 5. Consideration of Alternative Approaches 5.1 All alternative options available have been explored and detailed above; the only other option is to maintain the status quo but this would not enable the council to move forward as a commercial debt team. 6. Implications for local people / service users 6.1 Local people will be impacted as part of the process of debt recovery; however we are choosing to enter into agreements that are fair and consistent with approaches adopted by neighbouring local authorities. 7. Employee Implications 7.1 None. 8. Financial Implications 8.1 The proposal will generate improved collection rates and therefore additional income for vital front line services. 9. Community Strategy and the Council s Performance Management Framework 9.1 The Business Unit provides a key role in supporting the delivery of Future Council key priorities. 10. Tackling Health Inequalities 10.1 This proposal does not have any impact on tackling health inequalities. 11. Climate Change and Sustainable Energy Act 2006 11.1 There is no impact in relation to climate change as a result of this proposal. 6
12. Risk Management Issues, Including Health and Safety 12.1 There are no risk management issues arising from this report. 13. Health & Safety 13.1 There are no health & safety implications arising from this report. 14. Compatibility with the European Convention on Human Rights 14.1 This proposal does not contravene the European Invention on Human Rights. 15. Promoting Equality, Diversity and Social Inclusion 15.1 An Equality Impact Assessment has been undertaken and no issues have been identified. 16. Reduction of Crime & Disorder 16.1 This proposal has no direct impact on the reduction of crime & disorder. 17. Conservation of Biodiversity 17.1 No direct implications. Officer Contact:- Rachel Tyas Telephone: 01226 773169 3 November 2015 7