Exchequer Services Debt Recovery Policy Version 4 23/01/2014 1
1.0 Policy objectives The council has a legal duty to recover all money that it is owed. We have a responsibility to recover all such sums as efficiently as possible and to take early action against those who fail to pay. Housing Benefit overpayments are recoverable under the following regulations: Housing Benefit Regulations 2006, regulation 102. Housing Benefit Regulations 2006, regulation 105 allows for deductions from prescribed DWP benefits. Housing Benefit (persons who have attained state pension age) 2006, regulation 83. Housing Benefit (persons who have attained state pension age) 2006, regulation 86 - allows for deductions from prescribed DWP benefits. Social Security Administration Act, regulation s75(7) allows court action to be taken for non-payment. Every year, recovery targets are set for Exchequer Services to achieve, these targets are reviewed quarterly. 2.0 Debt Recovery Strategy The strategy is designed to state the Council s determination to recover debt in accordance with Council Fair Debt Collection Policy, Court procedures and the DWP guidance on Debt Management. The strategy is to ensure that: Proper rules and procedures operate. There is a formal recovery process It respects customers rights. It undertakes all methods of recovery available. The recovery of debts of commence in a timely and efficient manner. The correct procedures are covered when recovering through the courts. 3.0 Types of debt recovered: Exchequer Services recovers two types of debt: One off debts, such as: o Housing Benefit overpayments (appendix 1 for more details) o Fraudulent Benefit overpayments (appendix 1 for more details) o Housing rental deposits o Rechargeable works from Housing or Depot o Stray dog fees o One off hall bookings o Drainage recharges o General insurance debts o Building Control Inspection fees o Special (bulky) collections o Cemeteries o Overpaid salaries o Safer Runnymede charges o Ad-hoc debts when money becomes due to the Council 2
Regular or periodic debts, these can be invoiced monthly, quarterly or annually, such as: o Trade refuse collection fees o Lotteries o Allotments o Community Alarms o Insurance and service charge for DYSO properties o Regular hall bookings o Green waste collection fees o Water charges at Floral House and Darley Dene o Contract parking o Community meals o Alcohol and other licences With the exception of Housing Benefit overpayments the raising and recovery of debts is done used the Consillium TOTAL system. Benefit overpayments are raised and recovered through the Northgate iworld Revenues and Benefits system. 4.0 Recovery process: The recovery of debts commence with the department identifying a debt and notifying Exchequer Services: Overpayment / debt identified by department. Day book to be completed and passed to Sundry Debt section within seven days of raising or notifying the debt. This gives name and address of debtor, details of the debt, ledger code, amount and whether it is liable for VAT. Proof of the debt must be provided upon request. Sundry Debts will raise and issue the invoice within five working days of receipt of the daybook. If no payment is received: A first reminder will be issued after 21 days. A final reminder is issued 10 days after the reminder warning them that the debt will be sent to the bailiffs if the invoice remains unpaid. If no payment or arrangement is received the debt is normally sent to one of two bailiff companies that we use. If the debts are returned because recovery has been unsuccessful then these debts will be allocated to legal recovery. If a debt is under 50, a decision will be taken as to whether it is economical to continue recovery, especially if there is no other debt for debtor outstanding. However in the majority of cases recovery is persued. Checks are made that the debt is valid and proof of the debt is requested. A claim-warning letter is issued to the debtor within 14 days. This gives the debtor time to pay or to contact us to arrange installments. If the debt remains outstanding a County Court Judgement is requested, normally on-line by the Exchequer Services Manager. Once Judgment has been obtained, then other enforcement procedures can be taken to try and obtain recovery. (See methods of recovery). Throughout the whole recovery process, we will were possible try to contact the debtor by phone or email to encourage payment to prevent moving onto the next stage of recovery. 3
The following methods of payment are offered to the debtor, to make payment easy: By cheque via post to Civic Centre Kiosk in Civic Centre which accepts cash, cheques and card payments Direct debit Standing order Card payment over phone Card payment using automated telephone system (IVR) Internet using Runnymede s web site Post Office (free of charge) Pay Point (free of charge) Internet banking via debtors bank 5.0 Methods of recovery This council will use as many methods of recovery as possible. The Exchequer Services Manager will undertake a review every 12 months with the Senior Debt Recovery Officer to ensure all methods are viable and new methods introduced if necessary. Most of the recovery methods can be decided upon once a statement of means has been undertaken, either on a voluntary basis or by the means of an Oral Examination through the Courts. By instalments: It is accepted that some debts may be too large to repay in one payment. We will accept instalments and where possible clear the debt within twelve months. Where low instalments have been agreed, Exchequer Services will review the rate after every six months (the debtor should complete a statement of means). The payments will be monitored every month and reminder letters sent when payment has not been received. Where possible we will encourage the debtor to pay by direct debit or standing order. DWP deductions: Housing Benefit overpayments can be recovered from a prescribed DWP benefit, these include Income Support, Job Seekers Allowance, Retirement Pension or Employment Support Allowance. A request can be made to the DWP to deduct an amount from the weekly benefit. Providing the debtor does not have existing deductions in place the DWP will decide upon a weekly rate and this is sent to the Council monthly. This applies wherever the debtor lives in the UK. Deductions from Housing Benefit: If the debtor has an outstanding benefit overpayment and are in receipt of Housing Benefit from this authority, then the debt should be cancelled immediately and recovered from the ongoing entitlement. If the debtor is in receipt of Housing Benefit elsewhere in the country then deductions can be requested from that Authority. Depending on the Council these are either paid to us quarterly, yearly or when the debt has been cleared. Removal of credit from the rent account / Council Tax account: This should only be done with Rents permission and providing the debt is either for Housing or a Housing Benefit overpayment. Council Tax will allow the removal of a credit from their account providing the debt is for Housing Benefit overpayment. Bailiffs: From July 2007 it was decided to trial a debt collection company for 12 months. This trial was successful and has now been incorporated into the recovery methods. Debts that are proving difficult to collect will be passed to one of two bailiffs. Currently there is no charge passed onto the Council, as part of the Council Tax Bailiff tender the successful bailiffs offered to recover our debts pro bono. 4
Direct Earnings Attachment: New powers were introduced in April 2013 allowing the recovery of Housing Benefit overpayments (SI 2013 No 384). This recovery option will come into affect once debt has been through the invoice recovery stage and the DWP system shows that the customer is not on Income Support, Job Seekers Allowance or Employment Support Allowance. In order to apply for this order we can bypass the Court and approach the debtor and employer direct. It is a criminal offence not to provide the employer details or to ignore the request to make deductions. The debtor and/or the employer may end up with a criminal conviction and a level 3 fine of up to 1000. County Court Judgement: Using the Court s web site, the Exchequer Services Manager requests the CCJ. This incurs a charge which is passed onto the debtor. The Court will send the papers out with an Admission form and a Defence form. Judgement can be requested once the Admission form is received or after 21 days if the debtor fails to return either form. Attachment of earnings: Once it has been established that the claimant is earning and the employers details are known, then an attachment of earnings can be applied for through the Court. Third party debt order This is an order that freezes money held by a person, organisation or institution such as a bank or building society, which might otherwise be paid to the debtor. This prevents the debtor from getting hold of their money until the Court makes a decision as to whether the money should be paid to us. Charging order: This is an order placing a charge on the judgement debtor s property, such as a house or piece of land. The charge is for the amount owed. It means that we won t get the money immediately but it is safeguarded until the property is sold in the future. Warrant of execution: If the debtor is known to have an item in his possession that will cover the debt (i.e. a car) then an application can be made through the Courts to seize the goods up to a value of 5,000. Bankruptcy: This would be done as a last resort and only if the debt was worth over 2,500. It would be applied for through the Courts. Exchequer Services will make reasonable efforts to contact the debtor in person, including visiting their home/business if necessary. The Manager making the decision to pursue bankruptcy/insolvency or committal will ensure that it is a fair and proportionate action after: reviewing an accurate history of the origin of the debt and attempts to recover it considering information about the past, present, disputed or outstanding benefit claims or any discounts or exemptions that might be relevant, assessing whether the debtor has assets that will clear the debt if bankruptcy/insolvency is pursued, assessing if there is a realistic prospect of recovering the debt by other means in a reasonable timescale, gathering sufficient evidence about the debtor s circumstances, considering general equality duties including whether a debtor s failure to pay and to respond to other recovery measures could arise from a disability 5
(including a mental impairment with a long-term and substantial effect on normal day-to-day activities), and considering whether the debtor s personal circumstances warrant them being protected from the consequences of recovery action. Exchequer Services will gather sufficient information, when making contact by telephone or in writing or when visiting a debtor s home/business to levy distress, to assist in the decision making process and the appropriate course of action. Decisions about pursuing bankruptcy or applying for a charging order will be fully recorded and documented and the records will be retained together with the information considered by the decision maker. Written information will be provided to the debtor when bankruptcy or insolvency proceedings are being considered. That information will: warn the debtor of the serious consequences of the action being taken and their continued failure to make arrangements to pay the debt, and urge them to seek independent advice and where that advice can be obtained locally, e.g. CAB. List of Court charges is shown at Appendix 2. 6.0 Write-off policy A debt will be written off as unrecoverable, only after we have tried all avenues applicable for recovery. Sundry Invoices write offs are prepared by the Sundry Debt Officers and passed for approval by the Exchequer Services Manager and authorised by the Corporate Head of Finance. Housing Benefit write offs are prepared by the Overpayment Recovery Officer. The Exchequer Services Manager can write off debts up to 1000. Details of these are kept on a spreadsheet to be reviewed by Corporate Head of Finance when required. The corporate Head of Finance authorises write offs in excess of 1,000. If the debt is in excess of 5,000, then the write-off will require Committee approval. Debts will be written off for the following reasons: Debtor deceased Absconded Uneconomic to pursue Statute barred Insolvent Committed to prison Stated others Debt relief order If an Individual Voluntary Arrangement is received it will not be accepted. Debtor deceased: The invoice will be sent to the estate of the debtor following notification of death. If there is no money in the estate then the debt will be submitted for write off. 6
Debtor absconded: The following records will be checked before writing the claimant off as absconded: Council Tax records Housing records Electoral roll Benefit records LA of previous address for any forwarding address. DWP / JSA trace (if an overpayment debt) Experian debtor trace If no trace can be found for debtor then the debt will be considered for write off, 12 to18 months after absconded. Uneconomic to pursue: These debts will be either of low amounts that are not worth chasing, normally under 40. Statute barred debts: These are debts that cannot legally be pursued after losing contact with the debtor for six years. Insolvent: These debts are automatically submitted for write off once the official insolvency forms are received from the receivers. If the debt is for over 3,000 we will submit a claim against the proceeds but this rarely succeeds. Debt Relief Order (DRO): Introduced in April 2009 it allows people to apply to the Insolvency Service to write off their debts without being made bankrupt. The following conditions apply: You must be unable to pay your debts. You must owe less than 15,000. You can own a car to the value of 1,000 but the total value of other assets must not exceed 300. After taking away tax, national insurance contributions and normal household expenses, your disposable income must be no more than 50 a month. You must be domiciled (living) in England or Wales, or at some time in the last three years have been living or carrying on business in England or Wales. You must not have been subject to another DRO within the last six years. You must not be involved in another formal insolvency procedure at the time you apply After a year, providing none of the above conditions have changed the creditor has to write off the debt. The exception to this is Housing Benefit fraud cases. If a DRO is received in these cases then we need to contact the Insolvency Service representatives dealing with the DRO explaining the nature of the debt and what sanction was applied ie prosecution, caution or Administration Penalty. A decision will then be made as to whether we can continue recovering this debt. Committed to prison: If the debtor has been sentenced to more than two years imprisonment, then there is little hope of obtaining recovery and debts are submitted for write off. Also taken into account is whether the debtor has any ties in the area that will prompt their return to this borough i.e. property vacant for their return and family links. 7
Other (stated): Court costs where the principal sum has been repaid but not the costs to the Council pursuing the legal action. These cannot be pursued through the legal system. Won t pay see uneconomic to pursue. Any other reasons must be submitted after full investigation and with paperwork. Individual Voluntary Agreements (IVA): An IVA cannot be applied to a Local Authority debt, when one is received containing a Runnymede Borough Council debt, the IVA company will be contacted. A letter will also be sent to the debtor informing them that the IVA has been refused and they must contact us to discuss repayment. 7.0 Recovery targets Every year within the appraisal, targets will be set for the Senior Debt Recovery Officer to achieve. They will be broken down into the largest debt types and set a percentage target to recover both outstanding and the amount raised over the year (these will differ with debt type depending on the ease of recovery). These targets will be reviewed on a quarterly basis during the team meetings. Recovery of Fraudulent overpayments, will incur its own target in order to ensue recovery is dealt with as a priority. Exchequer Services will participate in any Benchmarking review and will aim to be within the top four authorities for debtor performance, recovery and cost. 8.0 Reports Every month, reports will be produced to show: The amount of outstanding debt, broken down into debt type and passed to the department concerned. The number and amount of invoices raised that month. The total amount of debt outstanding. Number of refunds issued to customers Number of credit and debit notes issued. Number of write offs entered. Ongoing review of targets. 9.0 Continuous improvement Exchequer Services will continue to improve year on year, the areas of improvement will be based on any benchmarking findings, the Exchequer Services Business Improvement plan and results of previously set targets. 8
Appendix 1 Further information about Housing Benefit overpayments: Background of Benefit overpayments The Housing Benefit system is widely known to be very complex with constantly changing regulations. Poor administration of overpayments could penalise the council through subsidy loss. The correct calculation of benefit is dependant on the customer always keeping the Benefits Service informed of changes that occur in their household, rent, income and savings. This is frequently not the case, and, as a result overpayments occur. Although a small percentage will be fraudulent, the majority will be through ignorance of the system or because they wrongly assume that another agency will inform us of the change. To advise customers about the importance of notifying the benefit service of change we do the following: Inform them that they must report all changes when they sign the declaration on the claim form. The notification letters advise customers of what changes to report. An advice leaflet is included with all notification letters explaining how to read the notification letters and how to check the information included in them for accuracy. A change of circumstances form is included with all notification letters. Overpayments often cause deep concern for customers, who are often in financial hardship. As a result the potential for full recovery is very low and many repayment arrangements are for minimal amounts that can take many years to recover. Therefore a fine balance needs to be struck between the financial hardship of the customer and the need to maximise recovery. There are five different types of overpayment: 1) Local Authority error: When the LA decision maker has made a mistake within the assessment process A change of circumstance is not actioned promptly Changes to the law are not actioned on time or revision of the law retrospectively The customer did not contribute to the error. LA error overpayments are not recoverable unless the customer could reasonably have known that he or she was being overpaid. This Authority will take into account all circumstances before recovering these types of errors. These include the age and health of the claimant. 2) Departmental error: Is an error caused by the Department for Work and Pensions or HMRC. The DWP or HMRC must acknowledge the error. These are not recovered. 3) Indicative rent level overpayments: Payment on account was made based on an indicative rent Subsequent Rent Officer decision was lower creating an overpayment. No error made by the customer or the LA Regulation 91(3) states that LA s must recover the excess payment on account from ongoing entitlement. If payment was not made on an in indicative rent level provided by Rent Service then it is a LA error. 9
4) Excess Council Tax Support: Is when Council Tax liability is reduced after CTS has been granted Single person discount granted Customer vacated the property Disabled reduction given. Except for very rate cases excess CTS is posted to the Council Tax account. 5) Customer error: Benefit has been found to be incorrect due to: Customer error Customer fraud Retrospective changes beyond the customer control eg backdated pay rise These overpayments are normally recovered, but the customer is given the right of appeal. Aims of the Benefits Service This policy document determines the actions that the Benefits Service will undertake to ensure that high standards are maintained in the administration of benefit overpayments: All benefit officers will be trained in the identification, processing, allocating, notifying and recovery of overpayments. All reported changes of circumstances that will be processed with seven calendar days from receipt of information or suspended to prevent further overpayment occurring. The claimant will be invited to provide information to establish any underlying entitlement. Invite re-claim when the claimant has started work or another circumstance that may still have entitlement. Take into account any un-cashed or returned payments when calculating the overpayment. Overpayments will be calculated, notified and recovery action started within 14 days of receipt of written notification of change. All invoices will be checked for accuracy and to ensure that the regulations have been correctly followed in making decisions about recovery. A prompt decision will be made about an overpayment occurring and whether it is recoverable. The decision to recover will take into account the personal circumstances of the customer, which should include health and financial circumstances and ensure that hardship is not caused. To notify the customer promptly of the decision being made, ensuring that the notification adheres fully to schedule 9, part 7 of the regulations. If there is a possibility of a misunderstanding with the official notification letter and if the overpayment is in excess of 500 then a manual letter will be issued in addition to a system letter. If the customer is over the age of 75 and the overpayment is in excess of 500, then a visit may be made to issue the overpayment letter together with an explanation (this may also be carried out if the customer is known to be sick or vulnerable). To ensure that the customer, landlord or any representative is fully aware of their right in respect of re-determinations, appeals and written statement of reasons. To deal with customers concerns and enquiries promptly and sensitively. To make sure that officers do not cause un-necessary and undue hardship to those on low incomes, by reviewing and reducing the deduction or repayment rate if requested. This is not automatic for proven fraud cases. Where the recovery rate is set below the Government maximum, this will be reviewed annually. Council tenants with overpayments will only have the overpayment or part thereof set to the rent account only if there is a credit on the rent account and 10
Housing agree. If they have died or vacated the property, this will be put onto the rent account at the next interface. Where possible the council will maximise recovery and minimise costs. To liaise closely with the DWP, each officer will pass on information likely to affect a claim. Also to adhere and monitor the Debt Management / DWP service level agreements. To use effective and prompt legal deterrents for wilful non payers and defaulters. To set challenging and realistic performance targets in respect of the notification and recovery of the overpayments. Monitoring performance and reporting to Members. In order for the above to be implemented properly then all relevant benefits staff must understand and apply the appropriate benefit regulations, claim incentives and promptly classify the overpayments correctly. This requires full training for new staff and regular reviews for existing staff. Definition and legal duties There are statutory regulations that specify how the council must deal with overpayments of Housing Benefit. Each case must follow the correct procedure and be assessed on its own merits. The key rules of overpayments laid out in the Housing Benefit Regulations 2006 (and HB for persons who have attained state pension age) are: Regulation 99 (80) defines an overpayment as overpayment mean any amount which has been paid by way of housing benefit and to which there was no entitlement ( Regulation 100 (81) deals with the recovery of overpayments. Regulation 101 (82) deals with the issues of from whom recovery may be sought Regulation 102 (83) deals with the methods of recovery open to a Local Authority. Schedule 9 Part 7 deals with the notice to be issued where there is a recoverable overpayment. SI 2003 No 384 deal with Direct Earnings Attachments. Respecting customer s rights When determining overpayments, deciding upon and attempting to recover, officers will do this sensitively, respecting customer rights. The Council will, where appropriate and practical adopt the DWP Good Practice guide. We will examine the circumstances of each individual and make determinations within the benefit regulations. Always advise customers of their rights under benefit legislation. Use discretion in deciding whether an overpayment is recoverable. Ensure that all overpayments are classified correctly and that the subsidy claims and stats are accurate. Advise customers that they can see a Benefits Advisor or seek independent advice. Ensure that if an overpayment is recovered from a landlord through another tenant, that the tenant is not penalised in any way, by writing to the landlord. 11
We will aim to answer all written statement of reasons within 21 days of receipt. Any re-determinations will be made within 7 days of the decision being made and the claimant notified. The reply will also include the details of what the Council will or the customer can do next. Documents for the Appeals Tribunal will be processed ideally within one month, but definitely within 3 months of the appeal being received. Legislation from October 2000 (Circular A47/2000) changed the overpayment rules regarding the recovery of Housing Benefit. We can now look at underlying entitlement; this will be the amount that the claimant would have been entitled to had we known the full facts, and now have the evidence. The amount awarded will then be deducted from the overpayment and the claimant will be advised of any remaining overpayment, however, because of the advantageous rule the claimant will not get any benefit owed in excess of the overpayment. The benefit regulations are there to ensure that: Overpayments are correct and have supporting evidence and reasons before recovery can be considered. Most overpayments are recoverable unless they have been caused by LA (except where the claimant could reasonably have known that they were being overpaid) or DWP / HMRC error. LAs have the discretion not to recover even where the overpayment is recoverable. Factors such as age, health and hardship can all be taken into account as part of the decision. Runnymede Borough Council will aim to recover most overpayments except: If the customers circumstances are such that recovery of the overpayment would lead to extreme hardship. Where there is an appeal outstanding. Where the overpayment was an LA error and the customer could not have been reasonably aware that an overpayment was taking place. Where there is insufficient evidence to support the overpayment. Where the customer is incorrectly notified of the overpayment (for example, the notification did not comply with Schedule 8 part 7). The overpayment is not economic to pursue. The claimant has died and there are insufficient funds in the estate. Where there is a surviving partner and the overpayment occurred because of an reasonable delay in informing us. When a decision not to recover is made, we will: Put a case forward to the Assessment Manager. Any overpayment up to 50 can be written off by the Assessment Team Managers. Any overpayment up to 1,000 can be written off by the Assistant Head of Finance or Exchequer Services Manager Over 1,000 is authorised by Corporate Head of Finance. Over 5,000 needs to go to Committee. 12