CORPORATE DEBT MANAGEMENT AND RECOVERY POLICY

CORPORATE DEBT MANAGEMENT AND RECOVERY POLICY www.chorley.gov.uk

CONTENTS Page Introduction 3 Policy Aims 4 How these link to the Council s Corporate Priorities Debts Covered by this Policy 5 The Legal and Policy Framework for Recovery 6 The Policy 7-9 Limitations on Debt Recovery 10 Procedures and Training Monitoring Future Actions 11 Appendix 1 Types and levels of Debt 12 Appendix 2 Available Methods of Payment 13 Appendix 3 Contact Details for Debtors 14 Appendix 4 Referral of Debtors to and from the Citizens Advice Bureau 15 Appendix 5 Advice on Priority Debts from the Citizens Advice Bureau 16 2

INTRODUCTION Effective debt management is crucial to the success of any organisation. Debt is a topical and high profile area in the current economic climate of high personal borrowing and rising interest rates. Nationally, levels of personal debt have increased 50% since 1997 1 and individual bankruptcy rates are at a 10-year high. 2 The Best Value Review of the Revenues and Benefits service highlighted the absence of a corporate approach to collecting debt. Subsequently, an effectiveness review of the Council s debt management across all debt streams was carried out by internal audit. Their report recommended that a corporate debt management and recovery policy be formulated. Key areas of concern were the wide variations in the ways that debts are pursued and managed across the authority and the failure to make best use of management information and data sharing to manage debts. This policy has been designed to address these concerns. Its implementation aims to deliver measurable service improvement and adherence to recognised good practice. 1 The Office for National Statistics. 2 The Department of Trade and Industry. 3

POLICY AIMS The key aims of this policy are as follows: To ensure a professional, consistent and timely approach to recovery action across all of the Council s functions. To cost effectively pursue all debts owed to the Council, ensuring that those with the means to pay do pay. To consider fully the debtors circumstances and ability to pay and so distinguish between the debtor who won t pay and the debtor who genuinely can t pay. To promote a coordinated approach towards sharing debtor information and managing multiple debts owed to the Council. To improve the levels of income collected by the Authority. To ensure that debts are managed in accordance with legislative provisions and best practice. To treat individuals consistently and fairly regardless of age, sex, gender, disability and sexual orientation and to ensure that individual s rights under Data Protection and Human Rights legislation are protected. HOW THESE LINK TO THE COUNCIL S CORPORATE PRIORITIES Serving our customers better In identifying genuine hardship, advice on benefits can be given to prevent the situation worsening and may enable a long-term arrangement at an affordable amount. With the debtor s consent, all their debts to the Council can be taken into consideration when making an arrangement, reducing the possible level of distress where different Council services are each seeking to recover debts. Investing in our capacity to deliver Prompt recovery action against debtors with the means to pay will improve debt collection rates and benefit the council s financial resources. Opportunities will be created to strengthen our partnership with the Citizens Advice Bureau and to create consistent and improved working practices across the Council. 4

DEBTS COVERED BY THIS POLICY The main units involved in debt recovery are Finance and Housing Services. The debts involved are primarily: Council Tax National Non Domestic Rates Rent Overpaid Housing Benefit Sundry Debts The policy will apply to all units of the Council and focus on collecting the charge set rather than how the charge is arrived at. Ability to pay is a paramount concern when considering debt recovery. For Council Tax and Rent, statutory benefits are provided on application, which are designed to offset the effects of low income on ability to pay. Charging policy, statutory or discretionary will never completely remove the problems of people and families on low incomes. The approach to recovery must therefore be sensitive to individual circumstances and take into account multiple debts owed. See Appendix 1 for details of the volumes of activity involved in each major debt stream. 5

THE LEGAL AND POLICY FRAMEWORK FOR RECOVERY Chorley Borough Council has a legal duty to ensure cost effective billing, collection and recovery of all sums due to the Council. This policy is in addition to existing legislation and will enhance the procedures already in place to collect debt. This debt recovery policy is concerned primarily with the recovery of debts prior to legal action being taken but the principles should still be applied wherever appropriate even if litigation has commenced. Local Taxation Council Tax recovery procedures are laid down by statute in The Council Tax (Administration and Enforcement) Regulations 1992 and subsequent amendments. National Non-Domestic Rates recovery procedures are laid down by statute in The Local Government Finance Act 1988 and subsequent regulations and amendments. Chorley Borough Council appoints bailiffs to recover local taxation arrears in accordance with our own code of conduct. Only certificated bailiffs can levy distress for local taxation and fees charged to the debtor are governed by legislation. Housing Benefits Housing Benefit overpayments are reclaimed in accordance with Regulations 98-105 of The Housing Benefit (General) Regulations 1987 (as amended). In addition there are Debt Recovery Procedures in place where Housing Benefit has been overpaid and is no longer in payment. Housing Rents The Council s Rent Collection and Arrears Pursuance Policy and Procedure sets out all activities involved in recovering existing tenant and former tenant arrears. Miscellaneous Income Sundry Debt arrears are collected within a well-established framework, but currently without written guidelines and in varied timescales. On certain debts, interest may be charged and costs incurred. The debtor will be made aware of any additional costs in advance so that they have the opportunity to avoid this wherever possible. 6

THE POLICY Full names, contact address and a phone number will be established wherever possible prior to service provision or invoicing/billing. All Council bills and invoices will be raised as soon as practicable on a daily basis and will include clear, relevant and full information as to: What the bill is for When payment is due How to pay How to contact us if there is a query in relation to the bill or in relation to making payment All letters and reminders will: Be written in plain English Explain fully what has been agreed and the consequences of nonpayment Include appropriate contact details Debtors will be encouraged to make prompt contact if they disagree with a bill or have difficulty in making payment on time. Contact can be made by: Telephone Letter Email Fax In person at the One Stop Shop Problems and bill discrepancies raised will be resolved as quickly as possible to prevent unnecessary delays in payment and incorrect debits. All debtors seeking help due to financial difficulties will: Be given the opportunity to have their ability to pay assessed by the relevant collection unit Be invited to provide details of their means by listing their income and outgoings. (Evidence to confirm the accuracy of the means statement will be requested if necessary) Be encouraged to use the money advice services available from the Citizens Advice Bureau Be asked if they have other debts owing to the Council that they also wish to be considered Be given access to the Council s interpreter service if required If legal proceedings have already commenced, consideration will be given to whether the debt can firstly be attached to earnings or benefits, the priority of the debts owed and the level of repayments currently being made. 7

If a specific recovery action has already commenced e.g. attachment of earnings or bailiff action, the action taken will usually continue. However, any arrears not included in the action will be considered in line with existing arrangements and this policy. If it is found that the debtor has the ability to pay, but refuses to pay, then recovery action will continue promptly within the existing arrangements for the type of debt. If it is found that the debtor is suffering severe hardship or has difficulty managing their own affairs, the following will be considered: Can we reduce the debt? Are they entitled to take up relevant benefits, discounts, exemptions and reductions to minimise the potential for debt accrual? Does the debtor owe money to other Council collection units? If so the debtor will be advised that, with their consent, all their Council debts may be taken into consideration when deciding on an arrangement. The advantage to the debtor in making a common arrangement is that they may save time and costs. However, it is for the debtor to decide if this is an option they want to pursue Can we hold recovery action and offer to refer cases to the Citizens Advice Bureau (CAB)? This will suspend additional costs to allow reasonable time for the CAB to assist the debtor and if necessary prepare a financial statement for them If a debtor takes up the offer to deal with all Council debts collectively, the various collection units and One Stop Shop (if utilised) will communicate the debtors details confidentially between themselves and will endeavour to take a holistic approach to collection without prejudice to their own collection unit. Where Local Taxation debts are involved, the local taxation team will coordinate the Council s work and act as a single point of contact for the debtor. In other circumstances, Finance Unit staff will take the lead role. Where there is no continuous liability a special long-term arrangement may be made according to the ability to pay and the existing recovery provisions such as an attachment of earnings. Where liability is continuous e.g. Council Tax, any arrangement made will normally require payments over and above the ongoing monthly liability. Future instalments must be paid when due as a condition of the arrangement. For example, someone owing Council Tax arrears of 600 in March has a new bill issued requiring monthly instalments of say 75.00 from April. They must pay the 75.00 each month, but could be allowed to spread the arrears of 600.00 plus any other Council debts over an agreed period. The 75.00 per month would be taken into account when assessing their ability to pay the 600 arrears. If the period agreed was 10 months to match the instalment period for the new bill, the monthly Council Tax payment would be 135.00 ( 75 plus 60). If only the current year s bill is owed, arrangements should require payment within the financial year (at the latest) whenever possible. 8

Longer term arrangements for older arrears will be strictly monitored and reviewed. If there is no improvement by the review date and if the amount payable cannot be reduced (by awarding Council Tax Benefit etc), the Council will reserve the right to continue with legal action, and in the case of Local Taxation, obtain a liability order from the magistrates court. This is to protect the Council s interests and prevent the debt from becoming statute barred and irrecoverable. Nevertheless regular contact with the debtor is encouraged and part payments will be accepted to reduce the overall debt. Furthermore it is not in the debtors best interest to have a long term arrangement when liability is continuous, since the level of debt will increase as time goes by and the debtors situation deteriorate rather than improve. If a debtor is receiving Income Support or Job Seekers Allowance, this will usually limit the ability to pay to no more than the amount that can be paid directly to creditors by the Department of Work and Pensions (DWP) - currently 2.80 per week for Council Tax and 8.40 per week for housing benefit overpayments. Where appropriate, a separate agreement will be made for additional debts and liability orders depending on the individual s circumstances. Debtors given time to pay will be advised to contact the Council immediately should they experience a change of circumstances affecting their ability to pay. This is to discuss the options available to prevent recovery action and additional costs. If a debtor fails to cooperate by: Refusing to provide details of their means, and/or Not consenting to multiple debts being dealt with together, and/or Failing to pay a special arrangement on time without contact, then recovery action will be taken promptly in the normal way. 9

LIMITATIONS ON DEBT RECOVERY All external bailiffs appointed will be given a code of conduct requiring them to refer to the council, before proceeding to take action, in the following circumstances: The debtor appears to be over 70 years old The debtor is severely ill or disabled The debtor has young children and severe deprivation is evident The debtor disputes liability or claims to have applied for a rebate which has not yet been granted The debtor is currently consulting his or her Councillor or MP Unless otherwise authorised, referrals to bailiffs for levying distress will not be made for less than 50. This covers Local Taxation debts where the power to remove goods is granted by the Magistrates Court. Unless otherwise authorised, referrals to collection agencies or bailiffs for debts where there is no power to levy distress, will not be made for less than 30. PROCEDURES AND TRAINING Although there are variations in the procedures relating to different debt streams, they must reflect the Council s requirement for the corporate approach to recovering debt set out in this policy. This policy will be made available to all staff dealing with income collection and recovery. This will be reinforced with training and management supervision of all staff involved in collecting debt. MONITORING Each unit/section will be responsible for ensuring that this policy is adhered to and effective. Management information will be required for each debt stream on a monthly basis. The numbers of long-term arrangements, CAB referrals and multiple debt management will be recorded. Internal Audit will test compliance with this policy in future reviews. Regular meetings between responsible officers nominated by each unit/section will be held on a quarterly basis. 10

FUTURE ACTIONS It is intended to introduce mechanisms to share bad/doubtful debtor information across the authority. This is in order to adopt a customer-centred approach by managing debts holistically. Trials are currently underway to assess the effectiveness of Local Taxation bailiffs in collecting sundry debts, Housing Benefit overpayments and rent arrears. If successful, it is hoped to reduce the number of debt collection agencies and renegotiate terms to seek out economies of scale. It is hoped to reduce the number of sundry debt invoices by looking at alternative payment methods e.g. obtaining payment up front for services. Direct Debit will be introduced for sundry debtor invoices as part of the introduction of the new financial systems during 2004/2005. 11

APPENDIX 1 CBC TYPES AND LEVELS OF DEBT * Type of Debt No of Accounts Total Debt Legislation Recovery Methods Council Tax 43,500 Properties 40 Million (Before Benefit) NNDR 2,700 Properties 17 Million General Income 5,520 Sundry Debtors 3.7 Million Housing Benefit overpayments 1,200 Cases 680,000 L.G.F.A. 1992 Council Tax Admin & Enforcement Regulations 1992 L.G.F.A. 1988 (Implemented 1990 and replaced General Rate Act) Reminder, Final Notice, Ring Debtor Rent 3,100 Properties 7.5 Million Housing Act 1985 Mortgages 68 Mortgages 91,600 - Liability Order; Penalties for Failure to Supply Information; Attachment of Earnings/Benefit; Distraint; Charging Order; Bankruptcy; Committal to Prison. Liability Order; Distraint; Bankruptcy; Liquidation; Winding Up Order; Committal to Prison (Not Limited Companies). If < 150 (average) case sent to external Debt Collectors. If > 150 (average) case sent to legal section for County Court /Small Claims Court action. Can only use County Court Bailiffs or, if > 600, High Court Sheriff. County Court Order of Payment, Attachment of Earnings/Benefit; Possession/Eviction (debt continues and may result in homelessness). Referred to legal section for County Court Action which may ultimately lead to repossession. Total 56,088 Accounts 68.972 Million * Approximate figures as at February 2004 12

APPENDIX 2 AVAILABLE METHODS OF PAYMENT Direct Debit This will be promoted as the preferred method of payment for Local Taxation since it is the easiest and cheapest method of collection. Housing will also have the facility for Direct Debit payments in 2004 with Sundry debts following later in the year. Debit/Credit Card Debit/Credit Card payments will be encouraged to avoid late payment, where appropriate. The cards we accept are Switch, Visa, Mastercard, Maestro, Delta, Solo, JCB, and Visa Purchasing. Payment by Electron can be made at the counter but not by telephone. 24 Hours a Day Payment can be made 24 hours a day, 7 days a week by Debit/Credit Card by: Payment Card Telephone 01257 511000 Online www.chorley.gov.uk At a choice of over 200 locations using a swipe card provided by the Council. Post Offices, Paypoint, or PayZone outlets accept the cards. Direct Banking Arrangements can be made to set up a standing order or an internet banking payment by sending payments directly to National Westminster Bank plc, 46 Market St, Chorley, quoting: Post Chorley Borough Council (Income Account) Account number on the bill Sort Code 01 01 94 Account number 01036335 Cheques (cash should not be sent in the post) can be sent to: In Person Chorley Borough Council PO Box 22 Chorley, PR7 1AT At the Civic Offices Union St Chorley Monday to Friday 8.45 16.45 13

APPENDIX 3 HOW TO CONTACT CHORLEY BOROUGH COUNCIL One Stop Shop Open Monday-Friday 08.45 16.45 Civic Offices Union Street All Council debts can be discussed with trained staff. Chorley Citizens Advice Bureau referrals arranged. PR7 1AL Interpreter service available. Local Taxation Office Council Tax - Liability, benefits, discounts, Civic Offices exemptions, reductions, bills and reminders, Union Street Tel 01257 515431. Chorley Council Tax - Recovery, summonses, attachments PR7 1AL of earnings and deductions from benefit, Tel 01257 515433. National Non-Domestic Rates - all enquiries, Tel 01257 515452. Email local.tax@chorley.gov.uk Fax 01257 515778. Housing Services Council housing including homeless housing. Civic Offices Tenant arrears. Union Street Former Tenant arrears. Chorley Tel 01257 515589/515528 PR7 1AL Email housing.rents@chorley.gov.uk Fax 01257 515584 Housing Benefits Housing Benefit Overpayments. Civic Offices Housing Benefit claims. Union Street Council Tax Benefit claims. Chorley Tel 01257 515408 PR7 1AL Email benefits@chorley.gov.uk Fax 01257 515462 Sundry Debts Invoices for various Council services. Exchequer Section Mortgages. Civic Offices Miscellaneous Income. Union Street Tel 01257 515471 Chorley Email income@chorley.gov.uk PR7 1AL Fax 01257 515475 14

REFERRAL OF DEBTORS TO AND FROM THE CITIZENS ADVICE BUREAU APPENDIX 4 A system of Referral has been in place since 2001. This is set out below and should be followed by all Units. Contact details are included. Units will encourage all debtors seeking help due to financial difficulties to use the services provided by the Citizens Advice Bureau. This will be offered: During interview During telephone conversation In leaflets, reminders and other recovery documents issued by the Council On the Council s website. Procedure to Follow CAB advisers and Council Staff will use an agreed method of identification before disclosing financial details. The contact number for members of the public for the CAB is 01257 268086. Referrals to the CAB at the customer's request will be made by Council staff. A telephone appointment will be made and the debtor will be given a slip with the date & time and details of Council Tax/ Rent/ Overpayments or any other council debts the customer has called to discuss. As explained, it will not be possible at this stage for the Council to clarify all debts - this will need to be done by the CAB at or after interview. A hold will be put on the customer s account, unless the Council has told them otherwise, when an appointment is made. The account will be marked as a CAB case and will be followed up. The CAB will get a slip signed when interviewing clients to authorise the Council to provide any debt information required. Debts with the bailiff will be recalled only in exceptional circumstances as costs incurred would fall to the Council and taxpayers as a whole. Unless the Council has agreed to put the case on hold, the CAB will need to negotiate directly with our bailiffs. This applies to both referrals and to debtors making direct appointments. When submitting financial statements, the CAB will verify that any payments shown as being made in list of outgoings are in fact up to date. The Council will give letters submitted by the CAB priority treatment on receipt. The CAB will confirm if necessary that the debtor has attended the appointment. 15

APPENDIX 5 ADVICE ON PRIORITY DEBTS FROM THE CITIZENS ADVICE BUREAU The following advice is supplied to debtors by the Citizens Advice Bureau for information. It does not override this corporate debt policy. Priority debts Priority debts are debts owed to creditors who can take the strongest legal actions against you if you do not pay. It is not the size of the debt that makes it a priority, but what the creditors can do to recover their money. Priority debts are: Mortgage arrears Rent arrears Income Tax and VAT Fines Maintenance and child support Council Tax and Rates Fuel debts Hire Purchase for goods that are essential e.g. a car needed for work If you have any of these debts, you must deal with them before you offer to repay any of your non-priority debts. Non-priority debts Examples of non-priority debts are: Credit Card and Store Card arrears Catalogue arrears Bank overdrafts and loans Benefits overpayments Hire Purchase for goods that aren t essential e.g. a television Money borrowed from family and friends You cannot be imprisoned for not paying non-priority debts. You are unlikely to lose your home or your essential goods. However, if you make no offers to pay, without explaining why, the creditors will take you to court. If you still fail to pay when the court has ordered it, the creditors can take further action for example, they can get another court order allowing them to send bailiffs in. 16