Debt Recovery Strategy for Housing Benefit Overpayments.

Debt Recovery Strategy for Housing Benefit Overpayments. 1. Introduction 1.1 The Service Statement of Intent for the Benefits Service states that we will provide a service that recovers overpayments, reduces the level of fraud and error in the system, investigates potential fraud and, where fraud is found, punish it. In addition, The Council is committed to reducing the overall level and the age profile of the outstanding debt. This Debt Recovery Strategy sets out what Manchester City Council is seeking to achieve and how we will achieve it. 1.2 Virtually all overpayments of Housing Benefit are legally recoverable except for some caused by official error. The Council is committed to the recovery of all overpayments where appropriate. 1.3 However, in this document the Council also recognises that people can have several different debts with the Council (rent arrears, Council Tax arrears etc) and it may be impossible for them to adequately service them all. 2 Types of Overpayments 2.1 There are a wide variety of issues that can cause overpayments, but for subsidy purposes all must be defined into the following categories: 2.1.1 Claimant responsible. This includes claimant error, fraud, and most overpayments previously defined as 'other', though some of the latter are not straightforward and occasionally may need to be defined in one of the categories shown below. 2.1.2 Department for Work and Pensions (DWP) error. This should only be used where the DWP have clearly accepted responsibility. 2.1.3 Local Authority error. This includes overpayments caused by delay in processing claims which are calculated automatically by the system during the subsidy claim process. 2.1.4 Technical overpayments. This is where overpayment is caused solely by Benefit being paid in advance. It usually only applies to Council Tax Benefit. These overpayments are also calculated automatically as part of the subsidy claim process. Page 1

2.1.5 Indicative Rent Level overpayments. This is where the overpayment is caused by the Rent Service setting a rent for Benefit purposes below the indicative rent figure previously used. This can only apply to Rent Allowance claims. 2.1.6 Duplicate payments. This is where Housing Benefit has been paid twice to the same person on the same claim for the same period, usually because of a payment not being received. It can only apply to Rent Allowance claims. 2.2 With the exception of some DWP or LA error cases, all overpayments are legally recoverable. However, just because an overpayment is legally recoverable does not necessarily mean it should be recovered (see Write Off Procedure Document for more information on when overpayments may not be recovered) 2.3 Because the Council wishes to prevent and deter fraud, special arrangements will apply to any overpayments identified in this category and these are categorized below. 3 Decision Making 3.1 Following the identification of an overpayment of benefit through the claim assessment process, The Council must make decisions in respect of each individual overpayment. 3.2 The questions that must be addressed are: 3.2.1 Is the overpayment recoverable? The answer to this question will usually be yes apart from some overpayments caused by DWP or LA error. Benefit Assessors will make this decision and always seek to recover overpayments via ongoing benefit where possible Page 2

3.2.2 Should the overpayment be recovered? If the answer to 3.2.1 is yes then the decision in most cases will be yes. Recovery may be delayed if the debtor has other priority debts with the Council (Rent arrears or Council Tax arrears). This situation is covered by the Council s Corporate Debt Policy. The Council may decide not to recover the debt and write it off. The criteria for considering whether an overpayment may be written off are dealt with in the Write Off Procedure for overpayments. 3.2.3 Who should the overpayment be recovered from? The law says that an overpayment can be recovered from the claimant or the person to whom the benefit was paid, depending on the reason for the overpayment 3.3 Where a landlord or agent has received overpaid benefit the Council would normally recover from them in the following cases: - Overpayments as a result of a rent decrease Where the tenant has left the property The tenant has died This list is not exhaustive and there may be other cases where recovery from a landlord is appropriate. A test of reasonableness and fairness needs to be applied when deciding who should be asked to repay the overpaid benefit. This decision is made by Benefit Assessors and recorded in the Council s Benefits processing system (Academy) and in the Revenues and Benefits Imaging system (Images) 3.4 In cases where a landlord has been paid direct, but the cause of the overpayment is a change in the customer s personal circumstances (a wage increase for example), then the landlord could not reasonably have been expected to have known about the change. Under these circumstances, the customer should be billed instead of the landlord. Page 3

4 How should overpayments be recovered? 4.1 The following methods are available to a local authority: - Deduction from ongoing benefit Deduction from arrears of benefit Deduction from other social security benefits Deduction from ongoing benefit by other Local Authorities when the debtor has moved away. Deduction from other tenants benefit (landlords only) Deduction from rent account credits (Council tenants only) Invoicing with the subsequent use of debt collection agencies County Court action, including the use of bankruptcy proceedings where appropriate Deduction using Direct Earnings Attachments 4.2 The Council will usually choose to recover overpayments from credits on accounts or arrears of benefit and from ongoing benefit as these are the most cost effective and easily administered methods of recovery. However, where the claimant is known to have significant capital or instalments would continue for several years and the landlord could not be asked to pay, other approaches may be more appropriate. In all cases the Council must tell the claimant (and the landlord if appropriate) in writing, how it will recover the overpayment. The Council will always consider any alternative proposals made for repaying the debt. 5 Overpayments caused by fraud 5.1 The Council is committed to punishing fraud where it is found. Because of this, different procedures apply to overpayments caused by fraud: 5.2 The recovery of overpayments caused by fraud will not be delayed if the customer is covered by the Corporate Debt Policy. The maximum recovery rate from ongoing benefit will still apply where a court conviction Page 4

or Administrative Penalty has been obtained. If the customer is not in receipt of Benefit, Overpayments Officers may agree instalments based on the customer s ability to pay and the payment plan is recorded in Academy. 5.3 Where an Admin Penalty has been agreed between the customer and the Fraud Investigation Group (FIG) as an alternative to being taken to court, the amount of the overpayment is increased by 50%. These overpayments are monitored separately. 5.3.1 FIG informs the O/P Manager when an Admin Penalty has been applied. These cases are recorded on a spreadsheet by the Manager. 5.3.2 The overpayment is created in Academy by the Benefit Assessors without the additional 50% to ensure the overpayment is recovered first. 5.3.3 The O/P Manager monitors all of the relevant overpayments through comparison with the spreadsheet on a monthly basis. Where an overpayment is fully recovered, s/he will create the additional 50% as an overpayment and set the indicator on Academy to show that the penalty is now being recovered. 6 Invoicing 6.1 Academy produces invoices in all cases, but does not print them in cases where ongoing recovery is instigated. 6.2 Reminders are automatically generated and sent in non-payment cases and if this action unsuccessful, the overpayment is reviewed for appropriate further action to be taken. (see section 8 below). 6.3 Overpayments raised as a result of fraud are identified on a quarterly Fraud overpayments report. This report is prioritised and dealt with each quarter currently by the Overpayments Team. The Overpayments manager then monitors progress on all identified fraud overpayments. 7. Instalment agreements 7.1 Where a customer makes contact and wants to repay an overpayment by instalments, this may be acceptable. Any agreement made needs to take into account the customer s circumstances, the offer being made and the City Council s need to recover the overpayment promptly and efficiently. It is pointless agreeing instalments if it is clear that the customer cannot afford the agreed repayments. Every effort should therefore be made to agree a mutually Page 5

acceptable and affordable arrangement. These efforts are based on the income expenditure statements requested by the team as a pre requisite to setting up an arrangement. The Overpayments Team may also request proof of income, expenditure, and other debts and may ask to see bank statements Accordingly, a flexible approach should be adopted when discussing arrangements with customers, but the main objective should be to try to recover the overpayment in as short a timescale as possible. As a general rule the Council does not expect that an instalment arrangement should exceed 12 months, but recognises that this cannot be an absolute requirement, especially if the customer has other debts to the Council. These decisions are made by the Overpayments Officers and recorded in Academy and Images. 7.2 The Council would not usually allow a landlord to defer repayment by an arrangement to pay in instalments but would consider it if circumstances were exceptional. 7.3.1 Where an overpayment has arisen due to fraud, it is expected that the debt will be recovered in the shortest timescale possible. Where deductions from ongoing benefit are used, the instalments should usually be at the maximum levels prescribed for fraud cases. The current recovery rate for fraud cases is 18.25 pw. Recovery of overpayments caused by fraud will not normally be reduced or delayed under the Corporate Debt Policy 8 Review stage 8.1 When the recovery options within Academy have been exhausted and an invoice still remains unpaid, it reaches the review stage. The Overpayment Officers will review each overpayment thoroughly at this stage. 8.2 This review consists of checks for: - Whether other methods of recovery have become available (for example from ongoing benefit, from Council Housing rent credits etc.) If they have, these should be implemented immediately. Whether the overpayment is still valid. If not, because a subsequent amendment has reduced or removed the overpayment, the invoice should be written off and, if necessary, an amended invoice issued. Page 6

Whether the DWP or another Local Authority could deduct the overpayment from payments they are making Whether the current whereabouts of the debtor are known. If the current whereabouts of the debtor are unknown, then efforts should be made to trace the current address by using all available tracing methods Whether the debtor may have significant assets, principally his/her own home, that may make bankruptcy an option. 9 Further action 9.1 Where no other methods of recovery are available following the nonpayment of an invoice (after the above review has been carried out) Overpayment staff will take the following action: - 9.2 Landlords 9.2.1 If a landlord is receiving cheques for other tenants, deduct any unpaid overpayment at the earliest possible time from these cheques 9.2.2 First, consider recovering the overpayment in one lump sum. However, instalment recovery may be appropriate particularly when dealing with relatively small landlords or large overpayments 9.2.3 Notify landlords in advance of any such deductions from their payments in order to comply with regulations. 9.2.4 If a landlord is no longer receiving benefit for any tenants, refer the overpayment to a debt collection agency. All such decisions are recorded in Images and Academy. 9.3 Tenants 9.3.1 If another method of recovery is now available, use it. 9.3.2 In the absence of any other in house available method refer all outstanding overpayments to one of the Council s Debt Recovery agencies. Details of theses overpayments are emailed. monthly 10 Collection Agency returned debts Page 7

10.1 If collection agencies return an overpayment either fully or partially unrecovered, check to see if another recovery action has become available since the debt was passed to them. If another recovery method is now available, use this. 10.2 If the overpayment has been made to a claimant check whether recovery is possible from other social security benefits by using the DWP CIS system. If recovery via DWP is possible send request form ISDED to the appropriate office. 10.3 Where any debts remain un-recovered, Overpayments Officers will annotate Academy so that appropriate action can be taken to deduct the sum outstanding from future benefit if the person reclaims benefit. 11 Bankruptcies 11.1 The Council recognises the efficacy of the bankruptcy process in some circumstances as a method to recover overpayments: Where the debt is over 1,500.00 ( 5,000 from 1 October 2015) Where the debtor has a significant asset 11.2 The process will be most effective against landlords, and the Overpayment Recovery Manager will consider all O/Ps over 1,500 5,000 from 1 October 2015) that we seek to recover from landlords for referral for bankruptcy. 11.3 The Overpayment Recovery Manager receives details of all cases of Council Tax arrears that are being referred for Insolvency proceedings and check to see if any of the debtors has outstanding overpayments that could be added to the petition for bankruptcy. S/he signs these off and retains them. 12 Targets 12.1 As part of the Council s commitment to recovering overpaid Housing Benefit, we have set challenging targets on an annual basis for both in year collection and total cash recovered. For 2014/15 the target for collection other than via ongoing HB was 2..25m, the amount recovered was 2.18m. The target for 2015/16 has been set at 2.25m Page 8

13 Review of Debt Recovery Strategy. 13.1 This procedure will be reviewed on an annual basis in order to ensure it remains valid, effective and relevant. 13.2 Last revised by: Steve Hopwood (Overpayments Manager) and Charles Metcalfe (Revenues Manager) March 2015. Page 9