Rochdale MBC Corporate Debt Management Policy Contents Page Page 1. Background and Objectives 1.1 What is a Corporate Debt Management Policy 1 1.2 Introduction 1 1.3 Objectives of the Policy 1 1.4 What the Policy covers 2 2. Governing Principles 2.1 General Principles 2 2.2 Delivering the Policy 2 2.3 Charging Principles 2 2.4 Legal and Policy Framework 3 3. Raising of Debts 3.1 Raising of Invoices 3 3.2 Prompt and Accurate Billing 3 3.3 Sharing of Information 4 4. Payment and Collection 4.1 Methods of Payment 4 4.2 Payment by Instalment 5 4.3 Financial Management Systems 5 5. Debt Recovery 5.1 Policies Specific to Sundry Debtors 5 5.2 Policies Specific to Council Tax 6 5.3 Policies Specific to National Non Domestic Rates 6 5.4 Policies Specific to Housing Benefit Overpayments 7 5.5 Charges on Property 8 5.6 Tracing People 9 6. Bad and Doubtful Debts 9 7. Adjustments to Bills and Invoices 7.1 Credit Notes 10 7.2 Refunding Credit Balances 10 8. Advice and Options available to Customers 8.1 Debt Advice and Multiple Debt Management 10 8.2 Complaints 10 9. Roles and Responsibilities for Debt Management 11 10. Performance Monitoring and Reporting 11
1 BACKGROUND AND OBJECTIVES 1.1 What is a Corporate Debt Management Policy The Corporate Debt Management Policy is the Council s statement on how the Council will work with its customers to raise and collect debt. The Policy is in recognition that it is good practice to communicate the Council s Debt Management Policy to key stakeholders. This promotes efficiency and consistency in the raising and collection of debt. This is important as the collection of due income is vital in providing resources to continue to deliver services. For the purposes of this Policy, a debt is defined as any amount of income owed to the Council. All Council bills and invoices will be raised as soon as it is practicable, and will include full and relevant information as to: What the bill is for; When payments are due; How to pay the bill; and How and who to contact for further information and/or advice. Anyone who receives an invoice, request for payment or a penalty notice is in debt until it is paid. 1.2 Introduction The Council has a responsibility to recover outstanding debts owed. The introduction of a Corporate Debt Management Policy will ensure that the Council maximises the rates of collection and there is a consistent approach in place for the raising and collection of debts. This Policy is communicated to key stakeholders and applies to all monies owed to the Council. The main types of debt which are owed to the Council are: - Council Tax; - Business Rates; - Housing Benefit Overpayments; - General Income (known as sundry debt) the fees and charges made for a wide range of Council Service such as Adult Social Care; and - Penalty Charge notices (parking contraventions). 1.3 Objectives of the Policy This Policy will apply to all Council services and operates within the framework of relevant legislation, best practice and Financial Regulations. The objectives of the Policy are to: - Maximise income and collection performance for the Council; - Take early, decisive and appropriate action for the recovery of debt; - Understand our customers situations and make repayment arrangements which help them to pay the amounts they owe in a timely manner; and - continuously develop and improve our services. 1
1.4 What the Policy covers The Policy covers the following: - The raising, payment and recovery of debt; - How customers can access advice and support including signposting to other agencies; - How information may be shared; - How the Council uses debt collection and other agencies; - How the Council will deal with debts which are considered doubtful or irrecoverable; - Corporate approach for dealing with adjustments to bills or invoices; and - How customers can access the Council s corporate complaints procedure. 2 GOVERNING PRINCIPLES 2.1 General Principles The Council will follow the principles set out below: - To comply with the fairer charging policies; - Payment in advance where possible; - Accurate and prompt billing; - Promote direct debit as the default method of payment, with a range of other options available; - Keep customers informed of the amount of debt which they owe to the Council; - Take appropriate and proportionate recovery action to ensure debts are paid in full wherever possible, including legal action and appointing bailiffs; - Multiple debt management the Council will deal with the customer on the basis of their total indebtedness to the Council; - Continue to trace individuals who have left the area with outstanding debt; - Ongoing review and provision for debts where recovery is assessed to be doubtful; and - Debts are written off only in extreme circumstances and with appropriate authorisation. 2.2 Delivering the Policy The Council will take steps to: - Provide clear and simple advice on how, when and where to pay; - Collect payment in advance of the service being delivered; - Raise a debt as quickly as possible after the delivery of the service and take action when it says it will if the amount remains unpaid; - Highlight the implications for non-payment, including reviewing all reminders and letters periodically and amending if required to heighten the impact; - Advise the customer what will happen if an account remains unpaid; and - Recommend to the customer which organisations or agencies can advise and support them and how these organisations can be contacted. 2.3 Charging Principles The Council will charge for all services where allowable unless there is a formal decision not to. Where possible, payments for all services provided by the Council should be made in advance of that service being received by the customer. 2
Discretionary fees and charges will be reviewed for each individual service on an annual basis and approved by Cabinet. 2.4 Legal and Policy Framework Council Tax Recovery procedures are laid down by statute in the Council Tax (Administration and Enforcement) Regulations 1992 and subsequent amendments. Non-domestic Rates recovery procedures are laid down by Statute in the Local Government Finance Act 1988 and subsequent regulations and amendments. Guidance issued by the DWP in relation to fairer charging for home care and other nonresidential Social Services. 3 RAISING OF DEBTS 3.1 Setting up of debtors All debtor accounts will be set up on the financial management system centrally to ensure that each individual person or company only has one debtor account for general income. This will enhance control and aid debt recovery processes. 3.2 Raising of Invoices The Council will send annual Council Tax and Business Rates bills in mid-march each year and send amended bills as soon as possible for accounts where amendments have been made; for example, a change of address or a benefit/ relief award has been granted. For all other charges levied, wherever possible and appropriate the Council will take payment before or at the point of providing a service. This is the most cost effective way for the Council to collect income and prevents a debt being raised and requiring collection. Where it is not reasonable to take payment before a service is provided, the Council s aim is to raise an invoice with all the relevant information to enable the customer to pay as soon as possible after the service has been provided or the charge date. 3.3 Prompt and Accurate Billing The Council recognises that prompt invoicing and billing is important in minimising the debt burden. The Council will: - provide bills and invoices accurately and promptly; - respond on a timely basis to changes in circumstances for exemptions, discounts, rebates, reliefs, disputes and appeals; - produce clear bills in plain English and show: o what the bill is for and the period of liability; o the amount due and, where appropriate, the instalment amounts and payment due dates; o how to make a payment; and o a contact point for enquiries, including email and website details. Where services are used continuously over a period of time, RMBC will use the most effective method of charging. This will include invoicing on a periodic basis to enable 3
regular standardised payment, based on expected service usage, with a reconciliation being undertaken at appropriate intervals. These options will be subject to system capability. 3.4 Sharing of Information Subject to any limitations imposed by the Data Protection Act (1998) and the Human Rights Act (1998), access to debtors information contained on different systems will be made available to key officers within the Council in order that an individual s full indebtedness can be established and properly dealt with. Data is provided to third party debt agencies via password protected files. This is in line with the Corporate Privacy notice. Only appropriate details will be shared with debt collection agencies. 4 PAYMENT AND COLLECTION 4.1 Methods of Payments Where payment can be taken prior to the service being provided then this payment option will be pursued. This will ensure that no debt is raised in these cases. The payment methods which can be utilised are: - Payment via the Internet; - Payment by debit/credit card via the Contact Centre; and - Payment by Cheque. When it is not possible for payment to be made in advance, a debt is raised. Direct Debit is the easiest payment method for customers and is the most efficient for the Council. Where it is applicable the Council proposes to use Direct Debit as the default method. Council Tax can be paid via the following payment methods: - Direct Debit; - The Internet; - A Bank (BACS); - The Contact Centre; - Debit/credit card via the automated telephone system; - Standing Order; and - Post Offices and PayPoint outlets. National Non-Domestic Rates (Business Rates) can be paid via the following methods: - Direct Debit; - The Internet; - A Bank (BACS); - The Contact Centre; - Debit Card via the automated telephone system; - Post Offices and PayPoint outlets; and - Standing Order. A Housing Benefit Overpayment invoice can be paid via the following methods: - Debit/credit card via the automated telephone system; - The Internet; - The Contact Centre; and - Post Offices and PayPoint outlets. Sundry debtor invoices can be paid as follows: - Credit or debit card via the automated telephone system; - The Internet; 4
- The Contact Centre; - Any Post Office or PayPoint outlet; - A Bank (BACS); and - Instalment by Standing Order. Penalty Charge Notices can be paid as follows: - The Internet; - The Contact Centre; - Credit or debit card via the automated telephone system; and - Any Post Office or PayPoint outlet. 4.2 Payment by Instalment Payment by monthly instalment can be utilised for both Council Tax and National Non Domestic Rates (Business Rates) in accordance with statutory requirements. Payment by instalments on other debtor invoices will be agreed by the Corporate Debt Team on a case by case basis and only in extreme circumstances. The intention is that the debt should be cleared as soon as possible. 4.3 Financial Management Systems For the main service areas of Council Tax, Business Rates, Housing Benefit Overpayment and Parking Notices, bills are created via specific purpose built systems. These systems are not integrated with other systems as they specialise in their prime function, with the focus being on raising and recording income. Progress against the overall debt raised is measured by the systems employed and in turn these systems automatically generate reminders at pre-agreed points in the life cycle of an overdue account. The Councils policy regarding pre-agreed reminders is detailed in Section 5.4 of this Policy. Other areas of income are collected via the Council s sundry debtors system which is part of the Council s overall financial management system. This deals with much of the income collected from sources such as periodical income from rentals or income which is collectable as a result of a service carried out by the Council. Once the debt is raised, the system periodically generates scheduled reminders if a debt remains unpaid, as summarised within Section 5.4 of this Policy. Officers involved in the collection and recovery of accounts will be given appropriate training in: - processes for collecting debt and income recovery; - the use of all applicable computer systems; and - interacting with and supporting vulnerable people and their carers. The Council will ensure that all computer systems used to bill and facilitate the recovery of monies satisfy statutory requirements and offer the full range of recovery options to be pursued and are audited regularly. 5
5 DEBT RECOVERY 5.1 Policies Specific to Council Tax The responsibility for the issuing of Council Tax bills, and collection and recovery of debt is held by the Chief Finance Officer. The Council will issue a Council Tax bill, which will give instructions on when the instalments are due to be paid. The preferred method of payment for Council Tax is direct debit and flexibility is available on the date on which the direct debit is collected. Unless paid by Direct Debit the first instalment is due by the tenth of the month. A reminder notice will be issued if an overdue instalment is not paid within seven days of the instalment due date. If the instalment is paid as requested then no further action will be taken. If the instalment is not paid or only partly paid, recovery action will proceed to the summons stage. Within a Council Tax year (April March) only two reminders will be issued for late payment of instalments. A final notice will be issued on the third occasion that an instalment is paid late. The final notice will be a request for the full balance to be paid. The balance must be paid within seven days of a final notice being issued. If payment is not received within fourteen days after the first or second reminder notice or within seven days of a final notice, the Council will take Legal action and a summons will be issued against the customer. All costs incurred and recoverable by the Council will be added to the amount due when the summons is issued. The Council reserves the right to take recovery action where a customer does not pay and does not indicate that they are experiencing difficulty paying. The Council s policy is to train all officers involved in the recovery of debts on anti-poverty and social inclusion awareness so they can: Inform customers of their entitlement to Housing and Council Tax Support, discounts, relief s and exemptions; and Inform customers of the general availability of other income related benefits. The ability to refer debt to bailiffs is an important tool in the recovery process of debt. The Council appreciates the sensitivity attached to the use of bailiffs and will only use them if it is deemed necessary. The Council will seek to use bailiffs only where it has been determined that this is the most effective collection method for the debt in question. Bailiffs will be appointed based on the contracts which have been procured in line with Contract Procedure Rules. Bailiff s performance and contract management will be in place to ensure compliance with codes of conduct and good practice. Bailiff services will comply with the National Standards for Enforcement Agents issued by the Ministry of Justice. 5.2 Policies Specific to National Non Domestic Rates (Business Rates) The bills for Business Rates are issued on an annual basis and the responsibility for issuing bills and the recovery of collection and debt is held by the Chief Finance Officer. Business Rates are payable in line with legislative requirements. The Business Rates bill will detail when instalments are due to be paid and the methods of payments which can be used to pay. If an instalment is not paid on time, then a reminder will be issued following nonpayment. 6
Only one reminder notice will be issued for Business Rate bills; any further default will result in a final notice being issued. A final notice withdraws from the customer the right to pay by instalments and requires full payment of the outstanding amount to be made within seven days. If the account is not brought up to date, the Council will apply for a Liability Order. The Liability Order provides the Council with the option of instructing bailiffs to collect the debt. If an appeal is made against the rateable value to the Valuation Officer, payment must still be made against the account until the appeal is settled, unless where it is clear that an assessment has been changed thereby reducing the liability. Bailiffs will be appointed based on the contracts which have been procured in line with Contract Procedure Rules. Bailiff s performance and contract management will be in place to ensure compliance with codes of conduct and good practice. Bailiff services will comply with the National Standards for Enforcement Agents. 5.3 Policies Specific to Housing Benefit Overpayments The responsibility for the billing of Housing Benefit Overpayments is held by the Chief Finance Officer. Invoices will only be issued where the overpayment cannot be recovered from on-going housing benefits. Where a benefit is still in payment, recovery will be made by deduction from the on-going entitlement. The maximum rate at which deductions will be made will be at the recommended recovery rates as set annually by the Department for Work and Pensions. If an invoice is raised for the recovery of a Housing Benefit Overpayment, the settlement terms are fourteen days from the date of the invoice. A reminder is issued after fourteen days if the invoice is not paid. This requests that payment is made within seven days. After a further fourteen days, a final notice is issued confirming that the debt is outstanding and that if payment is not received within seven days, the debt will be passed to a debt collection agency to recover monies or legal proceedings will commence. 5.4 Policies Specific to Sundry Debtors The responsibility for the raising of sundry debts against a debtor account set up centrally is held by each individual Director. Officers within Services will be responsible for the raising of debtor invoices and the retention of evidence to support the debtor invoice. The overall responsibility for the collection and recovery of sundry debt is held by the Chief Finance Officer. Directors will be responsible for ensuring that assistance is provided to the Corporate Debt Team in recovering the debt due to their Service where appropriate. Service providers must endeavour to obtain payment in advance or at the time when a service is delivered, wherever possible, through the payment methods listed in Section 4.1 of this Policy. The Council will only raise a debtor s invoice where payment in advance for a service is inappropriate. All sundry debtor invoices must be raised using the corporate sundry debtors system. The settlement terms for sundry debtors are twenty one days from the date of the invoice. A final notice will be issued to the debtor, twenty one days after the invoice date, which requires the account to be brought up to date within fourteen days. A Court Warning Notice 7
will be issued after a further period of fourteen days which will give fourteen days for the account to be brought up to date. If the case is sent to a private debt collection agency or a private bailiff and this proves unsuccessful, a debt may then subsequently be referred to the Litigation Team for recovery through the County Courts. The Council reserves the right to take recovery action where a customer does not pay and does not indicate that they are having difficulty paying. If the customer informs the Council soon enough that they are having problems, the Council may agree a special payment arrangement in which case no further recovery action will be taken. However, if the Council has started recovery action and subsequently makes a special payment arrangement, the Council reserves the right to continue with recovery if this new arrangement is defaulted upon. 5.5 Charges on Property Local Land Charges The provision of a Local Land Charges Register is a statutory function which is maintainable by the Local Authority. Specific Financial Charges arise where the Local Authority are empowered by statute to carry out works in default, for instance under the powers of the Public Health Acts, the Highways Act 1980 and the Building Act 1984. An example of when a charge arises is where the Local Authority incurs expenses whilst having to deal with a dangerous building (section 78 of the Building Act 1984). Such charges are registerable as a local land charge (specific financial charge) against the land or property and are binding against successive owners or occupiers. It is the responsibility of management within the Service to inform the Local Land Charges Officer of the details of the works carried out in default, in order that a specific financial charge can be registered on the Local Land Charges Register. Community Care Charges Community Care Charges relate to the provision of Residential Accommodation, as provided for under section 21 of the National Assistance Act 1948, by a Local Authority. The Local Authority is entitled to recover the care payments owed by the resident to the Local Authority. Where a person avails himself of accommodation provided by the Local Authority under s21 of the National Assistance Act 1948 and such person fails to pay any such sum assessed as due to be paid by him for the accommodation and they have a beneficial interest in land or property, then the Local Authority can create a charge, registerable against that persons interest (usually at HM Land Registry). This is provided for under section 22 of the Health and Social Services and Social Security Adjudications Act 1983 and they are commonly referred to as s22 charges. Alternatively, where the resident s liability to pay has been assessed in accordance with the provisions of the National Assistance Act 1948 and the resident cannot afford to pay the full fees for the cost of the accommodation, the Local Authority may consider it appropriate to enter into an agreement with the resident under the provisions of section 55 of the Health and Social Care Act 2001. In such circumstances the resident pays a contribution to the Care Home s fees with the Local Authority paying the remainder. The resident agrees that the Local Authority can register a legal charge against the resident s private property as 8
security for the monies paid by the Local Authority under the terms of the Agreement. These are commonly referred to as Deferred Payment Agreements. The effect of registration of a charge is to prevent a disposal of the property without the Local Authority s consent. This allows for the Local Authority s debt to be repaid out of the proceeds of sale (subject to any statutory limits). Interest If the debt on which a Land Charge has been applied is re-paid to the Council within ninety days of the Land Charge being applied then no interest will be applied to the debt. If the debt is not re-paid within the first ninety days then interest will be charged from day one of the debt at the relevant approved rate. 5.6 Tracing People The Council will make all necessary attempts to trace any debtor to ensure that outstanding payments are recovered. This will include checking internal and external sources of information and sharing information with other authorities where necessary. 6 BAD AND DOUBTFUL DEBTS The Council will adopt a prudent approach towards debts which remain unpaid or for which their full recovery may be considered doubtful, for whatever reason. All debts which are due to the Council will be subject to full recovery, collection and legal procedures as outlined in this Policy. However, the Council recognises that not all debts may be collectable and therefore it will be appropriate, in certain circumstances, to classify debts as irrecoverable. When a debt is deemed to be irrecoverable, consideration will be given to write off the debt where appropriate. Any such write offs will be considered at debtor level and not against individual invoices. Any officer, Member or contractor that has an interest in any debt must not participate in the decision making process regarding the write off of the debt and their interest must be declared. An interest is as follows: - the debt is owed by a relative, including relatives by marriage; - the debt is owed by a relative of a current or former partner; - the debt is owed by a friend or neighbour; - the debt is owed by an organisation of which you are a member; - the debt is owed by an organisation of which a relative is a member; and - the debt is owed by a company or individual with whom you have a business relationship. The policy for the approval of writing off debts is detailed within the Scheme of Delegation. Prior to a write off for sundry debts being approved, consultation must be held with the budget holder. However, even when debts have been written off as irrecoverable, the Council will reinstate debts and attempt to collect them if new information becomes available; for example, if a current address for a debtor whose whereabouts were previously unknown comes to light. 9
7 ADJUSTMENTS TO BILLS AND INVOICES 7.1 Credit Notes Where an invoice has been raised erroneously, it is not appropriate that the debt is written off but that a credit note is raised so that the cost is charged back to the Service. Credit notes will only be used when an invoice is raised incorrectly and must not be used to write off debt. Credit notes must be authorised in line with the Scheme of Delegation and should not be authorised by the same officer who raised the invoice. 7.2 Refunding Credit Balances The Council will adopt a corporate approach to refunding credit balances in that, wherever possible, checks will be made for other outstanding debts held by the customer, prior to a refund being made. 8 ADVICE AND OPTIONS AVAILABLE TO CUSTOMERS 8.1 Debt Advice and Multiple Debt Management The Council recognises that some customers will experience financial difficulty either in the short or long term. All officers dealing with families in difficult circumstances must be aware of this and recognise the affect that being in debt can bring to individuals. Customers in debt will be signposted to assistance in managing debt using the Council s independent partners such as the Rochdale Citizen s Advice Bureau. The Council will seek to deal with all debt outstanding at the same time so that a holistic approach is adopted. If we are aware the customer has multiple debts with the Council, we will review these debts in totality and try to agree a special payment arrangement which covers all debts with one payment. The agreements will attempt to maintain on-going payments and reduce arrears for all debts owed to the Council. 8.2 Complaints In the event of a customer complaining, the Corporate Complaints procedure should be followed. The Corporate Complaints procedure provides the Council with the opportunity to investigate and, where appropriate, provide a remedy in circumstances where the Council is alleged to have been guilty of maladministration which has caused injustice, and where there is no other reasonable avenue available to the complainant to appeal or seek redress. In the event that the complainant remains dissatisfied after the Council has investigated the complaint, the complainant may refer his/ her complaint to the Local Government Ombudsman, who is independent of the Council, but the Local Government Ombudsman will not consider a complaint where more than twelve months has elapsed since the alleged act/ omission. 10
9 ROLES AND RESPONSIBILITIES FOR DEBT MANAGEMENT It is the responsibility of each Service to ensure that they raise accurate and timely debtor invoices in respect of sundry debts. Officers within the Service must ensure that they have adequate evidence to support the raising of the invoice to assist in ensuring that any debt can be recovered effectively, especially if the recovery of the debt results in legal action. It is the responsibility of the Corporate Debt Team to manage any outstanding sundry debt to ensure that all income due is recovered. It is the responsibility of the Corporate Debt Team and Budget Managers where appropriate to have regular discussions on the current status of outstanding debts for their specific Service and it is the responsibility of Budget Managers to assist the Corporate Debt Team in recovering the debt. It is the responsibility of the Legal Team to provide assistance and guidance in the referral of debts to the County Court and for other relevant enforcement actions. It is the responsibility of Cabinet, based on the recommendation of the Chief Finance Officer, to set income targets and collection rates on an annual basis. It is the responsibility of the Chief Finance Officer to review and amend the Debt Management Policy on a periodic basis in order to ensure that it remains fit for purpose. 10 PERFORMANCES MONITORING AND REPORTING The Council will monitor the performance of debt management as follows: - Monthly reports to the Directors which detail (both in period and cumulatively) the following: o The level of debt raised; o Rate of collection to identify our performance against the targets set for the collection of debt; o Number and value of write offs; and o Number and value of credit notes raised. - Quarterly reports to Members on debt management performance, provisions and write off levels; - Quality checks on work processes to ensure fairness and consistency in approach; - Audit and quality checks on work processed by individuals; - Number of cases at each recovery stage within the process; and - Number of complaints received to assist with making service improvements and to identify and training opportunities in respect of the raising of debtor invoices. 11