Microsoft Word - Debt Recovery Strategy 09.doc

Executive Director Business Services
Rob Walsh
B.A. (Hons) Solicitor

www.nelincs.gov.uk

North East Lincolnshire Council - Corporate Debt Recovery Strategy

Background.

As part of Transactional Services the Debt Recovery Section deals with
recovery of outstanding debts relating to Council Tax, NDR (Business Rates),
Housing Benefit Overpayments and Sundry Debts.

As part of the Roles and Responsibilities of the Section 151 Officer debts are
administered in line with Corporate Policy, Legislation and Financial
Regulations.

General Principles.

The following sets out the general principles to be applied in relation to debt
management across all services provided by the Council:

  That the citizens and Businesses of North East Lincolnshire have a
responsibility to pay for the services they receive and the charges for which
they are liable.

  The majority of the debts owed to the council are priority debts and as such
the council expect the debtors to give priority to the repayment of these debts
over most other debts they may have.

  The cost of collection of sums due will be minimised by encouraging
customers to use cost effective payment methods such as direct debit
whenever possible. Payments through the internet and through debit cards
will also be promoted in preference to other methods due to efficiency, choice
and convenience.

  Although promoting electronic payment methods and Direct Debit the council
recognises that some customers will find it difficult to access these payments
methods. Therefore it will continually review payment methods offered to
ensure that customers are not restricted from meeting their liabilities due to
restrictions on the method of payment available.
Finance Department, North East Lincolnshire Council, Civic Offices, Knoll Street, Cleethorpes. DN35 8LN.
Telephone (01472) 323767 Fax (01472) 323746

  The council recognises the need to ensure that it’s services are electronically
available and will continue to develop services to allow for payments of
accounts to be made through the internet and other associated technology,
allowing customers to make payments outside of normal working hours.

  That payment in advance for services will be utilised wherever possible to
ensure the council maximises cash flow whilst minimising the number of
invoices issued. This will reduce costs and also the opportunity for debts to
arise.

  At the recovery stage the Council will review the total indebtedness of the
customer to the council and will attempt to arrange payment on a multiple
debt basis wherever possible. Fees and Charges are set down in the
Corporate Fees and Charges schedule, in line with legislation and regulations
and when required in agreement with Magistrates Courts.

  The Council will encourage effective sharing of information within the Council
and will explore the most efficient and effective way of achieving this whilst at
all times taking full account of the Human Rights and Data Protection
Legislation.

  Where appropriate the Council will notify the customer of the availability of
relevant benefits, exemptions, discounts or other relief’s which may reduce
the level of the debt or increase the income of the customer.

  The Council will pursue all monies owed; this will include the use of external
debt collection agencies and bailiffs where the in-house processes have failed
to elicit payment.

  It is recognised that there will be some circumstances where it will not be
possible to collect the debt. In these cases the Council will ensure that there is
clear guidance at corporate level which is documented, detailing the actions to
be taken prior to an account being considered for write-off.

  Disputes in relation to the invoice, bill or debt recovery processes will be
resolved at the earliest possible opportunity; with debtors being kept fully
informed of the ways in which they can contact the Council to discuss any
dispute they may have.

  Where part of the debt is disputed the Council will still continue to collect the
undisputed amount at the earliest possible stage whilst also dealing effectively
with the disputed debt.

  When consultation between the customer and the responsible department
fails to  rectify any  grievance or dispute and  the customer wishes to make a
complaint regarding the way in which the Council has attempted to collect a
debt, they will be fully informed of the Council’s Feedback/Complaints
procedure and will be given every assistance to register that complaint.
Finance Department, North East Lincolnshire Council, Civic Offices, Knoll Street, Cleethorpes. DN35 8LN.
Telephone (01472) 323767 Fax (01472) 323746

Principles common to all debts

Every bill or invoice will be correctly addressed to the person liable to pay it. The
name on the invoice or bill will be that of a person or body possessing “legal
personality”.

Bills and invoices will, as a general rule, be issued on the day of production.

All documentation relating to the bill or invoice will be kept, either in paper or a
scanned image format, for 6 years after the bill or invoice is raised.

In each case the Council will use the most appropriate and effective method of
recovery in order to maximise income.

All bills, invoices, reminders and final notices will be issued using 2nd class post
unless regulations or legal requirements specify otherwise.

Only officers within the Debt Recovery Section, after agreement with the Debt
Recovery  Manager, will be able to intervene in the recovery cycle to deal with
hardship or dispute situations. This includes the ability to make deferred payment
arrangements or suspend recovery action due to the debtor’s lack of means.

All notices issued by the Council will comply with the corporate style and will be
easily identifiable as being from the Council.

Where performance indicators exist, either locally or nationally, the Council will strive
for top quartile performance and will publish actual performance against these
targets on an annual basis. Progress reports will be produced at regular intervals
during the year in the form of a performance reporting system that is currently in use.

As prompt recovery action is key to managing debt and maximising income the
Council will:

  Set clear targets for the recovery of debt.
  Regularly monitor the level and age of debt.
  Have clear documented recovery procedures and processes.
  Set and regularly review priorities for specific areas of debt and the recovery
methods used to ensure maximum collection.
  Regularly review irrecoverable debt and submit write-offs for consideration by
the appropriate Officer or Cabinet.

All debts that are written off will be written off against the income code against which
they were raised.

Finance Department, North East Lincolnshire Council, Civic Offices, Knoll Street, Cleethorpes. DN35 8LN.
Telephone (01472) 323767 Fax (01472) 323746

The Debt Recovery Manager will use a third party agency where appropriate. Where
a third party agency is used to assist with the recovery of the debt the information
flow between the agency and the council should be in an electronic format.

Where legislation permits the Council will seek to levy and recover from the debtor
all the costs or fees raised as a result of the recovery action taken. Only in
exceptional cases, where it would not be in the public interest to pursue the costs or
fees, can authorised officer(s) within the Debt Recovery Section agree they will be
waived; the decision to waive costs will be in line with guidelines approved by the
Debt Recovery Manager.

Principles of Enforcement (all debts)

The Council will ensure that any enforcement action is:

Proportional - a balance will be struck between the potential loss of income to the
Council and the costs of the enforcement action.
Consistent  – that a similar approach to enforcement will be taken in similar
circumstances. The aim is to achieve consistency in the:

o Advice
given
o Powers
used
o  Recovery action taken

Whilst taking account of:

o  The debtors payment history
o  The debtors ability to pay
o  The social circumstances or vulnerability of the debtor.

Transparent – that reasons and clear explanations will be given for any enforcement
action taken.
o  If action is required the reasons for the action should be clearly explained,
in writing if required.
o  Timescales for actions must be clearly stated.
o  A written explanation must be given of any rights of appeal the debtor may
have against the enforcement action either before or at the time the action
is taken.

Communications should be in plain English unless the detailed wording is specified
in regulations or legislation.

Write-offs (all debts)

That every effort will be made to minimise the cost of write-offs to the Council by
utilising all available recovery action and all debts will be subject to the full collection,
recovery and legal procedures outlined in this strategy.

Debts may be referred for write-off consideration in the following circumstances:
Finance Department, North East Lincolnshire Council, Civic Offices, Knoll Street, Cleethorpes. DN35 8LN.
Telephone (01472) 323767 Fax (01472) 323746

o  Debts remitted by the magistrates court
o  The Council is unable to trace the debtor.
o  The debt is a small balance and it is not cost effective to pursue further.
o  The debtor had died and there are no or insufficient funds in the estate to
settle the debt.
o  The debtor is subject to insolvency proceedings and there is little likelihood
of a dividend payment for unsecured creditors.
o  The debt is not cost effective to pursue due to the likelihood of payment in
relation to the cost of proceedings.
o  The Council has evidence to confirm the debtor is suffering severe mental
or physical illness which makes the enforcement action inappropriate.
o  The Debt is Statute Barred

The limitations for authorisation of write-off of debt are those specified in the
Council’s Financial Regulations.

Debts will be referred to the appropriate officer of the Council or Cabinet at an
agreed frequency and in an agreed format as set in the corporate write off policy
which requires the signature of Executive Director Business Services or Deputy
Director Finance.

Strategy specific to Sundry Debtors.

The responsibility for invoicing for sundry debt accounts is held by the individual
departments, and business units as service providers. All invoices to be raised within
2 days of providing the service the exception being where a department is waiting for
the information from another  source i.e. Social Service assessments, all invoices
raised will be shown on the Ash Debtors system.

The budgets of the originating unit will be credited with the value of the invoice at the
time the invoice is raised. Where the debt remains outstanding 6 months after the
date the invoice is raised the relevant budget will be debited with the value of the
amount then outstanding. Any further monies recovered will only be credited at the
time of receipt of the payment.

In line with the general principles of this strategy service providers must show that
they are actively moving to obtain payment in advance or at the time of the service
delivery wherever possible. Sundry debtor accounts should only be raised where
payment in advance is inappropriate.

Services will set a minimum value for invoices that will be reviewed on an annual
basis.

Ownership of all sundry debts rest with the originating departments and it is only the
originating departments that may:
  Issue an instruction (in writing) to cancel an invoice
  Correspond with or discuss with the debtor issues relating to the validity of
the debt which must be in line with the Council’s charging and income
policy.
Finance Department, North East Lincolnshire Council, Civic Offices, Knoll Street, Cleethorpes. DN35 8LN.
Telephone (01472) 323767 Fax (01472) 323746

  Deal with a complaint relating to the provision of the service or the raising
of the invoice.

Except for invoices payable by instalments or as otherwise contractually agreed, the
settlement terms for all invoices will be 14 days.

Recovery action will commence no later than 10 days after the settlement date has
fallen due. All recovery action is the responsibility of Transactional Services and the
Debt Recovery Section therefore any arrangement made will be in agreement with
the Debt Recovery Section.

All statutory methods of enforcement will be available for use including:

Obtaining a County Court Judgement to enable the following actions to be taken by
the Council’s Court Enforcement Managers/Debt Recovery Manager.

o  Attachments of Earnings.
o  Warrants of execution
o Insolvency
o Possession
proceedings
o  Third party Debt Orders
o  Charging Order

The methods will be used in accordance with the principles of enforcement.

Further enforcement action will be taken where appropriate by converting the debt to
a High Court Judgement, the decision to convert a debt will be taken by the Court
Enforcement Managers/Debt Recovery Manager after discussion with the relevant
department. The costs of any enforcement action to recover sundry debts will be
charged against the budget of the service raising the invoice and any costs
recovered from the debtor will be credited against these budgets.

Officers will, where cost effective to do so, use external collection agents and
telephone contact with the debtor as means of recovering sundry debts.

Where legally able to do so originating units should suspend provision of future
services to the debtor until outstanding debts are settled.

The Debt recovery Section will provide reports to originating units on a regular
agreed basis as to the amount of debt raised in the relevant period and the age and
value of outstanding accounts.

On a regular agreed basis the originating units will receive reports detailing accounts
where decisions regarding on-going recovery must be made. The reports will detail,
but not be limited to, the following:

o  Accounts ready for county court action
o  Accounts where recovery has been suspended by the originating unit
o  Disputed accounts
Finance Department, North East Lincolnshire Council, Civic Offices, Knoll Street, Cleethorpes. DN35 8LN.
Telephone (01472) 323767 Fax (01472) 323746

Originating departments must review the reports and communicate their decisions
regarding ongoing recovery action to the Debt Recovery Section within 7 days of the
date the report, any dispute should be resolved within a time limit of 30 days.

Overpayments of Wages/Salary will be recovered direct from wages/salary on the
next available pay date, or on final salary. Any employee wishing to discuss the
repayment should contact the payroll section direct. The only exception to this is
when an employee has left North East Lincolnshire Council at which time the debt
will be raised as an invoice in the ASH Debtors system. Ownership of the Debt will
remain with the originating department; however, should the invoice remain unpaid
the normal recovery process will be implemented. All recovery action is the
responsibility of Transactional Services and the Debt Recovery Section therefore any
arrangement made will be in agreement with the Debt recovery Section.

Strategy specific to Council Tax and Business Rate accounts.

Council Tax and Non Domestic rate bills will be issued as soon as practical after the
Council has set its Council Tax for the new financial year and in any event in time to
ensure the statutory 14 days notice is given between the issue of the bill and the
payment date of 1 April.

Ad hoc bills issued during the year will be issued as soon as practicable after the
amount of liability has been calculated and payments will be due to commence on
the earliest date permitted by the legislation.

Reminders and Final notices will, as far as is practical, be issued 14 days after the
due date for payment in accordance with the recovery timetable set up at the start of
each financial year.

Summonses will be issued as soon as practical after the default to which they relate.

Liability order courts will be held each month and a yearly timetable for the courts will
be agreed with the Magistrates Clerk in November each year.

All appropriate methods of enforcement of liability orders will be used. These include:

o  Attachment of Earnings – Council Tax only
o  Bailiff action to levy distress
o  Deductions from benefits – Council Tax only
o  Attachment of Members’ Allowances – Council Tax only
o Insolvency
o  Charging Orders – Council Tax only
o  Application for committal to prison – individuals only
o  Prosecution of employers for failing to implement Attachment of Earnings
Orders. – Council Tax only.

When recovery action has commenced payment arrangements will only be entered
into when the debt is secured by a liability order or the debtor agrees to make
Finance Department, North East Lincolnshire Council, Civic Offices, Knoll Street, Cleethorpes. DN35 8LN.
Telephone (01472) 323767 Fax (01472) 323746

payment by direct debit. Arrangements will only be agreed by authorised staff and
will generally adhere to the following guidelines:

o  The debt will be cleared by the end of the financial year.
o  The debtor demonstrates a clear intention to maintain the arrangement
o  The arrangement is reasonable in comparison with payments that could be
secured by taking alternative action.

In exceptional circumstances special payment arrangements may be made by
authorised staff prior to a liability order being obtained and without the debtor
agreeing to pay by direct debit.

Strategy specific to Recovery of Housing Benefit Overpayments

Invoices will only be issued when a recoverable housing benefit overpayment cannot
be recovered by any other prescribed action.

Where there is a recoverable housing benefit overpayment recovery actions will
commence using the following recovery methods in the order of preference as
shown in the list:

1.  From arrears of housing benefit
2. From ongoing housing benefit entitlement, including direct payments to
landlords even if the claimant has moved address and/or landlord. Recovery
rates will be based on the DWP guidelines in force at the time of recovery and
the maximum recovery rate allowed will be applied in the first instance.
Authorised officers will, however, be able to consider applications to reduce
the rate of recovery where applying the maximum rate is causing
demonstrable hardship to the debtor.
3. Council Tax benefit overpayments will, apart from very exceptional
circumstances, be debited to the relevant Council Tax account.
4.  If there is no continuing Housing Benefit entitlement or underlying entitlement
an invoice will be raised on the First debtors system.
5. Where an invoice is raised the Council will seek to recover the amount
outstanding in a single payment. Where this is not possible due to the debtors
financial circumstances the Council may agree to a payment plan by
instalments.
6. By deductions from other prescribed benefits as defined in the Housing
Benefit Regulations.

Where an invoice has been raised and payment is not received after the issue of
reminders the Council will issue a claim against the debtor in the County Court with a
view to obtaining immediate payment or failing that to obtain a judgement against the
debtor.

The Council will, in appropriate circumstances reduce payments to landlords for
current tenants in order to recover arrears for former tenants. It will take this action
where the original tenant has no continuing entitlement and there was a
misrepresentation or failure to disclose a material fact.
Finance Department, North East Lincolnshire Council, Civic Offices, Knoll Street, Cleethorpes. DN35 8LN.
Telephone (01472) 323767 Fax (01472) 323746