Concessions for switching to Direct Debit – Legality

[outlawlgo]

If this post serves no other purpose, it may at least include some useful links

It seems Local Authorities, for their own advantage, are selectively implementing the law under the 1992 Council Tax regulations. Council's recovery policies reveal how they're circumventing regulations and using the threat of a Liability Order as bargaining power to negotiate take-up of Direct Debit.

After recovery action has commenced, it seems council tax payers who agree terms laid down by their respective councils are having recovery action reversed. Concessions differ from one authority to another but include:

i) Summons and costs being withdrawn,

ii) Reinstatement of instalments, and,

iii) The Authority agreeing NOT to apply for a liability order

Generally, the condition is that the account holder switches to Direct Debit – the council's preferred payment method.


West Lindsey District Council, for example state:

• If a customer brings their instalments up to date and agrees to pay by direct debit upon receipt of the first payment the summons and costs will be withdrawn

The London Borough of Hillingdon offer this:

In cases where the summons has been correctly served and would normally be due to be collected it will be possible to appeal against the costs if it can be shown that;

• The previous two years Council Tax has been paid when due and it has not been necessary to issue a reminder/summons and

• The customer has experienced a sudden loss of income due to redundancy, reduced hours or, if retired and living on a fixed income, they have been affected by the lower interest rates.

• In such cases customers should be asked to write in detailing the cause of the loss of income.

• If the customer meets the criteria for withdrawing/waiving costs, these will only be waived on completion of the agreed payment schedule.

.....Preferably any arrangement should be made using the Direct Debit scheme for summonsed debt...

Rutland County Council this:

4.8 If a customer agrees to pay by direct debit, instalments can be reinstated under the ‘start afresh’ procedures. See Appendix B for full details.

5.5 If a person contacts and agrees to pay by direct debit, the start afresh procedures can be applied, provided that an unpaid direct debit was not the reason for the default. See Appendix B for details.


APPENDIX B

START AFRESH PROCEDURES

1.1 If a taxpayer agrees to pay by Direct Debit, recovery action will be temporarily suspended, provided the reason for default was not due to unpaid/cancelled direct debits.

1.2 If a final notice has been issued, instalments will be reinstated (unless direct debit has already been cancelled/unpaid within the financial year causing reminders to be issued in the course of that year).

1.3 If a summons has already been issued, this will be withdrawn and the court costs will be removed from the account, allowing another chance to pay by instalments (unless direct debit has already been cancelled/unpaid within the financial year causing reminders to be issued in the course of that year).

Wandsworth Borough Council

4.13 At all times, staff should encourage taxpayers to pay by direct debit. If they transfer to direct debit, recovery action will be temporarily suspended and they will be given another chance to pay by instalments (unless direct debit has already been cancelled causing reminders to be issued).

Eastbourne Borough Council.....

25. If a taxpayer who pays by cash or cheque agrees to sign up to Direct Debit, the missed instalment must be brought up to date immediately and the instalment plan will be reinstated. This will only happen once we receive a completed and signed Direct Debit Instruction.

After instalments are cancelled

32. If a taxpayer has had their instalments cancelled, so long as we have not issued a summons or taken further recovery action, we will accept the following alternatives:

• Payment of the full balance due to the end of the year within 7 days, or

• Reinstated instalments in line with the original scheme ONLY when the customer agrees to pay off instalments, which are in arrears, within 7 days AND agrees to change the method of payment to Direct Debit for the remainder of the year

33. The second of these options is a concession that we will allow based on the taxpayer's commitment that future instalments will be paid on time. However, if the taxpayer goes back on his/her agreement (for example, by cancelling the Direct Debit) and defaults on a payment again, we will not offer the concession a second time.

North East Lincolnshire, Ashford Borough, South Kesteven and Rother District Council, all offer some variation on a theme of this...

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

There is of course an ulterior motive for this generosity in that the authorities secure more Direct Debit payers through their deals. However, it must be questioned whether or not it is lawful.

The penalties, or court costs charged to the individual are based (or should be) on how many orders are applied for by the council. There are therefore far greater implications for the alleged debtor than simply whether or not a concession is given for the take-up of Direct Debit.

Because of these concessions, the total costs are being split between fewer account payers, thus (theoretically) larger penalties are being charged to householders as a direct consequence of councils campaigning for a greater take-up of Direct Debit.

As well as the added imposed burden this has on the rate payer, unless a specific clause in the legislation provides for the council to apply regulations discretionally, then the authority will almost certainly be breaching the Council Tax regulations.

All councils have to adhere to set procedures laid down in statute whilst obtaining liability orders for council tax arrears through the court.

The Council Tax (Administration and Enforcement) Regulations state under regulation 34 exactly what steps the authority must take. These regulations are devised so meticulously that invariably when a householder appeals an unfavourable action, councils simply state their hands are tied and play their "procedures are laid down in statute” card.

Interestingly though, if the authority is able to benefit by bending the rules (securing additional Direct Debit payers in this instance), it seems they view the law as optional.

So to summarise, these penalties or court costs are being made higher because fewer householders are paying them as a direct consequence of our council's campaign for greater take-up of Direct Debit (the council's preferred payment method). And, unless a specific clause in the legislation provides for the council to apply regulations discretionally then the authority will almost certainly be breaking the law.

[bluebottle]

Re: Concessions for switching to Direct Debit – Legality

As well as being a more secure way of collecting payments, Direct Debit is relatively cheap to administer as it is electronic and funds are transferred between accounts. Taking cash payments at a counter is considerably more expensive, particularly in terms of manpower, insurance and cash-in-transit costs (security vans taking cash to banks or secure vault facilities).

As to the Council Tax (Administration & Enforcement) Regulations 1992 (as amended), I think it is now pretty well-known that local authorities engage in "Passing Off", something which is illegal and not provided for under the said legislation when enforcing CT arrears. If proven against a local authority, a local authority cannot then play the "procedures are laid down in statute" card, as it is they who have to prove that to be so. Because CT appeals are heard in a magistrates court, they won't get as easy a ride as they will in a civil court.

[outlawlgo]

Re: Concessions for switching to Direct Debit – Legality

....As to the Council Tax (Administration & Enforcement) Regulations 1992 (as amended), I think it is now pretty well-known that local authorities engage in "Passing Off", something which is illegal and not provided for under the said legislation when enforcing CT arrears. If proven against a local authority, a local authority cannot then play the "procedures are laid down in statute" card, as it is they who have to prove that to be so. Because CT appeals are heard in a magistrates court, they won't get as easy a ride as they will in a civil court.

The closest I can see in the regulations permitting councils to give concessions for making arrangements are Regulations 20 & 21, where Regulation 21(5) states:

Council tax: payments

21 (5) A billing authority and a liable person may agree that the amount mentioned in regulation 20(2) which is required to be paid under a notice to which regulation 20(1) applies shall be paid in such manner as is provided by the agreement.

However, having looked at Regulations 20 & 21 they don't appear to allow the billing authority to waive enforcement once commenced.

Regulation 21 states:

21.—(1) Unless—

(a) an agreement under paragraph (5) in relation to the relevant year has been reached between the billing authority and the liable person before the demand notice is issued... "

This seems to have relevance only to payment arrangements which are agreed prior to the issue of the council tax bill. It appears to have no provision for recovery action (and imposed costs) to be reversed. This is because the arrangement is made after recovery action has commenced.

The number of householders having recovery action reversed directly impacts on the level of court costs charged to other householders. Well! In theory that is; councils generally charge as much as they can get away with but the costs should be no more than those reasonably incurred, and split between however many defendants there are.

For example, an authority incurs £0.5 million each year in expenditure. The number charged with penalties is 10,000 (less 2,500 having concessions). The defendants will be theoretically paying £10 more than they should – they have been split between 10,000 rather than 12,500.

Costs are made higher directly because councils are making these arrangements. It is not responsible for councils to be securing Direct Debit accounts at the expense of its residents.

[labman]

Re: Concessions for switching to Direct Debit – Legality

TBH it stinks to me! What about people who simply do not have a DD facility? They're stuffed for a start, even though they may be equally as willing to pay by another method as someone who has in order to avoid enforcement being pursued further.

[outlawlgo]

Re: Concessions for switching to Direct Debit – Legality

Several requests were submitted under the Freedom of Information Act to gauge the number of taxpayers benefiting from concessions, in exchange for agreeing to take-up Direct Debit payments.

Only one (Brighton & Hove City Council) has complied and supplied data. All others refused, claiming they held the information but were exempt from supplying it as it exceeded the appropriate limit, i.e., £450.

The council in this instance increased the number of Direct Debit paying residents by 28% through enticing them with waiving court costs and enforcement if they agreed to change their method of payment.

According to figures, 20,071 council tax payers had Summons withdrawn, and either full costs or partial costs waived since April 2008.

It may be considered two birds have been killed with one stone. The council secures nearly 30 percent more residents paying the way it prefers, whilst the 'would be debtor' has been spared the cost of court penalties.

However, a substantial amount in penalties has been added to those householders having to share the burden as a direct consequence of the council campaigning for Direct Debit payment. Overall costs are split between those unable to take up the offer of waived costs, who are 20,000 fewer in number.

The most recent revenue statistics from CIPFA state that Brighton & Hove City Council impose costs of £100 for the summons penalty and £20 to obtain a liability order.

20,071 householders had Summons withdrawn over this period. Taking the liberty of assuming all would have incurred £120 costs, then over £2.4 Million has been the price paid by struggling council taxpayers to fund the council's campaign.