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Bailiff Reform - Fees

24th February 2014

Bailiff Reform – Fees.

I am sure that all readers of this publication are well aware that after 20 years of reports and consultations, that far reaching reform of bailiff law is due to be implemented on the 6th April this year.

The enforcement industry broadly welcomes the reforms, although we have concerns regarding certain measures that we believe will have unintended consequences, such as the geographical restriction placed upon enforcement action and the possible dilution of certain other powers and a lack of clarity in regard to some provisions.

However, we accept that the reforms had to balance the rights of creditors, debtors and enforcement agents and as a consequence we were unlikely to find every provision to our liking. Inevitably, as with any legal provisions, there will be areas that are not certain and will remain capable of different valid interpretations, until settled by a decision of a Court of Law.

One area where I had hoped that the reforms would have the support of all stakeholders is the new fee regime, which introduces certainty and transparency, which must be welcomed. It appears that I may have been overly optimistic in the respect, as it is rumoured that numerous clients are intent on undermining a fundamental objective of the reforms, “ensuring that any new Fee Structure adequately and fairly rewards agents in public and private sectors for the work they actually do”[1].

The attempts to undermine this objective take on numerous forms, including demanding that EA’s undertake additional “free” activities and asking EA’s to either discount or rebate their fees. The proposals are further undermined by comments that misrepresent the new fees as excessive, disproportionate or that they represent a significant increase over the current levels.

The first point that I would like to clarify, is the level of the new fees. The fee level was not set by the enforcement Profession. The level of fees was established following the recommendations of a highly qualified economist engaged directly by the Ministry of Justice, who completed a detailed review and analysis of the costs associated with providing an enforcement service.  

I am not qualified to challenge his conclusions and recommendations and I doubt that any of those who criticise the proposed fee levels are either. The criticism does not appear to be based on informed analysis, rather it is based on flawed comparisons between the pre TCE and TCE regimes, which are not valid and a knee jerk reaction to the apparent “increase”, without any balancing observations in respect of those debtors who will pay less under the new regime.

The new fees will impose a “cap” on the fees that can be charged, which will eliminate the potential for overcharging, will address allegations of “phantom” visits and will reduce disputes, as fees will be based on fixed, readily identifiable stages, rather than the current myriad of ambiguous schedules. In future, debtors will know with certainty what they will be charged if they fail to comply, whereas currently it is almost impossible for a debtor to ascertain in advance what fees will be applied.

It would of course be possible for enforcement to be free to debtors, if the paying majority was willing to pay for the cost of the service, either through increased local or central taxes. I’m not sure that this proposal would be well received by the general public.

Anyone who believes that the current Council Tax visit fees of £24.50 and £18.00 are set at an economically viable level must be living in some form of “time warp”. I’ve conducted my own rather unsophisticated research and have discovered that I cannot get any local tradesman to come to my house for less than £95 and that fee, unlike the enforcement agents fee, is guaranteed.

On the basis that the cost of enforcement must be met by those against whom enforcement action is taken, it is surely correct that everyone who pays, makes a reasonable contribution to the overall cost of providing the service – which is the model being implemented by the MoJ. It is surely obvious that the enforcement costs for those debtors who currently engage early in the process, is being subsidised by those who pay later. Is that fair and reasonable? I’d suggest that it is clearly not and that it is right that each debtor pays a fair proportion of the costs of providing the enforcement service.

The new fee structure will introduce greater flexibility to the collection process and will incentivise both debtors and enforcement agents to conclude the process at the earliest possible stage. In future, due to the introduction of a properly funded compliance stage, a significant proportion of debtors will no longer be subject to a door step visit and will be supported to manage their debt at the compliance stage and will only pay the £75, fixed fee. 

The only debtors who will be the subject of the enforcement stage fee are those debtors who “won’t pay”, who have failed to comply during the earlier stage and who have also failed to engage with the creditor prior to the case being issued for enforcement. The regulations build in protection for those who are vulnerable and cap the fees that can be applied. The Enforcement Profession made a concession on fee levels, agreeing to raise the level at which the % uplift is applied, in response to concerns that the trigger point would catch too many council tax debts, despite the empirical evidence that this was not the case.

Having hopefully demonstrated the proportionality of the new fees, I must now address those who would seek to undermine the fees by requiring discounts or kickbacks.

In the course of the last 5 years, I have had the privilege of meeting numerous government ministers, members of parliament and local politicians, of all political colours and not one of them has voiced any support for arrangements whereby clients receive a share of the enforcement fees. In fact quite to the contrary, the practice has been roundly condemned. This practice has of course been criticised by DCLG, in its good practice guidance issued in May 2013, which states at paragraph 4.7:

“It is inappropriate for authorities to receive extra payment or profit-sharing from the use of bailiffs and the charging of fees”.

This seems to be a clear and unequivocal statement and I fail to understand how any local authority could seek to ignore this clear instruction, or perhaps people are only being mischievous when asking service providers to discount the fees, or for their profit sharing proposals?

Any attempt to circumvent or reduce the fees that can be charged under the TCE provisions is contrary to the basis on which the reforms were formulated. In his report the economist stated

“If the proposed Fee Structure is to be successful it is important that creditors cannot use contractual arrangements with EACs/ HCEACs in order to circumvent the level of fees. Whilst contracts may specify quality and reporting requirements, they should neither be able to change the level of any of the new Fee Structure fees, nor to challenge the right of the EAC/ HCEAC to collect those fees where they are appropriately charged.”

And

“Similarly any attempts by EACs/ HCEACs themselves to obtain a competitive price advantage by offering to reduce fees below the Fee Structure level should not be allowed, and competitive differentiation should be made on quality of service alone.”

It is disappointing to read and be advised that clearly flawed arguments are being advanced to dilute the fees and in particular the order in which proceeds are distributed, justified by the fact that the word “may” appears in the regulations. I have over the years been disappointed at the lack of legal method and rigour utilised by ‘experts’ when reviewing and commenting on bailiff legislation and case law, but the comments on the TCE regulations probably plunge new depths.

The regulations are quite specific with regards to the order in which the proceeds of an enforcement power must be paid, when the amount recovered is less than the amount outstanding. The fact that in regulation 13 (3) of The Taking Control of Goods (Fees) Regulations 2014, the word “may” is utilised, does not signify that this order of payment is optional. A proper construction of this provision is that “may” is utilised, not to indicate that the order of distribution is discretionary, but reflects the fact that there might not be sufficient funds to pay the compliance fee, after any appropriate deductions and accordingly it would be absurd to direct that the enforcement agent “must” recover the compliance fee, when there are insufficient funds available. 

The legislation is clearly intended to be prescriptive and any departure from the rules on distribution could certainly be subject to a challenge and review by the administrative court. There is no provision for the compliance fee to be paid other than in the order prescribed in the regulations, before the debt and other costs and the explanatory note confirms that payment of the compliance fee has been deliberately prioritised, over payment of the debt.

The same flawed interpretation of the word “may, is also being used with regard to regulation 11 of The Taking Control of Goods (Fees) Regulations 2014, this time in respect of the fees chargeable when dealing with multiple cases. It would be absurd if the provision was “must”, in this context, for the reasons stated above. This does not mean that the provisions are discretionary. It is disappointing that the clear and unambiguous statements made by the Ministry of Justice officials, that the fees are fixed and that any deviation from the published statutory framework would constitute an ultra vires charge, are being ignored. 

Undermining the legitimate fees that an enforcement business can generate, risks pushing businesses into aggressive enforcement strategies in order to remain commercially viable, exactly what the reforms are intended to address.

I would question why any well informed client would think that it was appropriate to encourage or demand that the legislative fees are reduced, when those fees have been established at a level to achieve a sustainable enforcement profession, one that is able to properly invest and provide the quality service that clients should demand. Any dilution of the legislative fees can only result in a reduction in service levels, as suppliers are forced to cut corners and pushed to find creative strategies to generate a sustainable return, which will place the vulnerable members of the community at greatest risk.

One further method that is apparently being suggested to undermine the legitimate fee charging of Enforcement agents is the proposal that a client could undertake the compliance stage and “hive off” the £75 fee, then passing any cases that are not paid in full to an Enforcement Agent. This suggestion is flawed on a number of grounds. The Notice of Enforcement contains a warning that, “If you do not pay by the above date, an enforcement agent will visit you and may seize your belongings – this is called taking control” and accordingly, if a client had no intention of completing the process by visiting to undertake enforcement action, then any payment made has arguably been obtained fraudulently. Furthermore, any case passed to an enforcement agent would have to be re-commenced at compliance stage, resulting in a possible double charge to the debtor; a course of action that I am sure would be of interest to the Local Government Ombudsman.

The CIVEA rules, which all members are required to adhere to, have following an Extraordinary General Meeting of the Association, been changed to reflect the new regulatory procedure. This rule change demonstrates the commitment of all CIVEA members to adhere to the spirit of the new regulations.  I hope that clients will respect the spirit and letter of the law and will allow their enforcement providers to compete on quality of service, as is the intention of the reforms.

 

Paul Caddy

President CIVEA

21st February 2014.

 

 

 

 



[1] Effective Enforcement White Paper, March 2003. 



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