Effective enforcement – the economic and ethical case for civil enforcement

Effective enforcement – the economic and ethical case for civil enforcement.

Part Two.

In the first part of this blog series, we spoke about how the Welsh Parliament recently debated a Bill for the further regulation of debt collectors and how this highlighted one of the most common points of confusion.

For clarity, civil enforcement agents are not debt collectors and are only used after public bodies, such as councils and government departments have been unable to collect the debt themselves and have taken an individual to court.

There are, however, many similarities in how enforcement agents engage and resolve debt. Enforcement has evolved, especially in response to the post-pandemic economy. Local authorities have relied on enforcement firms to step up where austerity has limited their own resources. Consequently, there has been huge investment in technology with the adoption of fin-tech, especially at the Compliance Stage.

The Compliance stage is the last opportunity for a debtor to engage and avoid an enforcement agent visit. Since 2014, the Compliance stage has been transformed by firms seeking to engage debtors, identify vulnerability, maximise income and benefits and ensure repayments are sustained. Enforcement firms are required to invest heavily in identifying, analysing and communicating with people who fall into the “hard to collect” category.

The Compliance Stage, which can run for up to 28 days before a visit, accounts for around 40% of debt collected. This stage involves tracing, data cleansing, DVLA checks and other financial profiling.

At this point the objective is to engage with people. In response to local authority client requirements and a highly competitive market, an additional stage has evolved before the Compliance stage. Pre-enforcement action is the equivalent to the pre-action protocol that is standard in financial services.

This stage can involve a call or visit from enforcement agent to ascertain a debtor’s circumstances without any taking control of goods action. There may be letters and an outbound communication leading to interventions for vulnerability, such as welfare support offered by council services, debt advice and suspension of debt recovery.

No fee is collected for this stage and there is no additional input from local authorities, but a significant investment in technology has been made by enforcement firms.

Council tax arrears is distinct from other debts because the service is provided to anyone in the council’s jurisdiction. Unlike financial services and credit providers or utilities, there is no option for councils to choose their customers. Equally, residents cannot switch council and carry over their debt, like they can with utilities and banks.

The price that residents pay is means tested by valuation and not at the billing stage. Unlike consumer credit provision, which can be stopped and started, council tax is a recurring debt and the bill arrives annually. Paradoxically, we expect regular payment when people have irregular income. Therefore, the issue becomes not about how to collect, but who to collect from.

Enforcement agents cannot charge interest on debt, which reduces the risk that individuals end up in a spiral of debt. However, they can, in certain circumstances, arrange with the local authority for repayment to take place over a longer period if it reduces genuine hardship and increases the likelihood the debt will be repaid in full. This balance provides fairness to taxpayers and vital funding for councils while strengthening valuable protection for those who are vulnerable.