Effective enforcement – the economic and ethical case for civil enforcement

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

Part Three.

Previously in this series, we spoke about a common point of confusion that Civil enforcement agents are not debt collectors and are only used after councils have been unable to collect the debt themselves, followed by what similarities do exist and the different stages of enforcement. Finally, we consider the fees involved in enforcement and the economic and ethical case for local authorities to utilise these services in 2024 and beyond.

Enforcement firms are paid according to a fixed fee structure set by the Ministry of Justice. The Compliance stage is currently charged at £75, and firms can add a fixed fee of £235 if a visit is required and the debt is paid. A fee cannot be recovered where the debt is not collected.

The fact that a fee is not guaranteed leads some people to believe that enforcement agents are driven to poor practice by debt collection targets. Local councils do not pay a commission to enforcement agents in the same way that debt collection agencies charge fees and commission.

And while the collection rate is important to councils, there are other performance measures in SLAs. For example, customer experience and satisfaction, low complaint levels and support for vulnerable people and cases collected without a visit.

Unlike traditional debt collection, enforcement firms receive very little information about the individual’s that owe debt. In most cases the courts provide a name and address, the type of debt and the amount owed. The rest of the information is extracted by enforcement firms from data sources.

Compare this with debt collection agencies have a huge amount of personal details from creditors before they start collection, such as date of birth, bank details, Credit Reference Agency information, financial and payment history.

Debt collection rates will vary depending on the social demographics of an area, topography, and how many cases are historic. This impacts on the percentage that can be recovered without a visit, which is why it is not the only metric.

Enforcement agents are bound by highly prescriptive Taking Control of Goods Regulations 2013 and will face greater scrutiny with the establishment of independent industry oversight under the Enforcement Conduct Board.

Despite the challenge of recovering the hardest to collect debt, enforcement agents are highly effective and provide huge value to central and local government. Overall collection rates were approximately 21 percent during 2021/22. The average collection rate for council tax that did not involve a visit is 46 percent.

Collection rates have fallen as a result of the pandemic and the industry’s voluntary suspension of enforcement, but collection rates without a visit have held strong as a result of enforcement firms’ investment in technology and a focus on early engagement.

An increased effort to recovery outstanding debt is a fair response for councils that are struggling with deficit budgets. In 2021, in research commissioned by CIVEA, Europe Economics found that with only light touch enforcement an additional 7 million households would default on council tax payments each year, resulting in shortfall to the public purse of up to 12 billion pounds.

So, we can expect to see central and local government relying more on professionals that have specialist expertise in identifying and supporting vulnerable people and maximising revenue to the public purse. The increase in use should not be used to scaremonger and cause people in debt to go into hiding.

There is a clear economic case for civil enforcement and, with a raft of reforms and the prospect of a statutory regulator in the near future, there is a strong ethical case for civil enforcement now and beyond the next election when the incoming government will want to use every legitimate means to maximise revenue to tackle the cost of living crisis.