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Councils to take profits from debt stricken households

demanding lettersHouseholds across the UK which are struggling with debts are set to be dealt a further blow, as local authorities attempt to cash in on their financial difficulties.

A number of councils are said to be planning on introducing regulations which will force bailiffs to hand over some of the cash they extract, in a bid to raise money for their budgets.

Anyone who is unable to pay their debts and is unable to agree a repayment schedule with their creditor faces the agony of a visit from the bailiff. And, as those who have suffered the experience will testify, the cost of a bailiff visit is significant and can end up adding hundreds of pounds to the debt.

Councils which are struggling with less money due to austerity cuts are considering telling bailiffs they must pay a portion of the money they recover, a decision that has been slammed by debt campaigners.

A rather unusual alliance has arisen between bailiffs and those working in debt advocacy, two parties which are normally at odds with each other. However, both groups believe that the introduction of profit-sharing by councils will be a bad move and one likely to end up costing poverty-stricken individuals more money, as well as incentivising bailiffs to engage in bad practice,

Experts say that by effectively reducing the amount of profit made on each case – which is the net effect of taking a slice of the money – bailiff firms will either have to choose between making less money on work, or getting customers to pay up more. And it isn’t difficult to work out what the most likely option will be.

In addition, bailiff experts have expressed concerns that by driving down profits councils could be pushing bailiffs towards employing more aggressive methods in order to get their money, something which the government has said is ‘completely unacceptable.’

There were plans to regulate the industry but the arrangements to begin an investigation into the issue were put on the back burner this autumn. Despite the postponement of the consultation, ministers say they remain focussed on ensuring individuals are protected from ‘aggressive bailiffism’ as well as ‘unreasonable charting orders.’

Harrow Council, a borough in the northwest of the capital, is planning on telling bailiffs they must give them 8% of the money they collect, a move which they anticipate will earn them around £1 million.

A spokesman for the council attempted to justify the decision earlier this year, by telling a delegation of bailiffs that the council would be allocating work worth around £10 million, of which any firm could reasonably expect to collect approximately £3-4 million.

But taking a chunk of the debt payment is not the only measure that Harrow council plan to introduce to bailiff firms. In a move designed to increase competition, it says it will be using two different firms for its debt recovery, originally awarding them half of the work each. However, it will adjust how much work it allocates to each company depending on performance, but it says it will penalise any firm which charges more for the work carried out.

Bailiff firms which plan to increase their fees in response to the profit-sharing announcement from councils, may be viewed rather dimly following a recent report in the Sunday Times, which revealed the top five companies made more than £60 million in profit.

A seasoned debt campaigner, Labour MP Austin Mitchell, has increased his calls for the introduction of an ombudsman into the industry. Mitchell says that the risk of ‘malpractice flourishing’ could be a real danger without a regulator overseeing practices and stamping out any abuse.

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