Enforcement reforms: what will it cost?

Martin Lewis is campaigning for independent regulation of bailiffs and debt enforcement officers by the Ministry of Justice to protect those in distress from aggressive collections.

Is he right to do so?  Martin Lewis’s campaign is well intended, but is it well-founded?

And who will pay for the regulator?

Citizens Advice figures claim that bailiffs broke rules designed to help people who are struggling 850,000 times in the past two years.  The lack of an effective complaints system means bailiffs are not held to account. Its analysis of YouGov polling also shows that 72% of people who experience a bailiff breaking the rules do not complain at all.  However, these figures were based on a sample of just 277 and grossed up.  The author was questioned on this methodology at the Enforcement Law Review Group meeting at the House of Lords on 24th January and the Group was not convinced about its validity.

There is no doubt that the Advice sector has received an increased number of queries (not necessarily complaints) since April 2014.  The High Court Enforcement Officers Association believes that this is for two main reasons.  First, the prescribed forms that have been used since then all contain information signposting debtors to the Advice sector charities.  Second, local authorities have referred more council tax debt to enforcement agencies in response to their financial difficulties caused by reduced government funding.  Lack of co-ordination between departments in the same local authority has resulted in cases being sent for enforcement that were clearly inappropriate.

Private sector bailiffs who are being recruited by local authorities to collect debt are making a very successful industry out of commission payments.  The answer is perhaps not to regulate the industry even further, but to remove the commission element from their reward system so that there is less of an incentive to adopt aggressive tactics.

As recently as April 2014, the government passed legislation to “clean up the industry and ensure bailiffs play by the rules.  They will also make sure businesses and public bodies can collect their debts fairly”.  These were the words of Justice Minister, Helen Grant, in 2013, when the proposed legislative changes were announced.

The Ministry of Justice Review in April 2018 concluded that the reforms were “having many positive benefits”.

Under the reforms, bailiffs were required to give seven days warning of their first visit.  This often leads to a payment plan being agreed without any visit taking place. 

A number of restrictions on bailiffs’ powers were imposed.  Landlords are now banned from using bailiffs to seize property for residential rent arrears without going to Court and, in cases where local authorities or HMRC have power to force entry, bailiffs are responsible for proving to a Court that there are likely to be goods of the debtor on the premises before being granted power to use force to gain entry. 

Equally importantly, bailiffs must now undertake training and must be certificated.

As the law stands, a restricted number of creditors have the power to instruct bailiffs without a County Court Judgment.  These are mainly government departments.  The power to make the necessary reforms therefore lies with government, who are demonstrably using the same bailiffs time and again who abuse their powers or use them illegally. 

High Court Enforcement Officers are holders of public office regulated by the Ministry of Justice, who has power to impose fines and make compensation orders.

The answer is not further reform after only a handful of years since these effective changes were implemented.

The 2014 legislation followed a long consultation in 2012 which received 254 responses from a variety of sources including the Advice sector, the enforcement sector, public and private creditors, members of the public and the judiciary. 

Bailiff action is, by its very nature, intrusive.  It is necessary for bailiffs to be assertive and firm, if they are to be effective.  There is some anecdotal evidence that bailiffs may veer towards aggression.  Private bailiffs, who earn commission on the basis of success, are those who are most strongly criticised for this behaviour. 

Wholesale reform of the entire industry is unnecessary and an over-reaction to a very limited (even if justified) concern. 

We must be careful to avoid the knee-jerk reaction that led to the badly thought out pre-action protocol for debt recovery claims and its unintended consequences.  That protocol largely came about as the result of the need to protect consumers from aggressive collection tactics – particularly from debt purchasers.  In the rush to get some regulation in place, the protocol has been cobbled together with little thought for the needs of the credit manager.

In the business to business market, suppliers who deal with sole traders and individual customers are therefore already subject to the 30 day notice period imposed by the pre action protocol and the requirements for High Court Enforcement Officers to give seven days warning of their first visit.  This builds several weeks of delay into the process. 

There are also other reforms under consideration that may provide the answer if implemented properly.  HM Treasury’s consultation on debt “breathing space” and a new defined statutory debt repayment plan will enable people who enter into arrangements to pay back their debts in full whilst getting a level of statutory protection that has previously only been in place for those taking insolvency-based approaches, as long as government and local authority debt is not excluded from this.

Alan Hamblett, Partner at Corclaim