Credit, Collections & Insolvency News
For many years the question of independent, fair and effective oversight of the enforcement industry has provoked lively debate. The government and industry introduced tighter regulations in 2014 to ensure consistency of practices and take the first steps towards independent industry oversight. But, as with all regulation, it would only ever be retrospective as the enforcement sector continues to adapt and evolve.
The credit crunch of 2007 began the years of austerity that imposed harsh restrictions on government spending. This coincided with benefits reforms that impacted on low-income families Residents were pursued for long-standing debts and some households began to pay council tax for the first time. With reduced budgets and less revenue, local authorities were obligated to adopt a more rigorous approach to debt collection and place a greater burden on enforcement agents through tougher targets, albeit still at no cost to the public.
In reality, some people who are unable to pay slip through the net and find themselves facing enforcement action. So, whereas for many years enforcement agents pursued those flouting the law, they are now just as likely to encounter people in vulnerable situations. According to government figures, Councils are facing an estimated shortfall of £509m in their council tax collections for last year, which they have only been given until 2023-24 to pay off.
The Government has committed to review the 2014 enforcement industry reforms and is due to respond to a Call for Evidence launched in 2018. But rather than wait for the report, the Centre for Social Justice (CSJ) brought together representatives from the civil enforcement and debt advice sectors with a view to designing an oversight body fit for the post-pandemic.
The challenge presented by the centre-right think tank was to design a model of self-regulation that does not restrict innovation in a market that was responding rapidly to the needs of central and local government departments, but that recognises its responsibility to people who were struggling to manage their priority debts under additional financial pressure.
The solution is a framework document that has been developed jointly by the two sectors for a new ambitious, industry-funded oversight body – the Enforcement Conduct Authority (ECA).
Raising standards
The ECA will drive up standards in the enforcement sector by building on the existing National Standards of conduct. For the first time, it will assess the extent of perceived systemic problems that have been regularly reported by debt advisers. The ECA will monitor practices in the enforcement industry and sanction firms for non-compliance with new rules. This will help to standardise practice and ensure consistent application of regulations and codes of practice.
Improving accountability
Through increased transparency the industry will hold itself accountable. The ECA will publish an annual report that will be presented to the Secretary of State for Justice. It will conduct audits of firms’ policies and procedures. It will review video footage of enforcement visits and telephone calls to ensure compliance. It will analyse complaints to identify any trends and issues with the civil enforcement process and make recommendations. While this level of scrutiny is already in place, the big difference is that the ECA will be entirely independent of the influence of the industry and debt advice sector.
Adjudication of complaints
In a Justice Select Committee report published in 2019, MPs expressed frustration that it was not possible to quantify an accurate level of complaints. It considered this to be a significant failing, which prevented issues being identified and resolved. In response the ECA will assume responsibility for adjudicating complaints and complaints-handling processes across the enforcement sector. This will include issuing guidance to enforcement agencies on how to monitor complaints and setting out appropriate measures for redress.
Recognising vulnerability and achieving fairness
Enforcement agents have reported higher incidence of vulnerability in recent years. Enforcement agents have become the frontline in identifying vulnerable households and the ECA will recognise this by developing new affordability and vulnerability guidance, drawing on best practice from other sectors, that reflects the unique circumstances of people in debt to government.
The development of the ECA will be led by an independent chairperson, who will be responsible for working with the industry to meet the government’s expectations for public debt collection. The Cabinet Office is developing a programme of reform to improve how government departments manage debt and debt recovery. The Enforcement Conduct Authority is paving the way by ensuring that the civil enforcement process continues to be fair and proportionate.
