One MP has suggested that the current collection methods of councils calling in bailiffs to tackle council tax consumer debt is not only too heavy handed but also not efficient. We discuss our thoughts on how to handle low value consumer debt.

Are payment plans the best answer for low value consumer debt?

Makerfield MP Yvonne Fovargue has this week suggested current council tax collection methods are too “heavy handed”. She also suggests asking for lump sum payments is counterproductive and doing nobody any good. With figures to back her statement up, collection of low value debts by councils may need re-evaluating.

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Makerfield MP Yvonne Fovargue believes current council tax collection methods are too heavy handed and without adequate return on investment

Poor returns with existing methods

A Citizen’s Advice report called “the wrong side of tax” indicates current collection methods are not cost effective for the returns they achieve. Some councils say that for every £1 of debt referred to bailiffs, they are seeing only 27p collected. With bailiffs historically being a last resort and an extreme measure, it may be that councils are being too heavy handed too soon with debts.

Through our experience of consumer collection, many low value cases in the low hundreds are not often owed by those who can repay all at once. This means you will need some leeway to think about payment plans. While not ideal, many of our customers would much prefer a regular income of repayment than lots of pressure with nothing to show for it. With cases of this nature, it should not be a one size fits all mentality. AYOM’s corporate collections manager Ian explains:

“Our corporate clients are majority consumer collection. Within that, most of them are low value debts of less than £500. While this may not seem like an insurmountable value, for a lot of people it will feel like a lot. This is true especially for those on low income or requiring universal credit. With deductions for living expenses at the end of the month, many have very little left to afford debt repayment.”

“Consumers are also protected by FCA regulation meaning we have to do our due diligence when trying to resolve their case. It is vitally important to treat those in debt as humans with lives and not by the contents of their bank account. Many councils skipping straight to bailiff services may very well be strong-arming their way to nothing.”

“We often stress that collection of debt is about research, discussion and mediation. We need to know about all circumstances before we form a strategy. With our consumer cases, this is exactly how we approach matters. It has been incredibly successful and delivered returns far beyond what clients would expect from debts which otherwise would be written off.”

Dealing with debt appropriately

In 2018 we wrote about the effect of debt and mental health. In the article we discussed various regulations and best practice for consumer collection. There are vast differences with how an agency should approach debt based on several factors. These include:

  • Nature of debt (business/ consumer)
  • Value of debt
  • Age of debt
  • Current credit scores
  • Employment status
  • Mitigating circumstances

These and more give the collector an overview of how to approach any case. Acting in a more human manner helps break down barriers for discussion and helps the person owing open to conversation. Councils would benefit from taking this approach with debt as collection percentages are likely to increase without costs escalating through paying for bailiff visits.

While we must be firm in our purpose and ensure debts are properly repaid, we must also be fair. Engaging a bailiff to demand money or recover goods is a very drastic step. This is especially the case for council tax issues. If a person is unable to pay council tax, it is unlikely they harbour goods that will properly alleviate the debt. Doing so can also have a huge impact on mental health and quality of life.

For advice on handling consumer debt including how to manage large volumes of consumer debts, AYOM’s advisers are available. To speak to us you can call 0800 130 3357. You can also email us at Managing consumer debt doesn’t have to be expensive or heavy handed. Find out how you can cost effectively pursue consumer debt today.