The companies chosen to undertake the trial are Financial Collection Agencies (FCA) and Eversheds. Contracts will start in March 1996 and are expected to last for nine months. FCA and Eversheds will each be given about 3,750 cases during March and April and will have until December 1996 to deal with them. After that, all cases will be returned to BA.
Explaining the purpose of the pilot contracts, Lord MacKay said:
'As part of our Competing for Quality initiative, I have been considering whether the work currently undertaken by BA on recovering benefits overpayments and unpaid Social Fund loans could be opened up to bids from the private sector. This is just one of many parts of our business I have looked at in this way but there are some aspects of this particular piece of work that I would like reassurances on before I decide whether it should be market tested.
'These two pilot contracts will allow me to evaluate important issues such as these.
'We will therefore be seeking to ensure, via the strict terms and conditions of these contracts and our stringent monitoring and control of them, that the collection of these debts is performed in a way that is seen to be fair and acceptable to the debtors themselves and the general public, as well as within the DSS.'
Lord MacKay emphasised that the contractors will not be dealing with people who are still on DSS benefits. They will deal only with ex-customers, ie people who are no longer receiving benefit.
BA will continue to deal with the debts of people who are still on benefit. The contractors will be dealing with a sample of ex-customers who have been notified by BA that their case has been considered by an independent Adjudication Officer who has decided an overpayment has occurred and must be repaid. The ex customer has a right of appeal against this decision.
They will also deal with ex-customers who have failed to honour their agreements to repay social fund loans. Contracts will not include overpayments which have come about due to errors by the BA.
Lord MacKay continued: 'We want the contractors to use their normal methods to recover the debts. Most of these methods are used by the BA now, except for doorstep collection which is a standard feature of private sector debt collection for certain cases. As part of this pilot project, I want to see how suitable this particular methodis for BA debts.
'Civil proceedings may be contemplated in appropriate cases but the contractors will not be allowed to go ahead without the prior authority of BA, who will vet, approve or reject each individual case.'