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Councils urged to follow banks' stronger 'morality' on debt collection

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Councils have been warned the morality of their debt collection practice has fallen behind that of banks, with a devastating impact on vulnerable members of society.

The warning has come from former Somerset CC chief executive Sheila Wheeler, who is campaigning for councils to make less use of bailiffs in her new role as UK debt advice director of the Money Advice Service.

In an LGC interview, Ms Wheeler said the use of bailiffs traumatised children and families and had a “counter-productive” impact on councils’ overall objectives.

“There’s a rising amount of over indebtedness in council tax and housing related issues,” Ms Wheeler said. “If we pursue those [debts] to the ultimate end, what tends to happen is that those people become homeless and their children are very vulnerable as well, so that comes back as another challenge to the local authority.”

According to research by Citizens Advice, council tax arrears constitute the highest growing area of their clients’ debt problems, rising from about 7% of the debt problems they dealt with in the first quarter of 2011 to 13% in the final quarter of 2014. This period coincided with the government’s 2013 reform of, and cuts to, council tax benefits.

Ms Wheeler said sending in bailiffs to deal with arrears “has an impact, not only on the adults in the household, but it often terrorises the children as well and it causes anxiety and stress within the overall household”.

However, she said there were “beacons of good practice” within local government such as a venture between Hammersmith & Fulham LBC and the debt collection company 1st Credit. This offers a suite of services including enforcement training, predictive analytics, debt prevention advice and considers the negative impact of bailiffs.

Overall, Ms Wheeler insisted a positive “business case” could be made for a more sensitive system of debt collection which did not resort to bailiffs so easily, adding: “The banks will tell you that doing the morally right thing actually makes good business sense.”

She continued: “The private sector and most of the banks are already in this territory of looking at the whole dimension of the debt and how it can be managed differently and sometimes pressing the pause button, rather than a fast forward on debt with particular clients and groups.”

Ms Wheeler also said many councils were “not properly sighted” on the extent of the debt problem within their local population. Eight million people nationally have “money troubles”, feeling their debts were a burden or missing bill payments.

According to Money Advice Service research, based on online data relating to 26,000 people, the most indebted council area is Newham LBC, where 23.1% of residents believed they had a debt problem in 2016. The least indebted is the Surrey district of Elmbridge BC, where 9.4% of residents felt that way.

 

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Readers' comments (1)

  • We have been doing this for sometime now at the Royal Borough of Kingston bringing in Financial Inclusion and early intervention into debt issues. We use predictive analysis for Housing tenants in order for us to act quickly giving the right support early. Results have been good for both Kingston and our tenants.

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