Debt collectors or bailiffs? What is the current landscape of debt recovery in England today?
Winter 2022-23 has been one of the most controversial periods due to agents of British Gas forcefully putting prepayment meters in many vulnerable households amidst the cost of living crisis. It was a scandal that spotlighted fuel suppliers, their agents and their malpractice. At the exact time, inflation remains high, wages are low and state support systems for vulnerable communities have dwindled for over a decade. In Spring 2023, local councils raise council tax on average by 5%.
For those deemed too poor to pay council tax, once welfare reform was introduced post-financial crisis, local and central governments aggressively searched for revenue from low-income households once their budgets had been reduced. Recovery agents are enormous for the private and public sectors searching for revenue.
Many debt recoveries are being carried out by private companies. Yet, debt recovery still needs to be clarified for many people.
Role of a Debt Collector
Debt collection companies obtain authorisation from the Financial Conduct Authority (FCA) to collect debts. Along with authorisation, they must treat customers fairly and comply with its rules, including CONC 7 unless exempt.
CONC 7.3 states the following:
‘Treatment of customers in default, arrears (including reposition), lenders, owners and debt collections.’
They do not have the power to enter your home. They can’t force you to pay until they have lawfully obtained a court judgement against a debtor and try to enforce the debt through several recovery options, including the use of an enforcement agent (informally known as a bailiff).
For example, Barclays Bank may have an in-house debt collections team and would approach the defaulter to make payments to remedy a brief period of non-payment. If there has been a repeated non-payment of the debt and confidence of recovery has failed, Barclays may have a service level agreement with a third party to recover the debt on their behalf.
Avrato, British Gas and Prepayment Meter
In February 2022, the Times newspaper reported a forced prepayment story that shook Britain. Knowing whether Avrato was authorised to be an enforcement agent was initially tricky. Having looked at the FCA’s register, they are debt collectors.
But the question is: how did they manage to change the meters of many thousand households because a debt collector has no authority to enter your property as we have established above?
The Rights of Entry (Gas and Electricity Boards) Act 1954 allows an ‘employee’ of a fuel supplier to enter a property with consent or have obtained a warrant from a Magistrate Court to enter the property to put a prepayment meter. Avrato has a service-level agreement with British Gas, and according to the wording of the legislation, an ‘employee’ in Avrato’s case equates to an agent of the fuel provider. However, any malpractice related to a fuel provider is regulated by the Office of Gas and Electricity Markets (Ofgem) and not the FCA.
When several cases go to the Magistrates Court, Magistrates do not usually know whether a customer is vulnerable or at fault. It mainly undertakes administrative tasks to give warrants to fuel suppliers because a dispute between a fuel supplier and a consumer is a civil matter. At the same time, a Magistrates Court usually deals with criminal matters.
The courts allowed Avrato and other agents of fuel suppliers to get a warrant until the revelation of forcefully putting prepayment in public caused an uproar. Subsequently Justice Andrew Edis, the senior presiding judge, issued a guidance to Magistrates to halt listing applications warrant to enter the household property until further notice. At the same time, Ofgem started an investigation into the malpractice of fuel suppliers.
To recap, Avrato is a debt collector, not a bailiff. So, who are bailiffs and what are their rights?
Enforcement Agents (Bailiffs)
As a general rule, courts have formally instructed bailiffs to recover money on behalf of private companies, public bodies or the courts. Some of these enforcement agents undertake service-level agreements with creditors concerned.
Schedule 12 of the Tribunals Court & Enforcement Action 2007 allows civil enforcement agents to recover council tax debts, parking fines and child maintenance payments among other civil obligations. Over 85% of the bailiffs are Civil Enforcement Association (CIVEA) members. Complaints against civil enforcement will be escalated to CIVEA once you have complained against the company concerned.
Whereas, High Court Enforcement agents get their powers under the rules of the Court Act 2003 from the High Court. If the county court transfers a case to the High Court, having obtained a County Court Judgement, to recover the debt or the High Court instructs a High Court officer by a Writ of Warrant. They usually deal with cases related to utility arrears, rent arrears, business debts and tribunal costs. High Court Enforcement Agents are members of the High Court Enforcement Officers Association and will deal with any complaints related to High Court Officers.
Whilst, civil enforcement and high court enforcement agents are run by private companies, County Court bailiffs are employees of the County Courts. They usually deal with consumer credit debts and debts of low value.
Civilian Enforcement Officers enforce Magistrates Court fines, and other criminal penalties and they can forcefully enter a property once they have been permitted by the court. They may also be employees of the court.
All individual enforcement agents are registered with the Ministry of Justice and renew their licence every two years unless they are exempt due to being employees of the courts.
Powers of Enforcement Agents
Whether the creditor may have obtained a Warrant of Control from the County Court or a Writ of Warrant in the High Court, enforcement agents can visit a debtor’s home to recover the debt lawfully unlike debt collectors.
Taking Control of Goods Regulations 2013 outlines what Civil Enforcement and High Court Enforcement agents can charge regarding fees related to stages of compliance, enforcement and the sale of goods. According to the Ministry of Justice, the purpose of the Regulations was to incentivise early settlement. According to CIVEA, 60% of their cases are handled by civil enforcement agents and go to the enforcement stage.
Regarding the agents' powers, they are entitled to set up a repayment plan to pay for the debts and their fees. They can also set up a Control Goods Agreement on terms you repay.
Suppose the debtor defaults in repaying the agreed repayment. In that case, the agent can seize the goods under the Control Goods Agreement because technically the goods belong to the enforcement agent, until the debtor repays the debt and fees in full.
However, they are not allowed to take goods owned by someone other than the debtor, or the goods are part of household essentials such as beds and cookers or take equipment related to debtor's work. However, they are not allowed to enter the property unless permitted by the courts or the occupier.
Since 13 Dec 2022, to improve the standards in the enforcement industry, the Ministry of Justice imposed bailiffs to wear body cameras to deter malpractice in the enforcement sector and promote transparency and accountability.
Current problems in debt recovery
As we have seen with Avrato, an agent of British Gas, had obtained a warrant to put a prepayment meter on vulnerable communities. The regulator is investigating and reviewing the behaviours of fuel suppliers and their agents regarding their treatment of customers.
There are broader issues related to accountability, transparency and oversight to protect vulnerable communities from financial strain and vulnerability within the enforcement industry. This was recently highlighted based on data from clients' of Citizens Advice. The findings are being heavily disputed by CIVEA however.
But, commercial pressures and service level agreements no doubt exist for enforcement agents to recover debts since many of these agents work for private companies.
To simplify the enforcement sector and to make it accountable, the Enforcement Conduct Board has been established to supervise the enforcement sector through a single supervisory regime for the public interest.
However, it will not be able to address some of the fundamental causes of many low-income households' financial distress because it is political.
Since there is an increase in enforcement recovery actions due to the increased numbers, there is also an inevitable consequence of an increase in malpractice due to the pressures of recovery put upon recovery agents and their creditors to generate income in an underfunded social security system.
THIS IS FOR INFORMATION ONLY. IF INDIVIDUALS WHO ARE IN DEBT REQUIRE ADVICE, CONTACT THE NATIONAL DEBT LINE OR YOUR LOCAL FREE ADVICE SERVICE