How Good Are Councils at Enforcing Judgments?

Today we recovered ￡3.4K for a local council from someone who owed the council the money.  No big story on that - its our job and after 35 years of being in the business of enforcement I still get a kick out of seeing this sort of result. The front door the property our enforcement agent attended is in the photo.  Not the poshest of properties - but as the saying goes - never judge a book (or in this case the front door) by its cover.  Here we got paid in full on just one door knock.

So why has this job caught my attention today?  Well I keep reading some pretty staggering figures from my Google Alerts about the number of liability orders that Council are outsourcing to bailiffs for enforcement and that in itself is causing a few raised eyebrows by debt charities.

Opinion will be divided.  As a former district councillor myself, I can see the sense in councils recovering what they are owed so that they can balance their budgets - a tough enough job in itself.  But for me its the way that councils have failed to innovate in their collection policies and to segregate their debtors which causes me concern.  The act of recovery is a statutory obligation, but the wholesale use of bailiffs is not, and councils would do well to invest in shared services embracing best practice in this area to do a better job.  

This then brings me on to councils and the enforcement of other sorts of debts - CCJs for sundry debts, Costs Orders, Tribunal Awards, and the like.  Here getting councils to outsource this debt for collection is like pulling teeth in my experience.  They are too focused on the cost (it costs ￡60.00 to issue a High Court Writ of Control) and that cost is paid by the judgment debtor if the debtor pays.  Added to this councils can recover statutory interest at 8% per annum and can do so for up to 6 years on any judgment before needing further permission from the court.  They are also entitled to add a small amount for the costs of a solicitor to issue the Writ - although in we reality we can do that.

So what's the downside for a council thinking of going down this route?  Well if the debtor doesn't pay the council will have to pay an extra ￡75.00 compliance fee for each unsuccessful instruction.  But they have to pay that anyway on all those other instructions they are outsourcing by the thousands to bailiffs.  Well that's what the Regulations say.  

And then there is the decision on which judgments to enforce and which to leave well alone and for that I say - try!   If you follow my logic on a simple cost/benefit analysis you can pilot a project to get the all-important data on your results. HCEOs will now help councils segregate debt into judgments with the greater propensity to pay meaning that the eventual cost/benefit analysis will put the Council ahead when it comes to tallying up what has been spent in a year.  

And if you want to put some figures around all this - here's an example for you to consider and see if you agree with my logic.

If a council sends 10 cases to an HCEO the initial upfront cost in court fees is ￡600.00.  Lets say each debt is in round terms = ￡3,000.  That means there is a total of 30,000 to recover.  Each debt then carries 1 year's interest at 8% which equates to a further ￡2,400 of interest.  Each judgment also provides for costs to be added of ￡111.75 so another ￡1,117.50 has to be added to value for enforcement.  We are now up to ￡33,517.50.  Assuming a low enforcement rate of 20% for council judgments (sorry but councils don't have a great recovery rate) - we are looking at a council recovering ￡6,703.50 in cash which is say 2.5 of the judgment debts.  This means the council has had to spend ￡600.00 and has to pay 7 compliance fees of ￡75.00 = ￡525.00 (I will exclude the VAT as that is reclaimable) making a grand outlay of ￡1,125.00.  On that basis you can see, I hope, the positive outcome.  A council spends ￡1,125.00 to recover ￡6,703.50.

Any business or advisor can use this approach on any type of judgment debt portfolio.  The key figure really is to find out the performance percentage in terms of cash recovery - and don't rely on HCEO marketing puff for that!  Rely on the returns that you receive and build up a body of evidence.  In fact get the HCEO to do this for you. 

In my example you could argue the recovery rate is low - and I would agree with you - but its realistic - and then you do have to look at the front door in the picture and wonder how long it took for the council to pursue the judgment and enforce it. HCEOs can only work with what they are given and we never said we were miracle workers although some of us try!  But at least the council has fulfilled its statutory obligations and pursued what it is owed.  And it may be that the HCEO report will give the council other options to enforce such as Attachment of Earnings, Charging Orders or Bankruptcy.  

The bottom line is that I would like to see councils using enforcement when its really needed rather than as a wholesale collection process which is far too blunt in my humble view.  When it comes to enforcing CCJs councils should and can be more analytical.  They should pick an HCEO who they can work with to achieve cash recoveries, and alternative enforcement strategies that swell the council coffers and reduce the burden on residents.   And out of all that perhaps Councils can use the fruits of their labours to provide more services for their communities - I have always liked the idea of outdoor gyms, meals on wheels and litter pickers!