This change in law is partly driven by the need to modernise, partly to attempt to deal with 'rogue' bailiffs and partly to make the fee structure more transparent.
Joanna Elson, Chief Executive of the Money Advice Trust, said:
“We were pleased to see a commitment to prevent bad bailiff practices in the Coalition Agreement published in 2010, and we welcome the decision to implement new rules four years later. Some of the rules will have a positive effect, such as requiring that people are directed to sources of free debt advice in prescribed forms and notices".
“However, an opportunity to more thoroughly reform the industry has been missed. The point of bailiffs is to provide a method of collecting money from people who refuse to pay their debts – whereby the threat of losing possessions or the actual removal of possessions leads to debt repayment. The fees for using bailiffs are charged to the person in debt and collected by the bailiff on top of the original debt – this means the fees chargeable by bailiffs can incentivise bad practice and we are concerned the new fee structure does little to prevent this."
Karen Dyson from the Citizens' Advice Bureau has sais:
"Citizens' Advice Bureaus across the country deal with over a thousand inquiries about bailiff problems every a week.
"Obviously this is not the majority of bailiffs, but it is a significant minority.
"We are really pleased to see these new rules. It's a real chance for bailiff companies to review the way their staff are operating."
The main changes are:
- Bailiffs will be known as Enforcement Agents (EAs)
Enforcement Agents must follow a three stage process:
- i) Compliance stage - As soon as the debt is passed to bailiffs, the debtor is immediately liable for a fee of £75.00. The bailiff can take control of the debtor’s goods by giving at least seven days notice (excluding Sundays, bank holidays, Good Friday and Christmas Day) – the exact content of this notice is set out in Part 2 Section 7 of Link 2 above. This the ‘Compliance Stage’ where it is critical the debtor contacts the bailiffs and either settles the debt or enters into a ‘Controlled Goods Arrangement’ which MUST then be stuck to religiously to avoid further costs. If a court thinks the debtor may move or dispose of the goods in order to avoid them being taken control of, it may order a shorter period of notice..
ii) Enforcement stage - If the debtor does not contact the EA during this period, the bailiff will visit the debtor to take formal control of the debtor’s goods, and undertake activities necessary prior to the removal of goods. This incurs a further fee of £235.00 (+ 7.5% on the portion of any debt over £1500). The bailiff can visit up to five times.
iii) Sale stage - The Enforcement Agent attends a premises to either remove the goods for the purposes of sale, or commences preparation for sale if the sale is to be held on the premises.This stage concludes when the property is sold or disposed of.
- Levy, distress and walking possession agreements are replaced by "the process of taking control of goods" and a "controlled goods agreement"
- There is a time limit of 12 months for taking control of goods but if a payment arrangement is entered the 12 month period stops. A full 12 month period re-starts if the pay arrangement defaults
- Enforcement Agents may visit premises on any day of the week including Sunday but only between the hours of 6am and 9pm
- Enforcement Agents now have a duty to identify vulnerable persons and refer them to seek advice
- Enforcement Agents may take control of 'tools of the trade' with a value in excess of £1,350.00.
- Enforcement Agents must provide written notice to both the defaulter and any co-owner in respect of any objects which they have taken control
- It will become an offence to interfere with controlled goods or to obstruct an Enforcement Agent in the legal course of their duties.
A new fee structure
A new fee structure is introduced with a fee payable as soon as each of the three stage process begins :
- i) Compliance stage - £75.00 charged as soon as the case is passed from the local Authority to the Enforcement Agent.The charge is payable on each Liability Order.
ii) Enforcement stage - £235.00 plus 7.5%of the value of the debt that exceeds £1,500. The fee of £235.00 is payable upon first attendance at the premises. Only one enforcement fee maybe charged even if there are multiple Liability Orders.
iii) Sale stage - £110.00 plus 7.5% of the value of the debt that exceeds £1,500. The fee is payable upon first attendance at the premises to remove the goods or prepare for sale.
iv) Enforcement agents may also recover disbursement fees that are reasonably and actually incurred such as the cost of storage of goods removed and locksmiths fees.
v) The level of the fees is set by the government and will be reviewed annually.
vi) The £75.00 compliance fee is payable before the balance on the liability order.The Enforcement and Sale fees are payable on a pro rata basis.All fees belong to the Enforcement Agent and should be paid to the Enforcement Agent.
Transitional arrangements will apply in respect of accounts for which bailiffs have initiated action prior to 6 April 2014. In almost all cases the account reverts to the Compliance stage, the £75.00 is not payable but existing fees already incurred are payable.
However, the government have issued statutory regulations to cover cases that are already being managed "in house" by the enforcement companies. In essence if a debtor's account is currently subject to a payment arrangement, if the account is maintained perfectly, things will continue under the old regulations. If, however, the account defaults (even by only one day – we all know bailiff companies!), after 6th April the enforcement company may make an 'enforcement visit' and fees of £235 will be legally applicable.
Unfortunately this means that if a bailiff company has not commence the process of collecting a debt or you have not agreed a repayment plan by the 5th April, then the NEW RULES WILL APPLY, and the NEW FEES WILL APPLY.
We are aware that some companies are already sending out letters telling debtors that they are going to enforce the new rules, this is in fact a very very dodgy area at present, as ALL cases being dealt with prior to the new laws MUST be dealt with under the old rules. However, what is not clear form the new laws is does this apply to Debts that have been assigned to a company to collect, and they haven't started the collection process OR does it apply to all debts assigned to a company to collect irrespective of if they have started to collect or not. This is an area that is where the law if very murky.
Maybe it is not all good!
Things that dont seem to bode well for the new legislation, but we hope will be amended very quickly:
- No rule to make sure debts owed by people identified as vulnerable should be passed back automatically to the initial creditor.
- No statutory definition of vulnerability, meaning rules to offer remission for bailiff fees charged to ‘vulnerable people’ may be impossible to enforce. We hope that revised and strengthened National Standards for Enforcement Agents will be in place as soon as possible to help identify and deal with vulnerable people.
- No free and simple procedure for complaining about bailiff companies.
- A fee structure which provides an incentive to bypass the compliance stage (requirements were not built into the regulations for bailiffs to do more than serve the notice of enforcement, which can be done by sending a second class letter).
- Debtors that wish to make payment by cheque, postal order or bankers draft will NOT be able to avoid an 'enforcement visit charge' and the debt increasing by £235. This will mainly apply to debtors of a pension age who still use cheques and 'vulnerable debtors' without a bank account.
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Abbreviations used in DQF
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(c) All Spelling mistakes are my own design, infringement of them may result me sulking!