Government departments treat people worse than private companies when chasing debt repayments, according to a damning report by the Citizens Advice Bureau (CAB).
The CAB says the number of people seeking advice related to local and national Government debts has doubled from just under 200,000 a year to around 400,000 in the last ten years, adding that £1 in every £5 is now owed to Government departments.
The report found that Government debt collectors show little consideration in respect to whether people can afford to pay monies owed, as well as instances of people being forced to pay disputed debts.
Researchers focused on some of the most common debt problems, including council tax arrears, tax credits overpayments, benefits overpayments and magistrates court fines.
The Common Financial Statement (CFS) assists creditors to work out how much a person can afford, but the CAB says Government departments have not adopted this standard when collecting its own debts.
Citizens Advice has compiled a league table comparing Government departments with other types of debt collectors. It rates 259 debt collection ‘specialists’ against seven important factors, including how debt disputes are resolved, the range of repayment plans on offer and how easily creditors can be contacted.
Collection of tax credits overpayments received the lowest approval rating of just 34%, closely followed by mobile phone providers, magistrate court fines and the collection of benefits overpayments owed to the Department of Work and Pensions (DWP).
Overpayments can occur when a claimant mistakenly provides inaccurate or incomplete information, or when a tax credits award is incorrectly calculated by officials, and are rarely caused by fraudulent claims.
According to the league table, water companies were the most responsible debt collectors and local authorities finished second for practices used when they collect council tax debt.
CAB advisers have also expressed concerns over difficulties in contacting Government departments. 56% of advisers said they “rarely or never” get through to speak to someone at the HMRC, warning that this can have “dire consequences” for people struggling to repay debts – including the possible involvement of bailiffs and even potential imprisonment.
Only 12% of CAB advisers thought tax credits debt collections always offered affordable repayment plans, compared to 51% for both banks and private companies’ debt collections.
CAB advisers also say that Government departments perform poorly in resolving debt issues, with 48% saying HMRC tax credit collections staff were “rarely or never co-operative”, compared to just 9% for banks.
The report urged Government departments to adopt a number of major commitments, including:
- Ensure staff can be easily contacted by phone.
- Reward staff for good service rather than the amount of money they collect.
- When recovering old overpayments, provide full evidence of the debt and earlier communications.
- Allow 30 day break from debt collections when a person has made an appointment for debt advice.
- Stop collecting overpayments or reduce the amount collected during a dispute where the person is in hardship.
- Set affordable deductions from benefits and adjust payment dates where people have short-term financial difficulty.
Gillian Guy, Chief Executive of Citizens Advice, said: “Fair debt collection practices are fundamental to any functioning economy.
“Of course people must repay government debts as soon as they can, but there is a difference between people who can’t pay and won’t pay. Our evidence shows glaring inconsistencies in how some government departments and private companies go about recovering money.
“It’s unacceptable that government agencies are behind the standards set for private companies when recovering debt. National government, private firms, utility providers and debt advice specialists need to get together and urgently agree a fair and consistent way forward.
“It’s vital people can also access free and independent advice to ensure they get the all the help they need to avoid getting into unmanageable debt in the first place.”