Ministry of Justice explain why the Compliance Fee of £75 is deducted first.

[Bailiff Advice]

The subject of debtors paying the amount only of a Magistrate Court fine or a Liability Order for unpaid council tax direct to the court or the local authority is one that is causing problems for debtors given that there is a huge level of misunderstanding about the Compliance Fee of £75 that is applied to the account as soon as the debt has been passed to the enforcement agent by either the court or the local authority.

 

Confusion arises for debtors because if they make payment of the court fine or liability order after the debt has been passed to the enforcement agent the regulations state that the Compliance Fee must be deducted from any payment made (whether made to the court or the council or whether in person or on line) and the balance apportioned on a pro rata basis.

 

Given the confusion, it may be useful to know the reason why the government imposed this provision into the regulations.

 

The Taking Control of Goods (Fees) Regulations 2014 took effect on 6th April and on the same day, the Ministry of Justice also released the Explanatory Memorandum to The Taking Control of Goods (Regulations 2014.

 

This document is not only extremely useful but it's importance cannot be underestimated given that it was laid before Parliament on 6th April by Command of Her Majesty (Item 1).

 

http://www.legislation.gov.uk/uksi/2014/1/pdfs/uksiem_20140001_en.pdf

[Bailiff Advice]

The Explanatory Memorandum to the Taking Control of Goods (Fees) Regulations 2014 is very short and Item 8 addresses the subject of the 'Transforming Bailiff Action Consultation' that ran from Feb 2012 to May 2012 and Item 8.1 states that although the majority of the 254 responses were in favour of the proposed fee structure there were 'two elements' of the fee structure that had to be "revised' 'following consideration of the consultation responses and further work with stakeholder groups".

 

The first revision concerns the 'additional percentage fee' (which is 7.5%). Item 82 outlines the reason for this change.

 

The second revision (Item 8.3) concerns the distribution of payments (proceeds) between the creditor and the enforcement agent and states as follows:

 

The consultation response stated that in cases where the proceeds of enforcement are less than the amount outstanding, they should be distributed on a pro-rata basis between creditor and enforcement agent (regarding the outstanding debt and the enforcement fees and disbursements respectively). However, it has since been demonstrated that this would cause enforcement agents to operate at a loss for some time before they recovered their fees, undermining the fee structure model by significantly delaying remuneration and preventing the necessary investment in enforcement businesses required to provide a sustainable service.

 

Without this, successful enforcement could potentially decline significantly and enforcement agents may be encouraged to act in an aggressive manner in order to try and recoup the entire debt.

 

It was therefore decided that enforcement agents should be paid the compliance stage in full first, followed by a pro-rata division of proceeds between enforcement agent and creditor.

[reallyinthecrap]

I am in this exact position.

 

 

My CT says that it should be £1522.01 - the Liability Order, for some reason was for £1592.01 (£70 more) and then I have had 1 single letter from Swift and the total is now £1667.01, another £75 added as a "Compliance Stage Fee"

 

 

So, I now have £145 to pay, which I cannot afford..

 

 

Do you know if those figures are correct?

 

 

reallyinthecrap

[outlawla]

.....Without this, successful enforcement could potentially decline significantly and enforcement agents may be encouraged to act in an aggressive manner in order to try and recoup the entire debt.

 

It was therefore decided that enforcement agents should be paid the compliance stage in full first, followed by a pro-rata division of proceeds between enforcement agent and creditor.

 

The above is evidence that the Ministry of Justice's view of the enforcement industry is that they need paying incentives to stop them turning to crime.

[unclebulgaria67]

The above is evidence that the Ministry of Justice's view of the enforcement industry is that they need paying incentives to stop them turning to crime.

 

It is a stupid argument anyway. If they want the work, they have to meet agreed standards of behaviour. If they act in an agressive manner, the householder would be allowed to use proportionate force. If a bailiff visited me and acted in an agressive manner, I would meet it with a similar response.

 

Having the fees gives them more reason to be agressive, as it is an incentive. If they can't earn, why would the bother.

 

Should be in the hands of official court or council staff and not private bailiff companies.

[Conniff]

The real reason it comes out first is:

 

 

If the debt was paid first there would only be the fee remaining and we could all challenge it ie get a breakdown of how it was made up and if it was fair.

 

 

It's all about making money, no other reason.

[Neckbeard]

I'm sorry, but even that does not show that if you pay the creditor direct, they must pass on the £75 compliance fee to the bailiff.

 

That note is in reference to what happens should the amount the bailiff recovers from the debtor, either through cash or other proceeds, does not cover the full debt. Quite rightly, in my view (surprisingly), the bailiff takes his fee then the rest is split pro-rata. However, there is still nothing in there regarding the fee should the bailiff recover nothing. A bailiff can only be paid from proceeds - always has done, always will be. Proceeds are clearly defined in legislation.

[Neckbeard]

The above is evidence that the Ministry of Justice's view of the enforcement industry is that they need paying incentives to stop them turning to crime.

 

Bailiff's are the only trade that have needed Government legislation to make them act lawfully. Electricians, plumbers, window cleaners, etc... nope. Just bailiff's. Tells you plenty.

[unclebulgaria67]

Bailiff's are the only trade that have needed Government legislation to make them act lawfully. Electricians, plumbers, window cleaners, etc... nope. Just bailiff's. Tells you plenty.

 

There are legal requirements for Electricians. But I take your point.

 

What people have to realise is that during a time of recession where central government is cutting money, it puts pressure on local authorities, courts etc, to obtain as much money as they can from debtors. They will also take advantage by ramping up the fees by as much as they can get away with. Government have legislated to be as helpful as possible.

[Neckbeard]

I don't get that answer. The recession has nothing to do with bailiff fees - I could understand if those fees were going to the Government, but they're going to private companies. The Government have legislated because bailiff companies were out of control and had to be forced to cap their fees. The Government still got it wrong though - not sure how they felt raising the first fee from £24.50 to £75 was in any way helpful, except to Marston's et al.

 

A great opportunity was missed.

[unclebulgaria67]

I don't get that answer. The recession has nothing to do with bailiff fees - I could understand if those fees were going to the Government, but they're going to private companies. The Government have legislated because bailiff companies were out of control and had to be forced to cap their fees. The Government still got it wrong though - not sure how they felt raising the first fee from £24.50 to £75 was in any way helpful, except to Marston's et al.

 

A great opportunity was missed.

 

Because we know from what has been reported here that there has been some profit sharing between bailiffs and councils. We know that government and courts want to see improved collection of monies owed. If bailiffs collect more money, it eases the pressures on government/courts budgets.

 

Also it would not surprise me if there are very close personal relationships between government and owners/investors in bailiff companies. Some of the rumours about the funny handshake club are possibly quite true.

[Neckbeard]

Ooh, scandal... tell me more! I know about the implied 15% that Whyte's offered the police, but what's this about profit sharing?

[unclebulgaria67]

Ooh, scandal... tell me more! I know about the implied 15% that Whyte's offered the police, but what's this about profit sharing?

 

There have been council documents posted on here before, that have shown that councils have shared profits from bailiff fees. Can't remember which ones were involved and whether this still goes on. I would doubt that many would think that this was an ethical thing to do.

[Conniff]

I think this might be what you mean:

 

 

http://www.consumeractiongroup.co.uk/forum/showthread.php?415450-Harrow-Council-PCN-Newlyn-kickback-bailiff-tender-registration-plate-cloning

[Peterbard]

There have been council documents posted on here before, that have shown that councils have shared profits from bailiff fees. Can't remember which ones were involved and whether this still goes on. I would doubt that many would think that this was an ethical thing to do.

Yes that would be the LADER report some time ago. Disgraceful practice, where authorities award contract dependent on the percentage cut of fees they recovery from their authorized bailiff.

 

I find the discussion about the fees and the way the are assigned to be very interesting, I struggle however to see what this has to do with the full amount due being recoverable by the bailiff.

 

Yes proceeds is defined within the act, it is defined as the sums recovered through the use of a power(sic)(among other things) the compliance stage is one of the powers which is also defined in the act.

When the debt is passed to the bailiff this fee is due(this is also defined in regs) the sum of this and the amount outstanding under the order is also defined as "the amount outstanding". If this is not paid in full, then the balance will be due it really is not rocket sconce.

[Neckbeard]

 

Yes proceeds is defined within the act, it is defined as the sums recovered through the use of a power(sic)(among other things) the compliance stage is one of the powers which is also defined in the act.

 

Yep, as you say the sums recovered. If the bailiff recovers nothing, what happens then?

[Peterbard]

Yep, as you say the sums recovered. If the bailiff recovers nothing, what happens then?

 

If nothing is recovered then the order is passed back to the authority of course, the compliance fee is lost as far as i know, how does this help your argument?

 

You see the fee is due when the debt is passed to the bailiff, it does not matter if he collects or even if he completes the stage(see regs), the fact that a sum is paid to the authority rather than the agent is immaterial, the bailiff is sitll due tht fee out of any proceeds, as you say this is clear form the regulation.

 

In any case we know that this is the way it works , no amount of argument can alter the fact hat bailiffs will pursue the full amount even if part of it is paid to the authority, as is their right under the legislation.

[Neckbeard]

You see the fee is due when the debt is passed to the bailiff, it does not matter if he collects or even if he completes the stage(see regs), the fact that a sum is paid to the authority rather than the agent is immaterial, the bailiff is sitll due tht fee out of any proceeds, as you say this is clear form the regulation.

 

But paying the council direct cannot be classed as 'proceeds', even more so if the situation arises where the debtor pays the council before he's even been made aware of the bailiff's involvement.

[Peterbard]

But paying the council direct cannot be classed as 'proceeds', even more so if the situation arises where the debtor pays the council before he's even been made aware of the bailiff's involvement.

 

Where does it say that paying the council cannot be classed as "proceeds". Any payment made after the commencement of enforcement is proceeds, because the debt is in the hands of the EA.

As for the involvement notification, the regs say that the fee is due on the beginning of the stage, in this case the compliance fee stage, so that is your answer to that point.

[Peterbard]

Recovery of fees for enforcement-related services from the debtor

 

4. (1) — The enforcement agent may recover from the debtor the fees indicated in the Schedule in accordance with this regulation and regulations 11, 12, 13, 16 and 17, by reference to the stage, or stages, of enforcement for which enforcement-related services have been supplied.

 

(2) The fees referred to in paragraph (1) may be recovered out of proceeds.

 

(3) The enforcement agent may recover under this regulation the whole fee provided in the Schedule for a stage where the amount outstanding is paid after the commencement, but before the completion, of that stage.

[unclebulgaria67]

Where does it say that paying the council cannot be classed as "proceeds". Any payment made after the commencement of enforcement is proceeds, because the debt is in the hands of the EA.

As for the involvement notification, the regs say that the fee is due on the beginning of the stage, in this case the compliance fee stage, so that is your answer to that point.

 

I agree this is logical and this is what Citizens Advice say. The date on which the EA company is instructed would obviously be very important.

[Neckbeard]

Where does it say that paying the council cannot be classed as "proceeds". Any payment made after the commencement of enforcement is proceeds, because the debt is in the hands of the EA.

As for the involvement notification, the regs say that the fee is due on the beginning of the stage, in this case the compliance fee stage, so that is your answer to that point.

 

No, legislation states quite clearly what 'proceeds' are - TCE 2007 sch 12 50

 

(2)Proceeds are any of these—

 

(a)proceeds of sale or disposal of controlled goods;

 

(b)money taken in exercise of the power, if paragraph 37(1) does not apply to it.

 

 

So, proceeds are from the sale of the debtors goods, or money that has been taken by the bailiff whilst executing the warrant. There are absolutely no other provisions anywhere, in any legislation, as to what proceeds mean. If the bailiff has not taken anything from the debtor, he has collected not proceeds.

[Neckbeard]

As for the involvement notification, the regs say that the fee is due on the beginning of the stage, in this case the compliance fee stage, so that is your answer to that point.

 

Try to keep up... what if the debtor is unaware that the bailiff has been appointed and they pay the debt direct? How can anyone justifiably argue that the payment was made due to any type of enforcement action? The debtor would not have even known that a bailiff had been appointed.

[Peterbard]

No, legislation states quite clearly what 'proceeds' are - TCE 2007 sch 12 50

 

(2)Proceeds are any of these—

 

(a)proceeds of sale or disposal of controlled goods;

 

(b)money taken in exercise of the power, if paragraph 37(1) does not apply to it.

 

 

So, proceeds are from the sale of the debtors goods, or money that has been taken by the bailiff whilst executing the warrant. There are absolutely no other provisions anywhere, in any legislation, as to what proceeds mean. If the bailiff has not taken anything from the debtor, he has collected not proceeds.

 

Actually the regulations do define proceeds.

 

The term “procceds” is defined within section 2 the same regulations and reads: “proceeds” has the meaning given by paragraph 50(2) of Schedule 12

Section 50 reads:

50(1) Proceeds from the exercise of an enforcement power must be used to pay the amount outstanding.

.(2)Proceeds are any of these—

.(a)proceeds of sale or disposal of controlled goods;

.(b)money taken in exercise of the power, if paragraph 37(1) does not apply to it.

.(3)The amount outstanding is the sum of these—

.(a)the amount of the debt which remains unpaid (or an amount that the creditor agrees to accept in full satisfaction of the debt);

.(b)any amounts recoverable out of proceeds in accordance with regulations under paragraph 62 (costs).

.(4)If the proceeds are less than the amount outstanding, which amounts in sub-paragraph (3)(a) and (b) must be paid, and how much of any amount, is to be determined in accordance with regulations.

.(5)If the proceeds are more than the amount outstanding, the surplus must be paid to the debtor.

6)If there is a co-owner of any of the goods, the enforcement agent must—

.(a)first pay the co-owner a share of the proceeds of those goods proportionate to his interest;

.(b)then deal with the rest of the proceeds under sub-paragraphs (1) to (5).

.(7)Regulations may make provision for resolving disputes about what share is due under sub-paragraph (6)(a).

 

.The important parts of tis are contained in subsection 2(b) money taken in exercise of the power, if paragraph

The definition of enforcement power is given in section 1(2) schedule 12 of the TCE 2007 as:

(2)In this Schedule a power to use the procedure to recover a particular sum is called an “enforcement power”. (the enforcement stages has been defined earlier).

 

In addition section 50(1) above states: 50(1) Proceeds from the exercise of an enforcement power must be used to pay the amount outstanding

The amount outstanding is defined in the same paragraph as:

 

(3)The amount outstanding is the sum of these—

.(a)the amount of the debt which remains unpaid (or an amount that the creditor agrees to accept in full satisfaction of the debt);

.(b)any amounts recoverable out of proceeds in accordance with regulations under paragraph 62 (costs).

 

Section 62 reads:

62(1)Regulations may make provision for the recovery by any person from the debtor of amounts in respect of costs of enforcement-related services.

.(2)The regulations may provide for recovery to be out of proceeds or otherwise.

.(3)The amount recoverable under the regulations in any case is to be determined by or under the regulations.

.(4)The regulations may in particular provide for the amount, if disputed, to be assessed in accordance with rules of court.

.(5)“Enforcement-related services” means anything done under or in connection with an enforcement power, or in connection with obtaining an enforcement power, or any services used for the purposes of a provision of this Schedule or regulations under it.

We see here that the amount outstanding includes anything “in connection with” the use of the power. Since as also said the “amount outstanding” is paid out of the “proceeds”, if the sum paid by the debtor is short the fee for the use of that particular power (stage of enforcement) then that sum will still be owed.

[Peterbard]

You can see from above the "proceeds is defined as the sum derived from an "enforcement power", an enforcement power is defined as any action taken under the regs to recover any sum, ie the compliance , enforcement etc. stages.

 

So yes Proceeds is well defined and would include any payment made after the enforcement starts.