North East Borough Council planning to establish an internal Debt Collection agency

It has emerged that a council in the North East is planning to set up an internal debt collection practice. The news has raised serious concerns about the council’s intentions towards the collection of council tax arrears.

A whistleblower employed by Redcar and Cleveland Council contacted the local press explaining their fears that low income and unemployed residents in the Borough would be subject to additional debt collection costs that could not afford as a result of the plans.

In House Council Debt Collection Agency

The cabinet member at the council responsible for corporate resources has since revealed that the reports are correct and that proposals are under consideration. A decision is expected no later than the end of the 2015 financial year, once the debt collection agency scheme has been discussed and voted on by council members.

The tip off about the new debt recovery agency was sent anonymously by letter to the Northern Echo, the writer says:

“Bailiffs working for private companies are used by the council, however the council receives no income from the fees charged by the bailiff companies”

“We already try and do as much of the debt collection work as we can to try and keep charges to residents as low as possible. The bailiff’s first letter costs £80, so before they send this, we send the resident a last chance letter as there is no cost involved.”

“Also before the bailiffs are called in we will make phone calls, send text messages and write reminder letter to give residents every chance to pay before bailiffs visit and very high additional costs are added to the arrears that the resident is already struggling to pay.”

“The council is going to set up their own debt recovery and collection company to collect debts in house and generate an additional income stream for the council’s coffers”

“My main concern is that it will be financially beneficial for the council operated debt collection agency to skip the procedures we currently take to help residents and progress quickly to the bailiff stage where profits would be generated.”

Debt Recovery Agency Proposals

Council spokesman and councilor for corporate resources Norman Pickthall, openly admitted the council is considering the debt collection plans, claiming that: “the new agency would help and support vulnerable residents in debt.”

He continued: “At the current time, Redcar & Cleveland’s proposals for establishing an in house debt recovery agency are in the very early, and the preliminary stages.”

“A cabinet report is being drafted by officers to fully explain our position and how we intend to move forward in this matter. The report will be discussed and no doubt debated by the cabinet before being made public by the end of the year.”

“The plans in no way reflect and dissatisfaction with the current service. The proposed changes are part of wider reforms in welfare provisions. Establishing an in house debt recovery and collection service would give us increased control over welfare in the council tax collection process, enabling us to provide better support to vulnerable residents struggling with debt.”

While it remains to be seen if the proposals will be given the go ahead, other councils in the area and around the UK are thought to monitoring the situation and considering similar plans if the scheme is successful.