Debt Bonanza Brings Bailiffs Out Of Woodwork - Bruce

1.52.00pm BST (GMT +0100) Fri 11th Jun 2004

Average turnover of bailiff companies has increased by 205% in the last five years, almost fifteen times higher than other industries, according to new Liberal Democrat research.

Bailiffs are used by Magistrates' Courts to collect outstanding fines and debts owed to local authorities.

By law credit companies cannot use bailiffs, which begs the question why there's been an explosion in bailiff turnover.

The massive growth may imply that people have overstretched themselves with easily available credit. The repayments on one or two maxed-out credit cards are impacting on their ability to meet other bills, such as council tax or business rates.

When local authorities instruct bailiffs to act on their behalf, the final amount levied against a debtor will bear little relation to the original debt.

People who cannot afford to pay their council tax in the first place end up paying bailiffs for their time, for listing any items in their homes which may be auctioned off, for the use of the bailiff's van to take the goods away and for storage until they can be sold.

This aspect is not regulated and bailiffs can impose any fee they consider 'reasonable'.

The Lord Chancellor's Office argues that fees levied after bailiffs take legal control of goods should remain 'variable', but as such, the entire system dealing with vulnerable debtors is open to abuse.

The Liberal Democrats want to see a system of proportionality in the fees levied.

Commenting on the research, Malcolm Bruce MP, Liberal Democrat Shadow DTI Secretary, said: "The main problem for people is that bailiffs add their own collection fees onto the original debt or fine they are asked to collect. In some extreme cases, visits from a bailiff can increase an original debt or fine of £30 by 400%.

"The massive increase in the average turnover of bailiff companies shows this to be a flourishing industry. The lack of proportionality in bailiff fees simply forces many vulnerable people further into debt.

"Even though bailiffs don't call to collect credit card debts, it doesn't mean that, in our current climate of spiralling personal debt, people are immune to the unwelcome knock at the door.

"The bailiffs may well turn up when your repayments on a couple of maxed-out credit cards means you can't afford to pay your council tax."

"Debt is now all pervasive, and a flourishing industry is building up to feed on the casualties."

ENDS

Notes

The Debt Bonanza - the Real Winners are the Bailiffs

We took a sample of some of the largest bailiff companies in the UK (drawn from the membership of the Association of Civil Enforcement Agencies and the Certificated Bailiffs Association, and those companies used by the 42 Magistrates Courts in England and Wales) and looked at their turnover for the last 6 years

The turnover has grown by approx. 205% over 5 years, clear evidence that as more and more people climb further into debt, bailiffs become the real winners.

Average Turnover for other Small and Medium Size Enterprises.

Taken from the Small Business Service on the DTI website ( SME statistics). Based on private sector and public corporations excluding financial intermediation.

£ million excluding VAT, start of year.

2002 2,199,923

2001 2,112,013

2000 2,033,728

1999 1,943,880

The percentage increase between 1999-2002 is 13%.

1943880 - 2199923 = 256043 / 19343880 = 13.2%

· We are focusing our criticism of the system on those bailiffs used by magistrates courts or private creditors.

· County court bailiffs are employed by the Court Service and are consequently part of a structured management and supervisory system. As public sector employees, they are not subject to the same financial pressures as private bailiffs, whose income depends on the fees they generate.

· Credit companies use Debt Collection services and are not allowed by law to use Bailiffs.

The Burden of Bailiff Fees and Charges.

Many people who have a debt see it spiralling upwards because of the addition of bailiff fees and charges. The prospect of having to pay off two or three times the original amount once bailiff charges have been added diminishes their hope of every paying off the debt. Some create other debts by trying to pay off an original debt and are drawn into a cycle of constantly being in debt. Money for food or heating the home may have to be diverted to pay bailiffs.

Bailiff fees and costs are usually paid first, meaning all or part of the original debt may still remain even after considerable sums have been paid.

Abuse of the Fees and Charges System

The CAB are very concerned bailiffs are abusing the system to get more money. Anecdotal from the CAB:

· A client of CAB in Wales had two outstanding court fines for £75 and £45. The bailiffs called to levy goods on each account and charged fees for both of them even though only one visit was made. As a result, the money owed has risen to over £300.

· A CAB in the North West reported a client, on incapacity benefit, with two liability orders for council tax. The bailiffs added van charges of over £100 to each order before they had levied on goods. Prior to levy, the total fees should only have been £35.

· A CAB in Wales reported a client, on incapacity benefit and income support, who had court fines for illegal parking. Two warrants were issued. The bailiffs made two visits to his home on the same day, one for each warrant, adding £120 in costs.

Additional info

Magistrates courts deal with fines and the non-payment of, for example, council tax, child support arrears, vat and income tax arrears.

The Lord Chancellors Dept is looking to regulate bailiffs working in the civil enforcement system. This of course welcome, - the fact that they have dragged their heels over this issue for over 4 years and there is no sign of any being introduced in the near future is irresponsible.

The Home Office has already established the Security Industry Authority. This Authority will phase in licensing sector by sector, starting with wheel-clampers and bouncers. Primary legislation will be needed to accommodate the broadening of its current functions to include licensing enforcement agents.

The LCD recommends a series of fixed fees chargeable for those actions which are common across all types of enforcement business. We support this.

If the system of fees is clearer there is less room for abuse and it is easier for debtors to understand exactly what they should be paying. Variable fees however will remain for the actions of removal and storage. The LCD argues this is because the cost of these actions cannot be predetermined. We would argue for a system of proportionality in this area.