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Debt Recovery Update: March 2020

09 March 2020 Written by Stephen Cowan Category: Blog

Council Tax is Scotland’s Premier Debt Issue

A staggering £6.9 million is owed by Scotland’s council tax payers in outstanding debt. Citizens Advice Scotland has reported that it helped some 2,250 people last year with their council tax arrears. With an average debt of £3,102, this represents, on average, three times the usual council tax bill in Scotland. Describing the arrears as “Scotland’s number one debt issue”, Citizens Advice have urged tax payers to check if they are entitled to any exemptions, reductions or discounts. This is good guidance considering that, since 2003, those claiming a reduction in council tax has fallen more than 80,000.

In response to this, Citizens Advice have launched their “Check to Save Campaign” which aims to raise awareness of council tax debt and the numerous exemptions to which tax payers may be entitled. Hopefully, if the message gets out, fewer people will be in debt – this will be particularly important not least because the average rise in council tax bills in Scotland of 5% will only make matters worse.

City of Glasgow Council Calls in Sheriff Officers – for Councillor's Tax Arrears!

Amongst those who have not paid their council tax are a number of Glasgow’s city councillors. Despite warnings about the arrears, the council have instructed Sheriff Officers in an effort to recover the debts; in one case, the arrears were over £17,000. Whilst the actual numbers of defaulting councillors is by no means large, it will no doubt be embarrassing for the nine of them who have been visited by the Sheriff Officers. The good news as that all of the arrears have been paid. With local councils relying on the tax to be paid promptly to ensure essential services are met, surely these councillors should be setting a better example?

Debt Collection Company Wound Up by the Court

Newcastle Upon Tyne debt collection company Redwood Business Management Ltd was wound up by Manchester’s High Court in February 2020. The Official Receiver has been appointed liquidator. The company, trading as “Rojen Recovery Services” apparently cold called prospective clients offering their services. They said that their fees would be based on 18.5% of the debt which would be added to the outstanding arrears owed by the debtor. Between June 2017 and August 2019 they recovered almost £1 million. This was made up of monies recovered from their clients’ debtors along with court fees which had been charged to clients to raise court actions which were never activated.

Investigators were able to establish that that the company had failed to remit monies which they had recovered to their clients. They also made charges for the recovery process when none were due. In addition excessive fees were charged.

It is hardly surprising that the public can be fooled by debt collection companies which promise the earth but are, in fact, little more than criminal enterprises. Does the average business person think that debt collection companies are regulated? The answer certainly could be “yes” and, indeed many are regulated by the Financial Conduct Authority whose regime is arduous by any standards. The trouble is that a debt collection company only has to be regulated by the FCA if they are recovering debt regulated by the Consumer Credit Act. However, if a debt collection company is collecting non-regulated debt, such as business debts, then this has nothing to do with the FCA. So it’s no wonder that people are confused as they will be unaware that part of the industry is subject to stringent regulation whilst other parts are not. The problem will only be solved when all debt collectors are to be regulated.

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