Bank Arrestments are Forcing Thousands into Hardship

Bank Arrestments are Forcing Thousands into Hardship

The rise in the use of Bank Account Arrestments in Scotland (also known as Actions of Arrestment and Furthcoming) , to recover debts, is a growing cause for concern and forcing thousands of Scots to experience serious financial harm each month.

In many cases, the debt recovery tool that can only be used by Sheriff Officers, is forcing thousands of Scots into having to choose between buying food, paying rent or heating their home.

In the worst-case scenarios, the legal debt recovery tool is forcing many to seek help from food banks.

Even where the Bank Arrestments are not successful, because someone has insufficient funds in their account, they  still have the costs of the process added to their debt and banks add on a £25 administration fee (which when you only have Universal Credit can leave you suffering severe financial harm until your next payment).

Bank Arrestment Numbers Continue To Rise 

Last year in Scotland over 173,000 non-earning arrestments were executed by Sheriff Officers, with the vast majority being bank account arrestments (a 33% increase on the number since 2011-12).

These arrestments, once served, then force the bank to arrest all sums in the account over £529.90 (the Protected Minimum Balance) up to the amount of debt that is owed.

Unlike Wage Arrestments, however, Bank Arrestments do not restrict how much Sheriff Officers can take over the Protected Minimum Balance (PMB) of £529.90.

With a wage arrestment, only 19% of the amount above the PMB can be taken (until the monthly sum earned is over £1,915.32, when the percentage increases to 23%).

This means if you get your wages arrested and earn only  £1,200 per month, you will only have £127.19 taken. However, with a Bank Arrestment,£670.10 will be taken (assuming your debt is that or more).

It is no wonder, therefore, that last year in Scotland, when over 170,000 Bank Arrestments were executed, approximately only 70,000 Earning Arrestments were carried out.

Why arrest someone’s wages when, if you wait for them to be paid into their bank account, you can get £670.10 instead of £127.19?

Unduly Harsh 

Scots Law has always recognised the potentially harsh effects of Bank Account Arrestments, which is why in 2008 the Protected Minimum Balance was introduced.

However,  the level of protection the PMB provides is grossly inadequate. It has always been linked to the Protected Earnings Limit that exists in Wage Arrestments, but has never included the additional protection of restricting the amount that can be taken above the PMB.

Also, although it has always been possible to challenge a Bank Account Arrestment, on the grounds it is Unduly Harsh, this a Court Based procedure and can take over 8 weeks before you get a hearing in front of a Sheriff. By then it is too late and the undue hardship has already been suffered.

Statutory Debt Solution Review

I would call on the Scottish Government to use its recently announced Review of Statutory Debt Solutions as an opportunity to review what remedies consumers have when their bank acccount is arrested.

There is no question, that Bank Arrestments, one of the harshest forms of debt recovery available, are now excessively being used and risk bringing the whole procedure into disrepute.

Equally, how can leaving families, often with children,having to choose between  heating their homes and feeding themselves not be described as unduly harsh?

As an immediate solution, subject to eventually increasing the level of protection for funds held in bank accounts, I would urge the Scottish Government to replace the Court based procedure for challenging a Bank Account Arrestment, with an administrative procedure.

This would mean allowing people, with the assistance of a Money Adviser or Insovency Practitioner, to apply for a Bank Arrestment to be recalled or restricted to the Accountant in Bankruptcy’s Office.

Such a process would be free, quick and would also require the person  to seek advice, whilst avoiding them having to choose between feeding themselves and their children, heating their home or paying their mortgage or rent.





Could Scotland abolish Sheriff Officers?

Could Scotland abolish Sheriff Officers?

Does Scotland need Sheriff Officers?

I don’t think so.

I think with several legislative changes, the requirement for Sheriff Officers could be removed and the process as to how debts are recovered could be radically reformed.

This I believe would significantly reduce the costs involved for those seeking to recover debts, and for those who owe debt.

Scottish Diligence Statistics

The reason for me believing this has been brought on by the recent release of Scotland’s Diligence Statistics for 2018-19, which cover the types of legal debt recovery procedures that are used by Sheriff Officers.

These statistics bring into sharp focus the issue of how Council Tax debts in Scotland are being collected.

What the statistics show is that almost 88% of all work carried out by Scotland’s equivalent of Bailiffs, Sheriff Officers, is to recover Council Tax debts,  and probably adds close to £30 million onto those debts in the form of Sheriff Officer fees (Unanswered questions over local authority debt statistics – The Herald; 18th December 2019)

The type of work carried out by Sheriff Officers on behalf of Scottish councils includes:

Now this is concerning, as what the statistics also show is that the use of Sheriff Officers to recover debt by non-local authority creditors has fallen by 24.3% since 2011-12, but over the same period Scottish local authorities increased their use by 27.8%.

Also, in 2018-19, this continued with the use of Sheriff Officers by non-local authority creditors falling by 42%, whilst local authority use increased by 15%.

Which begs the question are Sheriff Officers advising Local Authorities to take a more aggressive approach to debt recovery to compensate for the loss of work by other creditors?

It also raises the question whether a radical overhaul of how Diligence (legal debt recovery) is executed in Scotland could significantly reduce the amount of fees that are being applied to the debts of those in default?

Scottish Councils should have their powers to recover debts increased

Now, a simple answer to this problem may simply be to increase the power of Local Authorities to recover debts.

Take, for example, Direct Earning Arrestments. These are types of wage arrestments that are used by Local Authorities and the Department of Works and Pensions for benefit overpayments. They are effectively wage arrestments.

However, unlike Earning Arrestments (which are governed by the Debtors (Scotland) Act 1987), there is no requirement for Local Authorities to use Sheriff Officers to execute a Direct Earning Arrestment. They simply send the Arrestment Schedule to the Bank themselves.

This begs the question why for Earning Arrestments, we could not allow local authorities to do the same ? If they can do it for one type of wage arrestment, why not for another, removing the requirement to use a private sector Sheriff Officer.

Which then begs the question, why then not also allow them to do the same for Bank Arrestments?

And if we are going to allow them to do that, then why not also allow them to send Charge for Payments by post?

This would arguably save tens of millions of pounds being added onto Council Tax Bills in the form of Sheriff Officer fees.

Council’s would not be alone in having such enforcement powers. As mentioned above, the Department of Works and Pensions also have the power to execute Direct Earning Arrestments without using Sheriff Officers.

The Child Support Agency and Child Maintenance Agency also have similar powers when it comes to Direct Earning Orders for child maintenance payments.

But not all debts are for Council Tax

However, this raises the question what about other debts, as not all debts are for Council Tax and not all debt recovery procedures are those mentioned above.

Well there is a simple answer to that question, in that these remaining types of debts and procedures could be recovered and executed by Court Enforcement Officers employed by the Courts.

In Northern Ireland such a model already exists where it is Court Officers rather than private Bailiffs that recover debts.

Court Enforcement Officers could therefore be employed on a full cost recovery basis by the Scottish Courts and Tribunal Service to recover these other types of debts and to carry out other types of enforcement procedures, for both Local Authority and non-Local Authority debts. They could also take on the role of Fine Enforcement Officers, who already exist in every court and can also execute bank and earning arrestments without having to use Sheriff Officers.

As all this would be done on a cost-only recovery basis, I believe it would help reduce the cost of recovering debts in Scotland for both those in debt and those that are owed debts.

It would also bring forward some radical reform to how debts are recovered in Scotland, which inevitably will have to occur anyway.

The simple fact is, if our entire system of enforcing Court Orders is being susidised by a form of Local Government taxation that none of the major political parties support, then reform will eventually be inevitable, as will how debts are recovered in Scotland.

It would seem logical to me, to begin that process of reform, sooner rather than later as currently Sheriff Officers have become overly dependent on Local Authorities for work and this is only adding to the misery of those struggling with Council Tax debts, as they are disproportionately bearing the burden of funding this no longer sustainable industry. 

Increased use of Sheriff Officers By Scottish Councils is a Cause for Concern

Increased use of Sheriff Officers By Scottish Councils is a Cause for Concern

New statistics, produced by the Accountant in Bankruptcy Office show that in 2018-19 Scotland’s Local Authorities increased the number of times they instructed Sheriff Officers to recover Council Tax debts by over 15%, adding, it is believed, up to £30 million in Sheriff Officer fees to  those in debt.

Also,  the type of action the Local Authorities have been instructing Sheriff Officers to take appears to be focused on one particular type of enforcement action: Bank Account Arrestments, which many believe are a particularly harsh form of debt recovery. 

Bank Account Arrestments for Council Tax Increase by 21%

In 2018-19 there were 167,356 bank account arrestments by Local Authorities for Council Tax debts (up 21% on the 138,021 there was in 2017-18).

When a bank account is frozen, any funds that are held in the account that are above the Protected Minimum Balance of £529.90 are frozen, up to the level of the debt that is owed.

So if there is £1,000 in an account and £1,200 is owed, then all funds that are in the account that are above £529.90 are frozen. If only £200 was owed then the first £529.90 would be protected, the next £200 would be taken by the Sheriff Officers and the remainder of the balance would be returned to the bank account holder.

The problem is people are usually only left with the £529.90 and this frequently leaves them without enough money to pay their mortgage, rent, gas, electricity or to buy other household essentials such as food.

If the funds held in the account are below the Protected Minimum Balance of £529.90, then the Bank Account Arrestment fails, but the Sheriff Officers fees are still added to the debt and most banks will still add a £25 administration fee to the person’s account.

So for most, whose only income is social security benefits, and whose funds in their account are never above £529.90, the pointless arrestment plunges them more into debt.

In contrast to the sharp increase by Councils in their use of Bank Account Arrestments is their use of other types of arrestments, such as wage arrestments, (there were 71,835 in 2018-19, which only increased by 4% on the 68,858 there were in 2017-18).

Wage Arrestments are not as harsh as Bank Account Arrestments, as  although the first £529.90 per month is protected, the amount that can be taken after that is only a percentage of the remaining funds, based on a sliding scale, meaning people are not just left with £529.90.

The increased use of Bank Account Arrestments by Local Authorities is, therefore, an indication that they are opting to increase their use of one of harsher forms of debt recovery, even if it means forcing more people into hardship.

This is not a proportionate debt recovery strategy.

Increased use of Sheriff Officers to Recover Council Tax Debts

What the Scottish Diligence Statistics also clearly shows is that Local Authorities are now some of the most aggressive creditors in Scotland.

Whilst their use of Sheriff Officers increased by over 15%, other creditors (Banks, Credit Card Companies Etc.) saw their use fall by 42%.

What this suggests is whereas commercial creditors are not using coercive debt recovery tactics, possibly because they don’t consider it to be effective, Councils are increasing their use of it.

If the Commercial Creditors are correct and it is not an effective form of debt recovery, then Councils have to show why their increased use of it is, as in addition to causing hardship, it is significantly increasing the levels of debt that people owe. 

With nearly 90% of all legal debt recovery procedures executed by Sheriff Officers now being for Council Tax arrears, the picture that is being painted  is one where Sheriff Officers are almost exclusively working for Local Authorities.

The question has to be asked is this increased use in  the best interests of local authorities or is it in the best interest of those Sheriff Officer that advise them?

The figures also demonstrate, that contrary to claims that Scotland is better than the rest of the UK, where the over-use of Bailiffs has been criticized by bodies such as the House of Commons Treasury Select Committee, the situation here does not appear to be much better.

Local Authority Debt Recovery Strategies Need to be Revised

Scottish Local Authorities now need to revise their debt recovery strategies by increasing the amount they are investing in free money advice services, which are believed to have been cut by 45% between 2014-2017 and is now believed to be worth less than £11.72 million per year.

Contrast that with up to £30 million in fees it is believed Sheriff Officer action is adding to people’s Council Tax Debts each year.

In addition to this the Scottish Government need to accept some responsibility.

If they are going to allow Local Authorities to increase the level that Council Tax rates can be increased by next year, they must also ensure with that power comes the responsibility to ensure those who are most affected can access advice and assistance to help mitigate the worst effects of any hike.

This could be done by increasing funding for free money advice by introducing a Scottish Debt Advice Levy and also national best practice guidance for Council Tax Debt Recovery, that places an emphasis on ensuring Local Authority Debt Recovery departments work in collaboration with local advice agencies and current year council tax is prioritised over arrears.

The Scottish Government could also, as part of the Accountant in Bankruptcy’s review of Diligence, look at how bank account arrestments are working in practice.

In particular they could review whether the Protected Minimum  Balance of £529.90 offers sufficient protections and whether the process to recall or restrict a bank arrestment could be made more effective, by transferring the powers from the Courts to the Accountant in Bankruptcy, with a right to appeal to the Courts only on a point of law.

The Scottish Parliament could also take a leaf out of the House of Commons Treasury Select Committee’s book and independently launch an inquiry into the issue of Council Tax debt recovery.

Then again, the Scottish Government could just see through on its promise and reform local government taxation and introduce a more progressive model of Local Government funding.

Council Tax Arrears: Do you need to tell Sheriff Officers where you work?

Council Tax Arrears: Do you need to tell Sheriff Officers where you work?

If you are in arrears with your Council Tax, do you need to tell Sheriff Officers who your employer is?

The simple answer is no, but you will have to tell the local authority if they issue you with the correct notification that requests the information.

You may choose to tell Sheriff Officers where you work, but be aware they are gathering that information so they can take legal recovery action against you. This is even the case if you do it when entering a repayment plan with them, as if you miss a payment, they may use the information at that point.

When can a Local Authority ask for your personal details?

Local authority’s can issue you with a formal notification that requires you to provide them with certain information which they can use to recover council tax arrears from you.

To do this, they first must apply for a Summary Warrant from the courts. Summary Warrants are equivalent to a Court Order.

To issue a Summary Warrant the Council must first issue you with a 7 day reminder when you miss a payment to your council tax.  If you don’t make the payment within 7 days of receiving the reminder, you will become liable for the full council tax for the year. 

If you do make the payment and then miss another payment you will receive another reminder that will tell you if you miss a third payment, you will not receive another reminder.

If you ignore any of the reminders, you will then receive a 14 day final demand to pay the full amount outstanding, although most local authorities will still enter a repayment plan with you at this point. 

Summary Warrants and Diligence

If you don’t enter an agreement with the Council or pay the full amount outstanding within the 14 days, they can then apply to the Sheriff Court for  a Summary Warrant.

A Summary Warrant is the equivalent of a Court Order. When it is granted, 10% of the amount you owe is added onto the debt.

The local authority can then give the Summary Warrant to Sheriff Officers to recover the debt you owe using legal debt recover procedures.  This means:

Once a Summary Warrant is issued, Local Authorities are also allowed to formally request certain information off you, that they can share with the Sheriff Officers to help recover the debt that you owe, using the above procedures.

What Information can Local Authorities request from you?

The type of information that Councils can request from you, is contained in The Council Tax (Administration and Enforcement) (Scotland) Regulations 1992, s31.

They can request:

  • The name and address of your employer and your place of work, or your employer’s place of business;
  • Your national insurance number;
  • The name of your bank account and your account number;
  • The name and address of any other person or persons who is jointly and severally liable for the council tax debt in respect of which the warrant or decree was granted.

How does the Council request the Information?

To request the information, the Local Authority must serve you a notification in writing. It must specify the information that they want you to provide from the information they are allowed to request.

They must also give you 14 days to provide the information.

If you fail to provide the information within the specified period, they can then give you a £50 penalty. This is not a criminal penalty,  but a civil fine.

They can then serve you a further 14 day notification.

If you fail to provide the information again within 14 days, the local authority can give you a £200 penalty this time.

They can then apply £200 penalties every time you fail to respond to a notification.

Can you Appeal the Penalty?

You can appeal a penalty if you feel it was wrongly applied. Appeals are to a Valuation Tribunal and the Local Authority should notify you of how to do this when they award the penalty.

Grounds you may use to appeal against a notification may be:

  • You did not receive the formal notification from the Local Authority;
  • You did not have access to the information that they requested;
  • You provided the information that was requested; or 
  • The notification you received did not specify the information that they told you they were penalising you for not providing.

What if you give the Local Authority the Information they requested?

If you receive a notification and provide the information that is requested, the Local Authority may pass that information to their Sheriff Officers, who could take the action specified above.

If you don’t have an agreement in place, you may wish to think about seeking advice and applying for a Statutory Moratorium. This is a temporary legal remedy that protects you from legal diligence for 42 days until you can seek advice and look at possible remedies that may be available to you.

If you have an agreement in place, no further action should take place, but if you miss a payment, then the Sheriff Officers may take action that is specified above.

Time To Pay and the Debt Arrangement Scheme

Two options you may have are to apply for are a Time to Pay Direction from the Courts or a Debt Payment Programme under the Debt Arrangement Scheme.

Both of these options will provide you with protection, even though you have provided the local authority the information they requested.

Also, just because you miss a payment, unlike with an informal agreement, this does not mean Sheriff Officers can take any of the action specified above, so you have greater protection.

A Time to Pay Direction does not fail unless you miss a payment, whilst other missed payments equal two missed monthly instalments.

Under the Debt Arrangement Scheme, a Debt Payment Programme does not fail until it is revoked.

This cannot be applied for unless you miss payments to your current council tax, or you miss a payment whilst owing the equivalent of two previous payments. 

Even when a revocation is applied for you can still make representations as to why your Debt Payment Programme should not be revoked.

If the reason you are struggling to make payments are you have become unemployed, or suffered a drop in income, you may be able to apply for a payment break that can be for up to six months. You remain protected during that period.

Points to Remember

  • Sheriff Officers do not have the power to issue a notification or issue a fine. It must be done by your local authority;
  • If you receive a notification, you must comply with it within 14 days or risk a penalty of £50; and £200 thereafter for each further time you ignore a notification;
  • You can appeal against a penalty to the Valuations Committee if you think you have grounds;
  • If you have to provide the information, you can apply for a Statutory Moratorium to allow you time to seek advice;
  • Time to Pay Directions and the Debt Arrangement Scheme offer greater protection than voluntary repayment plans and are more forgiving of missed payments.

Getting Advice

If you require further advice you should contact your local Citizen Advice Bureau or your local council and ask for contact information on your local money advice service.