Martin Lewis slams councils over ‘aggressive’ debt collection with up to 2million vulnerable people at risk

MARTIN Lewis’ charity has slammed councils over “aggressive” council tax debt collection practices.

The consumer champion’s Money and Mental Health Policy Institute has found local authorities are piling pressure on vulnerable households.

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Martin Lewis’ charity has found vulnerable people are struggling to pay council tax[/caption]

The new research, funded by abrdn Financial Fairness Trust, reveals around 2million people with mental health problems in the UK have fallen into a “council tax trap”.

The phrase refers to those who have missed just one council tax payment but face debt collection, fees and charges worth £100s.

The research found within three weeks of missing just one council tax payment, households can be hit with a “final notice” from their local council requiring them to pay their full annual council tax bill within seven days.

This could be up to 12 times more than their missed payment and for the average UK household means a missed £140 payment could result in a £1,668 bill within 21 days.

But the same research also showed that 91% of people behind on council tax bills could not afford an unexpected expense over £1,000 and a third could not afford an unexpected bill at all.

Anyone who fails to pay the full annual bill can be taken to court by their council and asked for a “liability order”, the Money and Mental Health Policy Institute research said.

These orders can see bailiffs sent to your property.

The research also found some local authorities are charging people up to £150 when they are issued with a liability order, which costs just 50p for the Ministry of Justice to produce.

The Money and Mental Health Policy Institute said 87% of 71 of some of the biggest councils in England and Wales were demanding that people pay the full year’s council tax within three weeks of missing the first payment.

The institute said these practices were disproportionately impacting people with mental health problems – people who are twice as likely to be in council tax arrears.

Martin Lewis, founder and chair of the Money and Mental Health Policy Institute, said: “Council tax collection practices are so aggressive they’d make the banks blush.

“The grotesque process couldn’t have been designed better to accelerate distress for people in council tax debt, especially those with mental health problems.

“When someone misses a monthly payment, rather than asking ‘how can we help’, many councils say ‘now you have to pay 12 times that’ – it’s like a caricature of the worst loan sharks.

He added: “Of course, councils have faced major budget cuts, and some are struggling to survive – a policy challenge the new government must address.

“Yet plugging budget gaps by ramping up punitive action on people in debt, a significant majority of whom have mental health problems won’t fix that.”

The consumer champion called on the Government to change the rules and stop allowing councils to be legally entitled to chase unpaid council tax “in a way no commercial lender would ever be allowed to”.

He called on the Government to make three changes:

• change the regulations to give people in arrears more time before being hit with bigger bills, extra charges, court summons and bailiff action
• cap how much councils can charge people for being issued a liability order
• call on councils to take steps to protect vulnerable households from harm before escalating debt collection to court or bailiffs

A spokesperson for the Local Government Association (LGA), which represents 350 councils across England, said: “Councils strive to ensure they have fair council tax collection policies and should always try to work with people who are struggling to meet their council tax bills.

“We agree that bailiffs should only ever be used as a last resort and anyone having trouble paying their council bills should get in touch with their local authority for financial help and advice.

“Councils do have a duty to their residents to collect taxes so important services are not affected but realise that times are still tough for many low-income households.

“Record numbers are claiming a discount on their council tax, which is adding further pressure on this already underfunded vital local safety net.

“Without enough funding to provide council tax support to those who need it, it is almost inevitable that bills will continue to be forced up for those who can least afford to pay.”

A Ministry of Housing, Communities & Local Government (MHCLG) spokesperson said: “While the collection and enforcement of council tax is the responsibility of councils, we expect local authorities to be proportionate and sympathetic to those in genuine hardship when determining the most appropriate action to collect unpaid tax.”

What to do if you miss a council tax bill

If you can’t pay for your council tax, you should contact your council straight away and explain why not.

You can find what council area you fall under by using the Government’s online council locator tool.

Your local authority may let you pay your council tax in smaller amounts or if you’re on a low income or benefits you may be able to get a council tax discount.

If you miss a council tax bill, you will get a reminder from the council around two weeks after its due date.

If you pay within seven days of this point, you don’t need to do anything else.

The debt will be cleared and you can carry on paying your council tax in instalments.

If you don’t pay within seven days of the reminder, you’ll be hit with a final notice which tells you to pay all your council tax for the rest of the year within seven days.

If you don’t do this, you will be slapped with a liability order which could lead to enforcement action such as bailiffs, taking a fixed percentage from your pay packet, deducting benefits or applying to have you declared bankrupt.

Can I pause my council tax payments?

You may be able to pause council tax payments for 60 days through the breathing space scheme.

The scheme protects hard-up Brits from bailiffs and prosecution for two months.

The scheme does apply to council tax arrears and other outstanding debt, including tax, benefit overpayments as well as credit cards and loans.

During this time, households will receive professional debt advice to find a long-term solution to their financial difficulties.

You can find out more about who’s eligible and how to apply.