Debt recovery—choose your agent carefully

The Taking Control of Goods Regulations 2013 came into force in April 2014. Carly Davies who handles debt recovery cases at Cartmell Shepherd, along with Peter Stafford, a partner at the firm, considers the impact of the new rules.

Original news

Taking Control of Goods (Fees) Regulations 2014, LNB News 09/01/2014 125

Detailed provision is made for the recovery of the fees and disbursements which can be recovered from the debtor, by an enforcement agent, when carrying out enforcement-related services in accordance with the scheme established in the Tribunals Courts and Enforcement Act 2007, Sch 12 and the Taking Control of Goods Regulations 2013, SI 2014/1 (the Regulations).

What are your observations in relation to Regulations since their implementation?

Since the implementation of the new Taking Control of Goods Regulations, in April 2014, Cartmell Shepherd has only sent a handful of new matters to our preferred High Court Enforcement Officer (HCEO). This is for a number of reasons, one of which is that I do not have a lot of confidence that the officers will be as effective as they have been in the past due to restrictions imposed by the Regulations.

I have worked in debt recovery litigation for nearly ten years and have noticed a considerable drop in recovery rates in the last few years. It is more and more likely that methods which were highly effective ten years ago are now not as successful. Obviously since the recession we find there are an increasing number of debtors now who are in the ‘you can’t take what I haven’t got’ camp but more so I see debtors who have the means to pay but who are wise to the process and how to get around it, the ‘won’t payers’ rather than the ‘can’t payers’. In my opinion the new Regulations, while clarifying the process for debtors, are potentially preventing HCEO’s from working effectively on behalf of creditors especially when faced with evasive debtors.

Are there any grey areas emerging?

The main reason I liked to use HCEO’s as a method of enforcement in the past is the element of surprise. Turning up at a debtors property unexpectedly would yield payment more often than not. Now with the implementation of the rule that a HCEO must give seven days’ notice of his visit this element of surprise is lost and it gives unscrupulous debtors ample opportunity to remove assets.

The notice of enforcement should result in an increasing number of debtors offering to pay in instalments (as suggested to debtors in the notice). However, as HCEO’s can no longer charge for collecting payments as part of an agreed plan I believe that fewer payment arrangements will be collected as it is plainly not in the HCEO’s best financial interest. This means that the matter will come back to the solicitor or litigant in person to deal with collecting payments themselves.

This creates problems with continuity, creates more work on behalf of the solicitor/creditor and means that if the debtor defaults the matter then has to be sent back to the HCEO wasting valuable time. Previously if the HCEO was collecting payments and the debtor defaulted they would arrange re-attendance immediately without notice to the debtor. Now if the payment plan is defaulted on, the HCEO must give two days’ notice of re-attendance which again gives the debtor an opportunity to be unavailable at the time of attendance or to remove goods.

Have the new rules proved to be practical and successful in achieving their aim?

As I have only sent a handful of new matters to our HCEO since April it is difficult to comment on the real effect the regulations have had so far but of the matters sent I have to date received £0 in recovered monies.

I agree with the need to simplify the process and clarify the costs and I think some changes are positive such as the changes in terminology and the transparency of fees and costs. The notice of enforcement must state the amount of debt, what it will cost the debtor if they pay within seven days and what it will cost them if they don’t pay in time. This should prompt them to make payment if they are able to. However, at this stage in the process they have usually been informed of the extra costs involved in issuing a claim as well as the extra costs of enforcement which hasn’t resulted in payment so I don’t know if this is useful in the majority of cases as a way of getting payment.

In addition the new regulations have increased the abortive fee from £60 plus VAT to £75 plus VAT. There is also a compliance fee of £75 plus VAT which is payable by the debtor. If a payment plan is entered into this fee is automatically taken from first payment. They are small amounts but they add to the reasons not to use this method of enforcement.

Do you have any best practice tips for lawyers advising in this area?

To provide the HCEO with as much information as possible in order to assist them in recovering effectively.

What are the trends?

Our preferred HCEO says that the initial impact of the new notice of enforcement on early collections has been minimal. Of the 900 notices served in April only 2% of debtors paid in full. I would predict that if this trend continues many solicitors will look to employing alternative methods of enforcement such as applying for an attachment of earnings order and will use the HCEO less if they are seen to be less effective.

Interviewed by Alex Heshmaty.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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