County Court Judgments (CCJs) are added to people’s credit records, so why shouldn’t the same be done for Liability Orders (LOs) for council tax arrears?
This is a really bad idea, involving major problems and costs for local authorities and magistrates courts. These would massively outweigh the potential benefits.
Magistrates Court Liability Order processes are not comparable to County Court processes
The Magistrates Courts procedures for Liability Orders have been described as a rubber-stamping process. For example:
- There is no equivalent of the Debt Pre Action Protocol.
- There is no means of admitting part of the claim.
- The alleged debtor gets little notice of a court hearing and cannot ask for it to be rescheduled to a time they can make or for it to be transferred to a local court if they have moved.
- Magistrates Courts are not geared up to hold hearings at all – it is common for a council to list over a thousand cases on a day.
- There is no equivalent to the County Court set aside procedure if someone comes back from holiday to find they have been given a LO, or that they were given a LO at a previous address some months ago.
The Ministry of Justice is sufficiently concerned about default CCJs to have started consulting on how the resulting credit record problem can be resolved. But CCJs already have a wide range of checks and balances which are entirely absent from LOs; the credit record problems resulting from LOs would be significantly worse.
To remedy these issues, there would have to be huge changes to the Magistrates Courts systems, involving new forms, new procedures and a significant amount of additional court time. A very large number of the people affected are likely to qualify for fee remission so it is hard to see how cost recovery could work.
Poor procedures by local authorities
Some common issues include:
- Councils go to court massively quicker than a commercial creditor does and make no effort to trace anyone who appears to have moved house.
- Failure to take account of benefits issues – this has always been a major problem and it reaches epidemic proportions when an area is moved onto Universal Credit;
- Incorrect charging after someone has left the property;
- Allocation of a payment to the wrong council tax year;
- Not taking into account a young adult who is in full-time education or is a student;
- Landlords of Houses in Multiple Occupation incorrectly saying that the tenants should be liable to pay council tax.
To correct these would require a major overhaul in council procedures. At the moment when there is an error, the council just agrees that that money isn’t owed and calls off the bailiffs if they have been instructed. If a Liability Order had been registered, that would then have to be deleted.
A completely new procedure would have to be set up for councils to record when Liability Orders are paid within a month so they can be deleted from the register. This would also have to take account of the very common situation where the amount of the Liability order is wrong and it takes months to get this resolved, at which point it is paid in full.
Registering a Liability Order may make it significantly harder for people to obtain a private tenancy, resulting in additional costs for councils for temporary accommodation, children moving between schools, mental health services etc.
The potential benefits
I have heard various benefits mentioned:
- “can pays” will pay their bills more promptly so would cost the council less. I do not believe this would be significant. The idea that there are lots of people who would rather deal with council tax bailiffs than default on a credit card doesn’t make sense.
There was an experiment by Nottingham Council when it trialled putting warnings about credit records in its letters and found a reduction in LOs. But ignoring the ethics of lying to your residents (!) there is the problem that I am told they also did a media campaign before and during the experiment – which effectively renders the results worthless. - councils would get access to real-time data. That isn’t worth anything unless the data is of any use.
- councils would be able to more clearly distinguish “can’t pays” from “won’t pays”. I have no idea how this is supposed to work. Just because someone has CCJs doesn’t mean they can’t pay their council tax and the absence of CCJs says nothing about whether they can. If a council wants to find out if a resident can afford the council tax bill, they need to join the other creditors in 2018 and start asking for a Standard Finanical Statement.
- people who pay their council tax on time will benefit from better credit scores. This one is wrong if only Liability Orders are being added to a credit record. It would require council tax monthly payments to be added to credit records – a much larger project.
- lenders would give people without LOs better credit terms. There is no shortage of available credit in the UK for people without affordability problems. There seems no reason to think that someone without problems would be able to get easier or cheaper credit if LOs were registered.
- it would improve lenders’ affordability assessments. Well to some extent, any more data is good. But there are a lot better ways to improve affordability assessments than adding LOs.
Conclusion
At the moment the whole Liability Order process is fraught with problems. To a large extent, these are ignored and the underlying issue of the alleged council tax arrears is resolved. But if LOs are going to be added to credit records, it would require a large and expensive change of processes by councils and courts. It is very hard to see how the costs of this could possibly be outweighed by any small benefits.
The MOJ’s consultation on default judgments
Problems paying your council tax?
End imprisonment for council tax arrears
Andy Shaw says
Similar to the recent moves towards including rent payments on credit files, this will just penalise people who accrue arrears through no fault of their own (e.g. through benefit delays).
I’m also not sure there is a massive problem with people who can afford to pay their council tax, but choose not to do so. Quite happy to hear any evidence to the contrary, of course.
Suzanna Walker says
Totally agree Sara, the LO process is a rubber stamp for Local Councils to fix the liabilty against individuals with little if no investigation. There is no means by which a person can exercise their normal rights if say it was a normal creditor taking legal action.
Personally I think the process is outdated and should be got rid of. The LO is the last step before Bailiffs are called in and we all know we think of that process. If the LO process was got rid of it would force Councils to take a better line in collection of council tax. If councils are strapped for cash then they should look to cutting trips abroad and reducing wastage, money spent on debt advice and payment plans would be more worthwhile. To place LO’s on to credit reports would be similar to saying that fines and CSA should be on the credit report.
Chris Bone says
Interesting that the Ministry of Justice “is sufficiently concerned” etc etc but from my experience since they introduced the Pre Action Debt Protocol for Debt Claims in Oct 2017 there is no back up guidance or evidence to suggest they want to be involved in the fall out from the regulations…..this being for example numerous examples of CCJ claims being issued without any apparent adherence to the protocol. So in this much deeper and wider issue I would hope there would be more engagement from them specifically in initial consultation AND post introduction issues, if it comes to that.
Malcolm Hurlston says
Excellent exposition of the problems to hand. Timely too for them to be taken into account. In the end, better information, sensitively used, should result in improved outcomes for all.
dean burgin says
Hi,
Very interesting read, I had the CMS (new CSA) hounding me. I received two Liability Orders from yet three from the bailiff.
I emailed and wrote a letter to the court requiring clarification of the legitimacy of the claim, have heard nothing since Feb 19.
Recently I checked my experian and have two LOs, both are Confirmed by Unknown and issued Aug 18.
I would like to know if these records are in fact publicly visible?
How to get them removed?
I wrote to experian (eventually as their complaints procedure is hard) and as yet have heard nowt!
Sara (Debt Camel) says
The article above applies to Council Tax Liability Orders not LOs for child maintenance arrears
Liability Orders for Child Maintenence can, since 2015, be “registered” and then they appear on your credit record. See https://www.gov.uk/government/news/pay-your-child-maintenance-or-damage-your-credit-rating.
dean burgin says
Hi Sara,
Thank you, tried searching and all I found was “not affect credit score” until your page.
Many thanks and I’ll look around here some more
dean burgin says
Hi Sara,
As expected nothing about removing unverified LOs, that I can find.
Would you know how I go about removal?
I am director of a young company and feel this is impacting on progress.
All that is on the experian credit file:
Name MR XXXXX XXXXX
Address
XXXXX
XXXXX
Court name NONCNT
Case number CMG000XXXXX (incidentally I can’t find this on any of the paper work)
Amount XXXX
Confirmed by Unknown
Date issued 24 Aug 2018
TypeLiability Order – Live
Notes
Sara (Debt Camel) says
Have you asked the Child Maintenance Service about the cases and Liability Orders? I suggest that is your best starting point. Experian is only reporting what they have been told.
dean burgin says
From my limited experience it is all a money grabbing scheme, the courts, councils, CMS, police etc… I know there are many who shirk payments for their kids (I’m not one) and it’s a touchy subject however not all should be tarnished the same. Which is why I now find it odd that CMS LOs will go on credit files but not council LOs?
I don’t feel that the CMS will be very obliging and it is the court that “stamped” the LOs without verification.
It is the verification (amongst other points) that I required disclosure on. I demanded my requirements were met within 21days or the claim be dismissed.
Now in tacit agreement they have not honoured the contract.
This has caused/and is causing both financial and reputation damage to both the person and the company, this I feel should also be remedied.
What do you think?
Sara (Debt Camel) says
“I now find it odd that CMS LOs will go on credit files but not council LOs?” odd or not, that is the way things are.
“I don’t feel that the CMS will be very obliging” if you want to find out what has happened and why, that is what I suggest. You could talk to National Debtline on 0808 808 4000 to see if they have any better ideas.
Fenton says
Hi Dean
Did you ever sort this? I have exactly the same showing dated 2016. I paid all arrears up two years ago. There is no further info and like you mine says ‘LIVE’. It has to be Child Maintenance as I’ve never owed Council Tax or anything. Be really interested to hear how you got on as I’m trying to sort my credit file so I can get a mortgage. Thanks