This report sets out the Advisory Group's recommendations on fee principles and fee structures for those conducting warrant enforcement business. The recommendations arise from the remit detailed in our Terms of Reference, one of the primary recommendations of our first Report, and the questions posed by the ongoing Enforcement Review.
As the Lord Chancellor's Advisory Group on Enforcement Service Delivery, we are tasked with advising Government, in the light of the findings in our first Report, on the structures within which enforcement services should be delivered (within a regulated regime) in respect of the main areas of enforcement business.
Our first Report considered the impact on the enforcement services market in the private and public sectors of the regulatory regime proposed in Towards Effective Enforcement, focusing in particular on:
the likely impact of regulation on the number, location and availability of enforcement agents to meet current and likely future business needs;
the relative effectiveness and efficiency of the different enforcement structures currently in place;
the relative effectiveness and efficiency of the different procurement models currently in place; and
whether there is a level of debt (in any enforcement business sector) below which the market would not be able to operate effectively and efficiently.
Following our consideration of the enforcement services market in our first Report we made a number of recommendations to the Lord Chancellor [Endnote 1]. Recommendation 2, in particular, provides the impetus for and the focal point of, the body of this, our second Report.
Recommendation 2 states:
"We strongly urge the Government to consider whether all creditors should pay an up-front fee to undertake enforcement action. We believe this would be the single most effective way to raise standards and discourage exploitation of fees. This view is borne out by the experience of this Group and was strongly endorsed by the views expressed at the Open Meeting."
As stated in the Green Paper Towards Effective Enforcement, Government is committed to ensuring that any new structure, or fee scales within it, does not simply replace one bad system with another. We need to find a way to structure fees that adequately and fairly rewards agents in public and private sectors for the work they actually do, encourages prompt payment by the debtor, and does not unnecessarily penalise those who pay more promptly than others. It should be a structure that incorporates safeguards against malpractice and exploitation. It should be a structure that is supported by, and inseparable from, regulation of the enforcement services profession and a single piece of bailiff law.
Professor Beatson's Independent Review of Bailiff Law [Endnote 2] indicated that bailiffs' powers, the way in which they are appointed and regulated and the issue of fees are all closely related. It is for this reason that the Green Paper identified the need to advance on a broad front and this Group was asked to assist with work on the fees principles in the light of responses to the Green Paper. A new fee system must be structured so that opportunities for exploitation and abuse are minimised, but greater simplicity and clarity in the law coupled with effective regulation are equally essential.
As our first Report indicated, it is the view of many in the enforcement profession and the advice sector that an up-front fee [Endnote 3] to procure private enforcement services, is the necessary first step to a modern and ethical fee structure. We concur with this assessment. In our view it is the expectation of work being done for nothing which has driven down standards to the level criticised in the NACAB Report Undue Distress [Endnote 4] and led to a situation where disreputable bailiffs rely on exploitation and manipulation of the current fees structure to attain profitability. Our economic model and market-based research as well as the comments from stakeholders strongly support this view.
In this Report we consider the proposition for an up-front fee in the context of a wider reassessment of the enforcement services market from both a practical and an economic perspective. Our thinking is informed by our knowledge and expertise of the market from the private, voluntary and public sector perspectives and from an independent economic analysis of that market.
Our starting point and much of our thinking has been market-based, but in our view the asymmetrical relationships that exist and the anomalies inherent in the enforcement services market render it unsuitable for a purely market-based solution. We are conscious of the need to ensure access to justice for all, so that those requiring enforcement of a debt have access to a service that will provide them with the appropriate level of service regardless of the nature and size of the debt.
The question of the level of debt (in any enforcement business sector) below which the market could not operate effectively and efficiently must be considered in the light of further commentary on this Paper and when specific proposals for fee levels are clear. Most creditors will take an economic decision on the issue of enforcement, but we agree with the Government's position that the enforcement system itself must operate in the interests of justice.
The Enforcement Review arises out of the Government's commitment to improving access to, and the efficiency of, civil justice in England and Wales, and is based on the premise that those creditors who have established a legitimate claim ought to be able to pursue it through a straightforward and accessible system. Therefore, since it is the Government's principled position that there must be scope for any size of judgment debt to be enforced, there will need to be an informed debate about how effectively the market can operate at the lower value end of the business and whether this varies for different sectors. In particular, in civil court disputes where individual claimants are involved and bulk issue and thus economy of scale do not feature it will be necessary to ensure adequate and appropriate arrangements can be maintained so that justice is not undermined.
In this Report, we are agreed upon the need for enforcement fees to be structured in such a way as to achieve three main objectives:
to minimise the scope for inappropriate behaviour by enforcement agents;
to provide a fair return for work undertaken by enforcement agents; and
to seek to ensure that debtors who pay do not subsidise enforcement against those who do not.
We are not charged with determining a detailed fee scale, nor the monetary value attaching to any particular item or stage in the scale. That must be done in the light of more extensive and detailed economic and market research by a regulatory body if, in accordance with strong support reflected in the Post Consultation Report, the Green Paper proposal is adopted. If there is no regulatory body, we believe that this should become a role for Government. Moving on from the Green Paper, it is our intention, further to clarify and develop the principles that should underpin such a fee scale, and highlight the reasoning by which we arrived at those principles. We are offering our recommendations to the Government in the light of previous consultation and in order to inform the thinking for a future White Paper.
We believe that, in conjunction with the control exercised by a regulatory body and the clarity provided by a single piece of bailiff law, a fee structure based on the principles explored in Chapter 3 will be an effective tool in raising standards in the profession. We believe that this integrated approach will be the best way in which to offer the likelihood of a fair return to agents for work undertaken in a competitive market, and fairness to both debtors and creditors.
A summary of the recommendations put forward in this report is outlined below. [Endnote 5].
There should be an up-front fee, payable by the creditor, to initiate warrant enforcement action [Endnote 6]. Such a fee will apply across all enforcement sectors and all types of debt. There are three potential models for such a fee:
fixed fee;
negotiable fee within a band width (with a fixed floor and ceiling);
a matrix of the two.
The up-front fee should cover the following elements:
take-up of a case by an enforcement agent;
the setting up of a file;
the use of licensed and reputable enforcement staff;
initial action(s) or investigation(s), which may lead to the provision of a probability report to be supplied by the agent to the creditor indicating the likelihood of debt recovery.
The up-front fee should be recovered from the debtor when enforcement is successful.
Following the up-front fee and initial action and report that it covers, if enforcement action continues, there are a range of activities that may be undertaken by the enforcement agent, for which fixed fees shall be charged, common across all types of enforcement business for the following actions:
The sequence and frequency of these following activities will, subject to the law and regulation, be a matter to be determined between creditor and enforcement agent. A future regulatory body will have relevant powers to ensure that abuses do not occur, but the necessary flexibility to enable professional enforcement agents to exercise their own best judgement according to the circumstances of the case will be critical.
Fees for the following activities shall not be fixed and shall not include charges to cover hourly attendance rates by enforcement agents. Fees for these activities shall be clearly conveyed to the debtor at the earliest stage in the enforcement process, and be monitored by a future regulatory body:
There shall be no fixed 'abortive removal visit' fee.
Enforcement agents should be able to charge a fee for establishing and administering a repayment plan. This fee, which should be proportionate to the size of the debt, is to be recoverable from the debtor.
The fees for enforcing a judgment for a large amount, which exceeds a threshold to be determined by the regulator, shall be negotiable, between the creditor and the enforcement agent. One possibility is as a commission at a percentage rate.
Any future Regulatory Body charged with the responsibility of advising the Lord Chancellor on a detailed fee structure should have the necessary investigative powers to obtain any relevant information they require from those providing enforcement services.
Based on the information currently available to us, we are minded to recommend that these fee principles should apply to those enforcing civil and criminal warrants.
The full report may be obtained from David Ilic, Civil Enforcement Branch, Selborne House, Room 3.23, 54-60 Victoria Street, London, SW1E 6QW (e-mail: David Ilic)
A Report to the Lord Chancellor's Department, July 2000.
Similar in principle to the fee charged by the county court and High Court to issue a warrant of execution or a writ of fi-fa.
Undue Distress: CAB clients' experience of bailiffs, National Association of Citizens Advice Bureaux, May 2000.
The full report may be obtained from David Ilic, Civil Enforcement Branch, Selborne House, Room 3.23, 54-60 Victoria Street, London, SW1E 6QW (e-mail: David Ilic)
Our principles apply across the following areas of warrant enforcement: High and county courts, magistrates' courts, parking charges, local and national taxes and duties, maintenance and child support.