76. The Green Paper explored the existing arrangements and the need for change for regulation of enforcement agents and considered four options:
77. Responses to the Green Paper indicated overwhelming support for increased regulation, and a majority in support of establishing a statutory executive non-departmental public body (NDPB) to regulate private and public enforcement agents.
78. The current enforcement profession is fragmented, with some firms and individuals operating outside of any structures and some evidence of threats and intimidation being used against vulnerable people in their own homes.23 Whilst the introduction of a single piece of law for enforcement agents and a revision of the fee structure will address some of the areas of malpractice, without regulation the impact of these changes would be insufficient.
| Regulation, through a statutory body, must ensure that warrant enforcement is carried out appropriately, effectively and fairly in relation to both debtors and creditors. It is proposed that the Authority will regulate all public and private enforcement services across all areas of warrant enforcement: the High Court and county courts, magistrates' courts, road traffic act penalties, local and national taxes and duties, maintenance and child support. |
79. The Government wants to raise standards across the profession, and promote best practice, fostering public confidence and creating a level playing field for all. Post judgment, the creditor has an entitlement to expect his claim to be enforced and for the reasonable costs of enforcement to be met by the debtor. It is right that creditors should make the choice about the enforcement method and have some choice about the enforcement agent they use. These choices must be well informed and exercised fairly. The indiscriminate or inappropriate use of distress is unacceptable: many debtors are in vulnerable situations and some simply cannot afford to pay.
80. All enforcement agents must be required to balance their duties to the court, the creditor and the debtor. They all do a difficult job, they all have broadly the same powers and must all behave in an appropriate way. All service users - whether creditors or debtors - are entitled to expect high professional standards.
| We therefore see the need for a system of regulatory control that as far as possible will apply in a uniform way but that will be sufficiently flexible to be relevant to the needs of all service users and embrace the public and private sectors, with variations of approach where necessary and justified. |
81. In accordance with guidance on Better Regulation, we have considered whether any other existing body could meet the sector's needs. The only body we identified whose roles and responsibilities seemed comparable was the Security Industry Authority (SIA).24 The SIA seems broadly to cover the purpose of an Enforcement Services Commission as proposed in the Green Paper. We believe therefore that with a broadened scope the SIA would be a suitable body to regulate enforcement services in principle and in practice. There is a broad but not exact fit between what we are seeking to achieve in regulating enforcement agents and the remit given to the SIA by the Private Security Industry Act 2001.
| The proposed enhanced remit is to enable the SIA to regulate enforcement services and does not cover any of their other sectors for which they have responsibility. |
82. The Home Office is in the process of setting up the SIA. It is being established to regulate between 300,000 and 800,000 personnel in the private security industry. The Authority will be established as an executive NDPB on 1 April 2003. Thereafter their aim is to phase in licensing sector by sector, starting with wheel-clampers and door supervisors with effect from late 2003, followed by manned guards and keyholders from late 2004, and private investigators and security consultants from late 2005. The SIA Implementation Team is currently setting up stakeholder groups to look at licence, training and qualification criteria for each sector that it will be regulating. Under the terms of the Act, the Authority must comply with any general or specific directions given to it in writing by the Secretary of State for the Home Department.
83. The SIA will also operate a voluntary company approval scheme and award a 'quality mark', and it will make recommendations to the Home Secretary on legislation and practice related to the security industry sectors that it regulates. It is charged with setting and raising professional standards in the industries that it regulates.
84. Primary legislation would be needed in order to accommodate the broadening of its current functions. It is our intention that the primary legislation would prescribe those broad requirements. These requirements will be underpinned by secondary legislation. The SIA would, however, be given considerable autonomy consistent with its status as an executive NDPB to determine how it goes about its tasks.
85. The primary legislation would need to provide for:
86. Secondary legislation areas will include criteria for approvals, accreditation, authorisations and exemptions.
87. Areas of detail we would like to see the SIA consider include:
88. We propose that the Authority could, with the additional power to make recommendations to the Lord Chancellor on fees and a provision to include public sector employees, regulate all enforcement agents.
89. The Authority will require a provision to be included in primary legislation to allow for enforcement services to be regulated by them. As a sector separate from its current areas of responsibility we will also need to make further provisions.
90. We will need to provide for the inclusion of the public sector in the Authority's statutory remit.
91. The Private Security Industry Act 2001 requires the SIA to operate a voluntary company approval scheme for the other sectors it regulates but gives reserved powers to make such a scheme compulsory at a future date. We propose, however, that all enforcement service providers will be subject to a compulsory approval process because of the intrusive nature of enforcement work. There are currently approximately 150 service providers in the private sector, some of which employ as many as 200 enforcement agents.
92. We propose that there should be a provision for accreditation of professional associations of which there are six at this time. One of the proposed conditions of a licence for all enforcement agents will be membership of an accredited professional association. The associations will have a role to play in the complaints process as well as providing other services and advice to enforcement agents.
93. All enforcement agents will undertake training and qualifications. We propose that the training providers should be authorised. This may include accredited professional associations but there may be other authorised training providers including organisations in the public and private sectors who may apply for authorisation to provide training and qualifications for enforcement agents.
94. One of the Authority's primary new functions will be to oversee a complaints scheme for enforcement services, headed by a Complaints Board that will convene as and when required. Although the SIA will have the power to revoke licences for failure to act within the terms of the licence, primary legislation will give the Authority the power to set up a Complaints Board and oversee the complaints procedures of enforcement agents, service providers and accredited professional associations, ensuring that systems are fair and balanced. The Complaints Board will only monitor complaints regarding the conduct of licensed agents and approved service providers in connection with enforcement activity and the abuse of fee scales and charges. We would expect, in the first instance, employers and professional associations to deal with complaints.
95. The Private Security Industry Act already provides the SIA with the power of investigation and maintaining a register. This would need to be expanded to include approved enforcement service providers and accredited organisations.
96. The Authority will require an additional power to make recommendations to the Lord Chancellor. The Authority will be responsible for making recommendations to the Lord Chancellor on a detailed fee structure. The Authority will also undertake and/or commission detailed economic analysis and research into how the fee structure operates within the enforcement market. The Authority will therefore require the necessary investigative power and adequate research capabilities to obtain any information relevant to an analysis of the market and those operating within it. This will need to include the power to obtain information from licensed agents, approved service providers and accredited associations as appropriate.
97. The SIA already has a responsibility for keeping under review the working of the legislation on private security. We propose that this responsibility should be extended to include legislation in relation to enforcement agents and should be undertaken at the Lord Chancellor's request or when the SIA deems necessary. The SIA could then draw up and submit proposals for amending legislation relating to enforcement services. Recommendations will focus on the maintenance and improvement of standards in the provision of enforcement services. We see the Authority as the central body most closely involved with the enforcement sector and best placed to make recommendations on legislation. The Authority may undertake specific research work and consult with stakeholders to fulfil this function.
98. As outlined above, the new regulatory body will be responsible for providing recommendations to the Lord Chancellor on fees and legislation regarding the enforcement profession. The Lord Chancellor should also have the final decision in the criteria for licences, approvals, accreditations and authorisations and exemptions from these. We envisage therefore a parallel role in the Authority for the Lord Chancellor (for enforcement agents) alongside the Home Secretary (for the other sectors). Overall sponsorship of the Authority as an NDPB, including financial and governance issues will remain with the Home Secretary.
| Responses to the Green Paper indicated overwhelming support for increased regulation, and a majority in support of establishing a statutory executive NDPB to regulate private and public enforcement agents. In accordance with guidance on Better Regulation, we considered whether any other body could meet our needs. It will be more cost effective to use an existing regulatory body rather than set up a separate Commission. |
99. The following paragraphs set out in more detail how LCD envisages regulation working in practice and in particular what secondary legislation is likely to cover.
100. We estimate that there are some 4,000 enforcement agents in the public and private sectors that will be licensed, and 150 enforcement service providers in the private sector that will be approved through the Authority. The Authority may also approve employers of licensed enforcement agents in the public sector and accredit professional associations, of which there are six at this time.
101. The Authority will advise the Lord Chancellor on all aspects of the regulation of enforcement services, including the criteria for licences, approvals, accreditations and authorisations, as well as making recommendations to the Lord Chancellor. In order to do that it will require advisors with expertise in the enforcement sector.
102. To be allowed to undertake enforcement work an individual will have to be licensed by the Authority, or hold an interim licence and be undertaking training under the supervision of a licensed enforcement agent with a view to becoming a full licence holder.
103. It will be an offence to undertake the designated activities and functions without a licence. This will be in line with the criminal offences for operating as an unlicensed security operative under the Private Security Industry Act 2001; unlicensed agents will be liable to imprisonment and/or a fine. The Authority's Inspectorate will have the power to check on both licensed and unlicensed individuals.
104. Individual enforcement agents will have to apply for a licence relevant to their area of work and expertise in order to exercise their relevant functions. We are recommending four separate licences for:
105. It is expected that there will be approximately 2,500 applications for licences to take legal control of goods. A further 900 applicants are likely to come from public sector enforcement agents who will be required to acquire a licence from the Authority, and a proportion of these will also require one of the 500 licences for arrest and 200 for possession.25 It is our intention that the regulatory regime will embrace all enforcement agents, since exempting parts of the public sector would put at risk the stated policy aims and objectives.
106. An individual who undertakes more than one if not all of these activities could apply for a composite licence.
107. We would except there to be an electronic system for licence applications. We would also expect that application process to build in criminal record checks, to which the SIA already has access. It is proposed that the applicant will have to declare that they are not under liability in respect of overdue fines or court judgments, not an undischarged bankrupt and not insolvent. The Authority would be empowered to make investigations and enquiries into any of these criteria where appropriate.
108. An applicant will be able to appeal against the refusal or revocation of a licence. Under the SIA the external appeal route is currently through the magistrates' courts, and appeals against this decision can be made to the Crown Court. This may have to be reviewed in the long-term in the light of the civil jurisdiction of magistrates' courts.
109. The approval process and criteria will differ for the public sector, for example they will have to provide appropriate alternative arrangements for insurance, which include Crown indemnity, and the relationship with the Authority's Inspectorate and the guidance on monies and accounts will have to be specific to the public sector's status and role.
110. It will be an offence for an enforcement service provider to employ enforcement agents and operate as enforcement firms or partnerships without being granted approval by the regulatory body. A person who operates as a service provider without approval, or holds himself out as approved when he is not so registered as approved, shall be liable to imprisonment and/or a fine. The Authority's Inspectorate will have the power to carry out checks to ensure that the new requirements are being complied with.
111. An applicant will be able to appeal against the refusal or revocation of a licence. Under the SIA the external appeal route is currently through the magistrates' courts, and appeals against this decision can be made to the Crown Court. This may have to be reviewed in the long-term in the light of the civil jurisdiction of magistrates' courts.26
112. We have explored with key stakeholders through the consultation process and subsequent discussions some of the finer detail. As already mentioned, the SIA will be given considerable autonomy and would have the final decision in settling the procedures for the regulation of enforcement agents, enforcement companies, professional bodies and training providers. The following paragraphs therefore set out issues we would expect the Authority to consider.
113. We envisage that the Authority will consider issuing a Code of Practice for Licensed Enforcement Agents, Approved Service Providers and Accredited Professional Associations to be published prior to the implementation of the procedures for licensing, approval, accreditation and authorisation. It will build on the National Standards for Enforcement Agents (May 2002), which has been widely distributed, well received and supported by the industry. It is envisaged that the Authority will issue additional guidance to supplement legislation on a number of issues such as the observance of religious and cultural festivals, goods that should not be removed by enforcement agents, and the enforcement agent's responsibilities to people who are potentially vulnerable.
114. We expect that in order to obtain the relevant licence, applicants will:
115. We expect that an applicant for an interim licence will have to undergo the same checks and application procedures as an applicant for a full licence, with the exception of the completion of the training criteria.
116. Licences will be subject to renewals, which will be determined by the SIA in line with their forthcoming decisions relating to the issuing of all other licences. The SIA is developing proposals for a uniform licence fee across all sectors. These licence fees would be significantly cheaper than a licence fee under the model of an Enforcement Services Commission suggested in the Green Paper.
117. It is proposed that the regulation will be self-financing through the licence, approval or accreditation fees.
118. The Authority might wish to set provisions in respect of insurance required for enforcement agents. We propose that the Authority will have the power to set the standards of training and qualifications required for enforcement agents and, through the authorisation of training providers, will determine who may provide it.
119. The Authority will have the discretionary power to prescribe business interest restrictions for related business activities undertaken by licensed enforcement agents. These are likely to include buying or trading in debt. We would then expect applicants for licences to be required to declare all other business activities on the application form, and that these may be subject to investigations by the Authority in the case of a conflict of interest that in the Authority's views would make licensing inappropriate. An appeals mechanism would be available.
120. Following on from the criteria suggested for obtaining a licence we expect that to retain a licence, licence holders will:
121. In order to obtain approval, we envisage that enforcement service providers will:
122. Approved authorised enforcement service providers should, we expect, be required to:
123. In addition, we envisage private sector enforcement service providers should:
124. Approved enforcement service providers will, we expect, be required to have their name and contact details included on the Authority's register, which will be available to the public, and will be entitled to:
125. The Authority will have the power to obtain information relating to licensed activities from enforcement service providers in order to inform their deliberations with regard to fee structures and charges.
126. Appeals for the non-granting of approvals will be made in a parallel process to the appeals for the non-granting of licences set out above.
127. We expect that accredited professional associations will be required to:
128. In order to obtain accreditation professional associations will, we envisage:
129. The accredited professional associations would be able to provide a number of additional services to their members specific to their needs and the sector in which they operate. These could include:
130. Appeals for the non-granting of accreditations could be made to a magistrates' court in a parallel process to appeals for the non-granting of licences and approvals.
131. Providers will, we envisage:
132. The Authority will consider the training needs of enforcement agents. Its role will involve considering the content of any qualifications and any ongoing training necessary to cover legislative and process changes and best practice. All licensed enforcement agents will have to demonstrate their knowledge and understanding of law relevant to enforcement and the implications of their licence. Training will inform the enforcement agent of their role in balancing the needs of creditors, debtors and the court. It will also cover agents' ability to negotiate instalment plans with the debtor and involve raising awareness of the debt advice sector and handling vulnerable client groups.
133. Professional associations, service providers and education providers will be obliged to apply for authorisation to administer and/or run formal training courses and qualifications for enforcement agents, which will be provided to meet the licence criteria.
134. Licensed enforcement agents will be obliged to keep up to date with process and legislative changes, as well as best practice in the profession. There will therefore need to be training sessions to cover any changes or updates, and an enforcement agent will be required to prove, when applying to renew their licence, that they have attended these.
135. There are currently no uniform standards for dealing with complaints. The Authority will consider issuing and publishing guidance on the new Complaints Scheme. The guidance will, we envisage, set out the requirements for complaints and disciplinary procedures for licensed enforcement agents, approved service providers and accredited professional associations.
136. The Complaints Board will be responsible for considering and investigating any complaints that have not been resolved, and any appeals against the internal procedures of the enforcement service provider or professional association. The Board will have the power to award compensation to be paid by the enforcement agent, service provider and/or professional association. On making such an award the Board will also have the power to make recommendations to the Authority on the appropriate action, which could include the revocation or suspension of a licence, approval or accreditation.
137. It will be necessary when working on the details of the complaints process to look at where the role of the Authority will fit, bearing in mind the recourse available to the court on illegal enforcement and the roles of public adjudicators and the Parliamentary Commissioner for Administration.
138. We propose that the formal process for private sector enforcement services will have to allow the creditor and/or debtor to lodge their complaint against an enforcement agent or service provider to the enforcement agent, service provider, professional association, or the Authority.
139. If any complaint in either the private or public sectors is upheld and compensation is awarded, it will be an obligation for a record to be lodged with the Authority's complaints register. It is intended, however, that the accredited professional associations will have primary responsibility for the complaints process for licensed enforcement agents, with the Complaints Board ensuring that appropriate arrangements functioned effectively. This would keep the administrative and personnel burden of the Authority to a minimum.
140. We recognise that it may in some circumstances be appropriate for a Commission to have the power to award financial or other compensation. Their powers will be limited to claims of irregular action including complaints about fees by licensed enforcement agents and complimentary to those of the court, who will continue to handle complaints of illegal behaviour in respect of enforcement agents.27
141. We will prevent the potential for double jeopardy in legislation.
142. As we have indicated, to regulate enforcement agents the SIA would need to broaden its current structure and extend its role. To inform policymakers and assist the SIA in considering how to handle these tasks LCD commissioned a project enabling stakeholders, including the key trade associations, to comment in detail on how aspects of the new regulatory structure should operate in practice. The project was undertaken by John Kruse, freelance writer, trainer and consultant, and member of the Lord Chancellor's Advisory Group on Enforcement Service Delivery.
143. Mr Kruse noted that there was already a large degree of consensus between consultees as to the elements to be included in a new regulatory system and considerable cross sector agreement on the detail of issues such as qualifications and complaints handling. He concluded that although the SIA, as prospective regulator, may have little experience of a sector as complex and legalised as enforcement, it is likely that by the time they take over responsibility for the area they will be presented with an industry that has already taken great steps to reform itself along the lines likely to be required by any regulatory body.
144. In terms of the most important individual criteria that should be applied during the licencing process, Mr Kruse summarised these as:
145. In line with its existing terms of reference, the Lord Chancellor's Advisory Group on Enforcement Service Delivery has been invited to provide advice to Ministers on the transitional arrangements necessary to move from the current enforcement structures, where bailiffs are certificated under the Distress for Rent Rules 1988, to those that are envisaged in the future licensing regime for enforcement agents.
| Government believes that regulation can only work successfully with a single piece of enforcement law, clearer guidance and an improved fee structure and that we must make the system easier for all involved - debtors, creditors and enforcement agents. |
146. This section sets out proposals for a single piece of legislation to govern the actions of enforcement agents when taking legal control of goods. The legislation will bind the actions of all licensed enforcement agents and set out arrangements for actions undertaken in accordance with the new 'Commercial Rent Arrears Recovery' legislation which will replace the current remedy of Distress for Rent, which currently allows landlords to seize goods in lieu of unpaid rent.
147. Professor Beatson called for a single piece of legislation to regulate all enforcement agents, and made detailed recommendations for change. LCD accepted most of these but felt some would benefit from public consultation in the Green Paper. An Inter-Departmental Working Group has also discussed the issues in-depth.28
| It remains the Government's position that the enforcement system in England and Wales permitting the seizure and sale of a debtor's goods in order to settle a judgment debt may always be necessary. |
148. The above position is tempered by the belief that seizure and sale should be undertaken in a reformed and regulated system, where efforts are made to ensure it is not used indiscriminately; our proposals for licences, increased professionalism and changes to the fee structure are intended to assist here. Other methods of enforcement and proposals to make them more effective are addressed elsewhere in this White Paper. This Section concentrates on how Government intends to unify and rationalise the mix of legislation and common law that currently governs taking legal control of goods.29
149. LCD has accepted there are two basic principles:
|
150. The Beatson Report also considered how current law and practice would need to be modified to ensure greater compliance with the requirements of the ECHR.30 Currently, much of the law which affects enforcement stems either from case law arising from the Distress for Rent Act 1689 or the various statutes which permit taking legal control. The majority of private bailiffs undertaking warrant enforcement work must currently be certificated under the Distress for Rent Rules 1988. The proposed single piece of enforcement law will address these issues and, while there will be a Commercial Rent Arrears Recovery system, its regulations will not be used for certificating enforcement agents.
151. The legislation will have a particular emphasis on:
152. Primary legislation will give the Lord Chancellor the power to set regulations:
153. Under these powers the Lord Chancellor will make secondary legislation which will set out regulations for specific actions in taking legal control of goods, as follows:
154. To support these regulations, the Authority will also be responsible for producing a Code of Practice as outlined at paragraph 113. The Authority should give guidance that will underpin the secondary legislation on:
155. The following paragraphs reflect the sequence of events we would expect when an enforcement agent seeks to take legal control of goods for the purpose of enforcing a debt. These actions should only be undertaken by a licensed enforcement agent or under the direct supervision of such an agent.
156. At present there is no requirement to give notice before taking legal control of goods but some form of written notice is given in most cases. The purpose of giving notice is as an incentive and opportunity for the debtor to seek advice or pay the debt. It may also give debtors an opportunity to remove goods. The debtor will be entitled to notice from the creditor (or enforcement agent if the creditor wishes) or the court detailing the consequences (both procedural and financial) to the debtor if failure to pay the debt leads to enforcement action. In all cases the notice will be served not less than seven calendar days before any enforcement action is taken.
157. However, the creditor will have the right to apply to the court to dispense with notice if there are reasonable grounds to believe that the debtor may dispose of goods to avoid enforcement action. It will be for the creditor to show objective evidence, and not merely a subjective fear. An example would be evidence that the debtor had previously evaded enforcement action by removing goods.
158. If the notice as set out above fails to spur the debtor to payment, a licensed enforcement agent may take legal control of the goods. The Authority will determine the requirements for the agents to:
159. The information provided to debtors will cover:
160. To protect both the debtor and third parties, the enforcement agent will be required to direct the debtor to inform him or her of any petition for bankruptcy and the status as to the ownership of the goods.
161. Issues regarding the days and times at which taking legal control of goods may commence or be undertaken were explored in the Green Paper. The National Standards for Enforcement Agents usefully raised awareness of the sensitivities of these issues, particularly amongst enforcement agents themselves. As indicated in the Green Paper, taking legal control of goods will only be allowed to commence between the hours of 6.00 and 21.00 (or at any time a business is trading). However, it is envisaged that enforcement agents will be bound by a Code of Practice, issued by the Authority, recommending that enforcement should take place at a reasonable time taking into account all the circumstances.
162. Not withstanding the guidance and Code of Practice, taking legal control of goods may take place on any day of the year. It would be problematic to seek to identify all religious festivals and adherents to all religions; to restrict a ban on this action to Christian holidays might be regarded as discriminatory. Guidance is needed on religious and cultural sensibilities from the Authority in the Code of Practice.
163. The following paragraphs define the different types of entry. The underlying principle of allowing an enforcement agent entry to premises in order to take legal control of goods is to ensure that:
164. Normal entry will be by unlocked outer doors (including French windows but not through windows), and includes normal access to the outer door of premises across a drive, or a yard, or a garden (at the invitation of the debtor or otherwise).
165. We seek to establish the principle that refusing to open a door or unlock a gate will not stop legitimate enforcement action, nor should superior technology to protect the entrance to a property prevent enforcement from taking place. For example, currently there is little scope for entering private homes that are protected by video cameras and electronic gates. Forcible entry in domestic premises will be permitted - but only with prior judicial authority.
166. Forcible entry in commercial premises is currently allowed for those enforcement agents who undertake civil enforcement on behalf of the High Court and County Court. It will continue to be permitted for those who presently have this power. Forcible entry to commercial premises will also be permitted for other enforcement agents with prior judicial authority. Having failed to gain normal entry, enforcement agents, save for those who are currently officers of the court, may apply to the court for permission to undertake forcible entry in commercial premises with or without notice.
167. Normal entry to third party premises will be appropriate. However, the agent should be certain that the goods are on the premises before attempting to gain entry. Forcible entry to third party premises will require prior judicial authority in all cases.
168. There has been much discussion on what goods should be exempt from being taken into legal control. The types of goods that may be taken should be set out clearly and be consistent in all cases. The power to exempt goods will be exercisable by the Lord Chancellor in secondary legislation. Whilst the onus is on the debtor to show that goods are exempt, the enforcement agent will also have a general responsibility to direct the debtor to tell him or her which goods are exempt.
169. In secondary legislation the following should be set out:
170. The Authority will have the power to issue guidance to enforcement agents on the interpretation of this list.
171. It is intended that the important points in relation to exempt goods will be that:
172. It is LCD's view that there should be a new statutory provision authorising the seizure of money, banknotes and bills of exchange, promissory notes, bonds, specialities and securities for money. We recognise that dedicated, specific training is necessary to ensure that those taking legal control of such items are fully aware of the need firstly, to recognise the worth of such items and secondly, to recognise that some debtors are in a vulnerable position. An agent will only be given the permission to seize the above when he/she can be shown to be fully qualified and have relevant expertise.
173. It is important that all those involved in the seizure of goods have an opportunity to challenge the seizure of any item on the grounds that it is exempt. Therefore, a debtor, a joint owner with the debtor, or any person in possession of an article seized, may make an application to a court within seven days and the court will have the power to make an order releasing the goods if satisfied.
174. Currently there is, in theory, a distinction between seizure and impounding, however circumstances have changed and the use of 'walking possession' has become more widespread, and the distinction between seizure and impounding is less clear.32 As we seek to rationalise and simplify the law, we accept that this should be replaced by a single simple process called taking legal control of goods, irrespective of the actual form of that control.
175. There should be three types of legal control of goods:
176. Currently where legislation provides a statutory form for walking possession, the obligations of the signatory and the agent are set out quite comprehensively. These should be included in enforcement law. The agent should give the debtor an inventory of the goods seized, and legislation will provide for a standard form of agreement. The debtor/signatory should sign two copies of the agreement, and retain one. The agreement will set out the terms on which an agent has taken legal control of goods by walking possession and should:
177. Where legal control by agreement has been arranged the agent will give the debtor a statement of the terms of that agreement.
178. It will be mandatory for enforcement agents to give debtors a document setting out the inventory. The notice/inventory should either: list and identify each item seized, or imply that all goods on the premises have been seized. However, it would be inappropriate and disproportionate to consistently use the latter - as often the debt would not be large enough to justify seizing all the goods on the premises, i.e. to do so would make it an excessive (and irregular) seizure of goods. Agents should take care in deciding the manner of the inventory taken. The Authority will provide guidance on this.
179. The maximum period for a levy should be the same as that of the lifetime of a warrant, which is currently 12 months. The warrant may be renewed.
180. An agent will lose the right to return and remove the goods if he or she abandons them; goods are abandoned when there is evidence that the agent intended to abandon the levy. In most cases of taking legal control by agreement, this will be unusual, as the agent will not need to do anything further to keep legal control of the goods.
181. Secondary legislation will specify the circumstances in which an enforcement agent is permitted to make a second levy, that is:
182. The creditor should be able to issue repeat warrants for a particular debt, as many times as necessary, but it should be possible to issue a second warrant for a particular debt only after the first warrant has been returned. In addition, the up-front fee attaches each time an enforcement agent takes on a warrant because the principle of payment for taking on the case should apply.
183. However, in the case of High Court Enforcement, if no single enforcement officer were assigned to at least one of the districts involved, and no single enforcement officer assigned to at least one of the districts involved was willing to execute outside his home district, then a judgment creditor could issue more than one warrant. The creditor would only be able to recover a single up-front fee from the debtor, in addition to the original debt.
184. No goods should be sold until the expiration of a period of at least seven calendar days following the day on which the agent has taken the goods under legal control. Sale by private treaty may be allowed with the permission of the court.
185. The sale may take place on the debtor's commercial premises unless the debtor makes a written request that it takes place elsewhere and may take place on domestic premises with the consent of the debtor. However, in all cases the cost of removal and storage is at the expense of the debtor.
186. Goods taken into the legal control of an enforcement agent and taken away from the premises must be deposited in a fit place. The Authority may issue further guidance.
187. Professor Beatson recommended that if it appears that there are insufficient distrainable goods on the premises to cover the expenses and 10% of the debt or £50, whichever is the lesser, the goods should not be sold. The sale of an item at auction is dependent on market value and will vary. This recommendation for a hard and fast rule on proportionality is not accepted. However we would still expect agents/creditors to keep in mind the need for proportionality when undertaking enforcement work. The Authority will ensure that enforcement agents act appropriately at all times - i.e., do not seize goods when it is obvious that the sale of such goods would not meet the expenses of the enforcement agent and some of the debt. With the introduction of an up-front fee (see Section Three, paragraph 235) it will be for the enforcement agent and creditor to agree as part of their contracts what is expected in such cases where it is obvious that the debtor may fall into the 'can't pay' category.
188. The sale must be appropriately advertised, and an auction sale must be advertised at least three days before it is held. Secondary legislation will include rules governing the conduct of sale (normally by public auction) and the passing of title of goods sold.
189. Secondary legislation should provide that action should cease if the debtor pays the amount owed and the costs, either before the enforcement agent takes legal control of the goods or at any time before sale save during the process of taking legal control or removing the goods from the premises. The debtor is responsible for all costs in the enforcement procedure and there are no plans to change this.
190. The legislation should also specify that any goods seized should be made available for collection if payment is received.
191. If the debt and the enforcement agent's fees are paid before entry then the agent will not be entitled to proceed or to claim any further fees.
192. The Government's position is that the punishment for the debtor interfering with goods taken into legal control should be similar to the punishment for the creditor who takes legal control of goods improperly. Secondary legislation should provide that the debtor who is alleged to have interfered with goods seized must be informed promptly and in detail, of the nature and the cause of the accusation.
193. A person who wrongfully interferes with any goods taken under legal control should be liable on summary conviction to up to one month's imprisonment, or a fine not exceeding level four on the standard scale, or both.
194. It is believed by those in the enforcement profession that currently, many of the complaints about enforcement agents are about the fees and costs charged (to the debtor). Complaints about fees such as overcharging should be dealt with as any other complaint. As explained earlier, under the new regulatory structure it is expected that most complaints, if they have not been successfully dealt with at an earlier stage, could be addressed by the Authority. However, there are circumstances in which a debtor will be complaining to a court about the illegal behaviour of an agent and this may also have an aspect of complaints about fees and/or charges. In these circumstances the court which authorised the proceedings would deal with the whole of the complaint, as the Authority would deal with the whole of a complaint about irregularities.
195. Remedies are currently little used and the Government believes that wherever possible, disputes should be resolved by the parties, with the courts used as a last resort. There is a need to reduce the likelihood of cases being taken maliciously or to prevent or delay sale of goods. By aiming for a more simplified way of defining illegal/wrongful and irregular actions we are not attempting to limit the remedies available to debtors for the actions of enforcement agents and creditors. The objective is to introduce a simplified accessible system to address the needs of the debtor.
196. We recognise that even in a well-regulated enforcement sector a complaint process will be required. The face to face nature of enforcement by taking legal control of goods means that debtors will, rightly or wrongly, feel they have cause for grievance. Therefore the procedure should be quick and simple for the benefit of the debtor, agent and creditor. We want to introduce a simplified remedial structure to provide the same regimes:
197. If a complaint has not been resolved at an earlier stage, allegations of irregular action will be dealt with under the Complaints Scheme of the Authority. Irregular action will apply:
198. The courts will always deal with complaints of illegal action. Illegal seizure of goods applies where the action was not authorised or justified from the outset or where entry to the premises is obtained in an unlawful manner. Currently, damages where recoverable will be for interference with goods, trespass and/or conversion.35 The existing remedies for illegal behaviour should be available under a simplified regime and we see no good argument that the distinction between distraint and execution should continue.
199. The claim for all three remedies is simple damages up to the value of the goods plus special damages which may also be claimed. Special damages would be any additional claims on top of the value of the goods, such as loss of earnings if a car was removed and the debtor needed the car to carry out their job. They might also include the automatic return of goods, or payment of their full value to the debtor if they have already been sold (i.e. replacement value).
200. We need to ensure that debtors readily understand how to seek a remedy for an illegal action by an enforcement agent or a creditor, and that information is accessible. The enforcement agent must provide information to the debtor on any rights of appeal or avenues of complaint the debtor may have. There will be a standard form of words in secondary legislation setting out what his or her rights are.
201. If a third party claims exclusive ownership of the goods, he or she should provide evidence to the enforcement agent (or to the creditor if the creditor has nominated goods to be seized). If the agent/creditor is satisfied about exclusive ownership then the goods will be released. This does not interfere with the retention of interpleader action.36
202. The question of goods taken into legal control which are jointly owned and the opportunities for a joint owner to apply for release of that article has been addressed in Beatson's Recommendation 18, therefore interpleader action should be limited to claims to full ownership.37
203. Replevin is an ancient remedy and little used.38 We consider that the proposed system of illegalities and irregularities should be sufficient and therefore there should be little need to retain replevin. It will therefore be abolished as a remedy for illegally taking control of goods.
204. In the light of the Enterprise Act 2002, which states that for the purpose of insolvency there will be abolition of Crown Preference, and the PIU report on Modernising Government Loans, Crown priority will be abolished. We will therefore follow the lead of DTI and abolish or remove the priority which Crown debts have with regard to taking legal control of goods.
205. The priority accorded to landlords in respect of distress for rent will be abolished. In keeping with Professor Beatson's recommendation 44, landlords using distress for rent will no longer have priority over other creditors.39 LCD sees no justification of priority for landlords as they alone will be able to take legal control of goods without prior court approval.
206. Secondary legislation should provide that a warrant allowing county court enforcement agents and sheriffs to take legal control of goods will bind the property in the hands of the debtor from the time that the warrant is delivered to these officers to be executed, so that the priority for execution is determined by the time of delivery, as it is now.
| It is still the Government's position that the current Distress for Rent procedures are not an appropriate or proportionate remedy and should be abolished for residential properties. However, LCD believes that enforcement action should continue to be available for use by enforcement agents in commercial properties only, with some additional safeguards, under a new Commercial Rent Arrears Recovery system. |
207. A new system, entitled Commercial Rent Arrears Recovery, will be introduced to replace the current distress for rent procedures, as part of the Government's intention to unify and rationalise the current mix of legislation and common law on distraint. It will be a non court-based remedy allowing licensed enforcement agents to collect arrears of commercial rents on the written instruction of commercial landlords. It will not be available for use in residential premises nor for commercial premises with living quarters attached which are inhabited. The new procedure will be accessible and fairer, and set out more clearly actions landlords and agents are legally entitled to undertake.
208. The Government therefore intends to abolish the current remedy of distress for rent which also provides for the certification of enforcement agents who undertake distress procedures (Distress for Rent Rules 1988 and subsequent Amendment of 1999).
209. Clearly, several of the safeguards designed to make the new Commercial Rent Arrears Recovery remedy a transparent one will have very close links with a single piece of enforcement law. Therefore, we acknowledge that many of the statements made earlier in this section also apply to the actions of those who undertake rent enforcement.
210. This section of the White Paper sets out our proposals on the introduction of primary and secondary legislation, explains how the new system will operate and highlights the main differences between the new remedy and general enforcement agent legislation.
211. Under primary legislation, the Lord Chancellor will take the power to set out the regulation allowing enforcement agents to collect commercial rent arrears on instruction from landlords of commercial premises.
212. Secondary legislation, setting out substantial and procedural rules, will be introduced to support primary legislation. New regulations will cover similar issues to those undertaken in taking legal control of goods as any licensed enforcement agent will be able to. For example, minimum period of rent outstanding; advance notice; sale; information given to the debtor; exempt goods and remedies. Secondary legislation will be underpinned by a Code of Practice, issued by the Authority, which will bind the actions of enforcement agents.
213. The following paragraphs outline the steps to be taken by landlords and enforcement agents in using what is basically a method of taking legal control of goods for a debt (see paragraphs 174-177), in this case the debt being rent arrears.
214. Commercial Rent Arrears Recovery system will only be permitted for the collection of pure rent as set out in a lease. It is not intended for the collection of service charges or any other variable charge collected under commercial leases.
215. Landlords of commercial premises will be entitled to use Commercial Rent Arrears Recovery in premises used for commercial purposes. Where a commercial property has living accommodation attached and it is used for this purpose the landlord will not be permitted to use this system.
216. Currently under the Distress for Rent Rules, a landlord is permitted to take action as soon as the rent is overdue and without notice. In order to ensure that the use of the Commercial Rent Arrears Recovery procedure is proportionate to the amount of rent arrears owed and the action taken is proportionate, LCD considers that there should be a reasonable minimum amount of arrears outstanding before action can be taken. We have considered various formulae to establish this minimum amount, for example a percentage of the rent, or a period of rent in weeks or months, but none have been considered fully satisfactory, as yet. In order to reach a satisfactory conclusion, research work will be undertaken by the Office of the Deputy Prime Minister and LCD on the following options:
217. It will no longer be permitted for landlords to carry out enforcement action for themselves. The landlord will be able to instruct an enforcement agent to undertake Commercial Rent Arrears Recovery action without judicial authority. Only licensed enforcement agents will be legally permitted to undertake this action on the written instruction of landlords. Landlords will be required to give written instructions to an enforcement agent. They will also be required to give the tenant a minimum of seven calendar days notice that the enforcement action will commence if the arrears are not paid. (The landlord may request the enforcement agent to do this as part of their contract.) The landlord will reserve the right to apply to the court to dispense with this notice if there are reasonable grounds to do so, as set out in a single piece of enforcement agent law.
218. In undertaking the Commercial Rent Arrears Recovery system the enforcement agent will be bound by most of the legislation relating to a single piece of enforcement agent law. That is, the agent will be bound by the rules on entry, exempt items, third party goods etc., agreements, inventories, levy, abandonment, sale, payment and remedies for debtor and creditor.
219. However, LCD believes that because the Commercial Rent Arrears Recovery procedure will not have judicial oversight and will only ever be used in commercial premises, there should be some particular differences from enforcement law.
Hours
220. There will be no limitation on the hours at which this enforcement action may be taken as it should only ever be used on commercial premises, and like all commercial premises, taking legal control of goods can be done at any time the business is trading. It should be noted however that like all enforcement action of this nature, the agents will be bound by what is reasonable in all the circumstances.
Notice of sale
221. The landlord/creditor will not be allowed to sell goods seized without 14 days prior notice to the tenant. Like other regimes under which legal control of goods is taken, a debtor is likely to have had several warnings that the debt is being pursued, for example for road traffic penalties or a judgment debt. In those cases the debtor will have had ample opportunity to seek advice. Due to the more direct nature of the Commercial Rent Arrears Recovery procedure, instead of seven days notice of sale of goods as required in the single piece of enforcement law (see paragraphs 184-188), 14 days notice of sale must be given to the tenant before goods may be sold, in order to ensure that the tenant has time to seek legal advice on his or her situation.
Remedies
222. The final difference is that under a single piece of enforcement law the penalty for interference with goods is currently a fine and/or imprisonment. However this is the penalty for interfering with goods in the custody of law, i.e. the court. This is not the case with Commercial Rent Arrears Recovery. There is no judicial authority before this enforcement action is undertaken and the goods have not been seized through any court procedure, therefore it is not suitable that the penalty for such an action be the same in the case of interfering with goods taken under the Commercial Rent Arrears Recovery. It remains LCD's position that any remedies against the tenant for interfering with goods taken into legal control should be for compensatory damages, firstly, for reasons of proportionality and secondly, to ensure that excessive penalties do not increase the debt unduly.
| We are committed to ensuring that any new fee structure adequately and fairly rewards agents in public and private sectors for the work they actually do, is responsive to the market conditions in which it operates, and encourages prompt payment by the debtor. It will incorporate safeguards against malpractice and exploitation. It will be a structure that is supported by, and inseparable from, regulation of the enforcement services profession and a single piece of enforcement agent law. |
223. This section sets out our proposals for reform of the fee principles and fee structures for those conducting warrant enforcement business. We intend these principles to apply to all licensed enforcement agents, across the following areas of warrant enforcement: High Court and county court judgments, road traffic penalties, magistrates' courts fines and penalties, local and national taxes and duties, Commercial Rent Recovery, maintenance and child support.
224. These principles and the outline structure are derived from responses to the Green Paper consultation and as a result of the work undertaken by the Advisory Group on Enforcement Service Delivery, including its market evaluation. The Green Paper consulted on fee principles to be set out in primary legislation, along with the powers to enable the regulator, after consultation, to propose clear fee scales which would then be set out in secondary legislation by the Lord Chancellor. This was generally supported.
225. The details of a potential fee scale were not addressed in the Green Paper because of the need to seek views on the wider range of proposals for a regulatory framework and powers first. Following the analysis of responses to the Green Paper, the fee principles and potential components of a fee structure were subject to further consultation; this was undertaken through the Advisory Group.
226. The Group's Second Report, devoted to the subject of enforcement agents' fees, followed extensive consultation and analysis, including a discussion paper from LCD's Economics Branch Warrant Enforcement: Towards a New Fee Structure. This was submitted to many of those in the enforcement sector, and discussed at a 'Stakeholders Meeting' in June 2002. The views of a range of creditors, debtors, and enforcement agents from the public and private sectors informed the final Advisory Group Report.40
227. The Report makes ten recommendations, which are appended at the end of this chapter. These have also been subject to further responses from stakeholders, whose views, in writing and through soundings taken at major enforcement conferences and inter-Departmental meetings, have informed the proposals put forward in this chapter.
228. The proposals put forward here are founded on a number of key principles explored in the Green Paper and subsequent economic analysis of the enforcement services market. Any new fee structure must:
| The new fee structure must support the principles of transparency, consistency and proportionality, minimise fruitless activity and promote a sustainable response. |
229. The principles referred to above should be set out in primary legislation.
230. A structure based on these principles will address many of the concerns raised by Citizens Advice in the report Undue Distress. Their report points to abuse of the fee structure by, predominantly, unregulated private sector enforcement agents. Despite the anecdotal nature of much of the evidence offered by Citizens Advice, the range of current fees does offer scope for exploitation.
231. The existing scales and structures have led to claims that initial activity is done for nothing in some debt stream areas, with the suggestion that in some cases, enforcement agents actually pay creditors to take on their warrants. The agent's costs for unsuccessful work then have to be covered through fees charged and met by those debtors who do pay. The current situation also makes it easier for unscrupulous agents to deceive debtors as to the actual costs they are likely to face, as different fees are applicable in each of the debt stream areas.
232. Furthermore, since there is no uniform regulation of enforcement agents, standards are perceived to have been driven down to the level criticised in Undue Distress. An absence of effective control has led to a situation where disreputable enforcement agents rely on exploitation and manipulation of fees to attain profitability. Economic analysis and market-based research indicates that profitability for enforcement agencies is constrained by the current fee structure.41
233. Primary legislation will grant the Lord Chancellor the power to set fees for enforcement agents in England and Wales following advice and recommendations put forward by the regulatory body. Legislation will also grant the regulatory body the power to conduct research into market conditions in order to inform the recommendations made to the Lord Chancellor. Any recommendations made by the regulatory body must be consonant with the overriding principles mentioned here.
234. In line with these principles we suggest that a future fee structure should be based on the following sequential components:
235. Our economic analysis suggests that two key elements make an impact on the profitability and probability of enforcement - an up-front fee and improved information, respectively. We have taken these into account in recommending the introduction of an up-front fee and suggesting what that up-front fee should cover. However, we recognise that the only factor that directly improves recovery rates is more and better information given to enforcement agents. We believe that requiring creditors to pay an up-front fee to initiate enforcement activity will encourage them to improve, to the best of their ability, the accuracy of the information they provide to the enforcement agent. The issue of increased access to information for creditors and enforcement agents where debtors prove recalcitrant is addressed in Chapter 3.
236. An up-front fee marks a significant shift away from the ethics and mechanics of the existing fee structure and will require attitudinal and practical changes to the way enforcement is approached, managed and undertaken, both by creditors and enforcement agents. The concept of the up-front fee has received widespread support from those within the enforcement profession. Stakeholders both within and outside Government recognise that a situation in which debtors who do pay subsidise enforcement against those who do not cannot and should not be sustained. Our economic analysis of the market indicates that this can be achieved by the introduction of an up-front fee, payable by the creditor in all circumstances, and recoverable from the debtor when enforcement is successful.
237. Accordingly, the Advisory Group put forward three options for an up-front fee:
i. a fixed fee;
ii. a negotiable fee within a bandwidth, with a fixed floor and ceiling; and
iii. a matrix of (i) and (ii).
238. It is proposed that the regulatory body will make final recommendations on fees, including the type and possible limits of the up-front fee. We are not yet in a position to determine the parameters within which it can meet the needs of those enforcing in the market as a whole, or within the sectors representing the various debt streams. This issue will require further and ongoing economic research by the Regulator.
| Question 1: In order to establish an evidence base to inform the
future regulator, we seek views on: i) which of the three up-front fee options would be preferable? ii) whether the same type of up-front fee should apply to all debt stream areas? iii) if a fixed fee were introduced, at what level should it be set? iv )where upper and lower limits are set, what should those limits be? |
239. The Government's preferred option at this stage is a negotiable fee within a bandwidth, with a fixed floor and a ceiling for debts below a value threshold to be determined by regulation (for debts above this threshold, see paragraphs 264-265 below). We believe that this offers the best blueprint for effective enforcement, in that a floor provides a minimum return for the enforcement agent and a ceiling offers sufficient protection to the debtor, from whom the fee will be recovered when enforcement is successful. A bandwidth provides scope for negotiation prior to contractual arrangements between creditor and enforcement agent. Unlike a system with a fixed up-front fee, this will offer the freedom necessary to recognise the different recovery rates in different debt stream areas and the special circumstances pertaining to bulk issue creditors. A negotiable fee within a bandwidth will also recognise and accommodate the enforcement agent's professional status and ability to negotiate a contract that reflects the service offered by those operating in a competitive but regulated market.
240. The reasonable cost of nugatory work undertaken in good faith should be funded legitimately within the enforcement process. The level of the up-front fee within the bandwidth should be sufficient to ensure creditors embark only on appropriate and proportionate warrant enforcement action, and to act as an incentive to issue warrants with the best available information enabling enforcement agents to operate effectively.
241. We are aware that, where the creditor and the agent are part of the same organisation, as is the case with some public sector creditors, the new fee structure will need to accommodate that configuration. The principles of consistency, transparency and fair reward will still apply, but the concept of a variable negotiable up-front fee cannot - an organisation cannot negotiate and contract with itself. However, we believe that, in order to ensure that the costs of non-payment will be the same no matter who enforces, the amount of a distinct up-front fee, set at a level that neither favours nor disadvantages public sector creditors and their debtors, should be added to the debt owed under the warrant, and recovered directly from the debtor when enforcement is successful.
242. We are also aware that the introduction of an up-front fee may impact differently on different sectors of the enforcement market, and could result in fewer warrants being issued, both overall and in individual debt stream areas.
| The aim of the Enforcement Review is to build an enforcement system in which the most appropriate form of enforcement is used, whether or not that is a warrant of execution and that, when chosen, enforcement proceeds on the best possible information, efficiently and effectively. |
243. The up-front fee will cover the take-up of a case by an enforcement agent and the setting up of a case file, and constitute a financial recognition that the creditor is paying for the use of licensed and reputable enforcement staff. It will also cover initial action/s or investigation/s by the enforcement agent, and may lead to a probability report being supplied by the agent to the creditor indicating the likelihood of debt recovery. The extent and nature of services provided by the agent in return for the up-front fee should be the subject of negotiations between the creditor and the agent, within the bounds of contractual propriety and any recommendations issued by the regulatory body.
244. The work involved in producing a status report may vary according to the circumstances and the nature of the business, and should be determined in the contractual arrangements between the enforcement agent and the creditor prior to the agent taking on the case. It could indicate such matters as whether the address is correct and whether there is visual evidence of assets likely to meet the debt, thereby establishing a baseline level of probability of enforcement from which the creditor may decide whether and how to continue enforcement action. The recommendation that a status report should be produced should not, however, constrain contractual arrangements between creditor and agent where it is agreed that such a report is unnecessary.
245. The up-front fee will cover any activities that occur prior to the production of the initial report, including some of the activities that are itemised below and that would otherwise attract a separate fee. If the creditor and the enforcement agent agree that the up-front fee shall cover a set number of visits or letters or other modes of enquiry (such as telephone contact) then they shall not be charged separately. However, any events occurring after the production of the status report, or at a point agreed between creditor and agent, will fall within stage two of the charging regime and be dealt with as outlined below.
246. We suggest that the up-front fee should cover the production by the enforcement agent of a status report on the probability of enforcement (when such an arrangement is agreed between creditor and agent), although this should not preclude initial contact between the agent and the debtor leading to an arrangement for payment to be made or to payment in full. If the first visit between the agent and the debtor results in an agreement to pay, the amount recoverable should be the amount owed under the judgment plus the up-front fee. If payment is to proceed by instalments, the amount recoverable should be the amount owed under the judgment, plus the up-front fee and the fee attaching to an instalment repayment scheme (see paragraphs 262-263 below).
247. Secondary legislation should make clear that whenever it is agreed that the debt should be repaid to the enforcement agent, either in full or by instalments, the amount to be recovered should include all the fees incurred up to that point. The minimum amount to be recovered will therefore include the amount of the debt plus the amount of the up-front fee; the maximum will depend upon the point in the process at which the debtor agrees to pay in full or starts to pay by instalments. In accordance with the requirements set out in enforcement agent law, notice to the debtor of the charges likely to be incurred should be provided by the enforcement agent at key points during the enforcement process.
248. Currently problems are caused if the debtor offers to repay the debt directly to the creditor after the warrant has been handed to the enforcement agent, as the enforcement agent may have undertaken work for which he may charge a legitimate fee. If, however, the creditor does accept payment from the debtor after issuing the warrant, they should be able to recover the amount of the up-front fee (which they will already have paid to the enforcement agent) in addition to the judgment debt. The enforcement agent will be entitled to retain the up-front fee. If payment is offered direct to the creditor after the point at which the agent has performed activities that attract either a fixed or a variable fee, the amount owed includes those fees. How other fees legitimately incurred by the agent should be dealt with will be a matter of contract.
249. We envisage that the influence of the regulatory authority and the relevant professional bodies will provide sufficient safeguards to ensure that enforcement agents and creditors are acting within the spirit and the letter of their agreed arrangements.
| Our proposals for fee reforms, in particular the introduction of an up-front fee, recognise the professional status of enforcement agents under a new regulatory regime. |
250. Following the up-front fee (and any initial action/s and report that it covers), we propose that there should be a series of fixed fees chargeable for discrete actions common across all types of enforcement business, should enforcement action continue. As with all fees, these will be recoverable from the debtor upon successful enforcement, i.e. when payment is being made by the debtor in a manner deemed acceptable by the creditor and as set out in enforcement agent law.
251. The concept of fixed fees is based on the principles of transparency and consistency. It is our belief that, wherever possible, as many components of the fees structure should be made known to the debtor at the earliest stage of enforcement, so that they will be aware of the consequences of their refusal to pay. It is also our belief that enforcement agents should receive payment for the work they have actually undertaken, and that payment should relate to provable activities legitimately undertaken in pursuit of enforcement. Common activities should incur common charges, and there should be transparency and consistency in the fee regime pertaining to warrant enforcement generally.
252. Following the up-front fee, fixed fees will attach to activities occurring up to and including the point of taking legal control of goods after entry (which includes the practices previously known as levy, seizure, impounding, walking and close possession) as defined in a single piece of enforcement agent law. These activities will include letters delivered by post, visits, and the act of taking legal control of goods. If a letter is delivered by hand at the time of the visit, this should not be chargeable as a letter, only the fee attaching to a visit will be chargeable.
253. We also propose that a fixed fee should attach to the act of 'making enquiries,' up to and including the point of taking legal control of goods after entry, where this is not covered by the contractual arrangements made between the creditor and the enforcement agent as part of the up-front fee.
254. It will be up to the regulator to advise the Lord Chancellor as to the amount of each fixed fee, and to recommend the number of times it can be charged in any individual case.
255. Following the act of taking legal control of the goods, we propose that fees for subsequent activities shall not be fixed but shall not include charges to cover hourly attendance rates by enforcement agents. As with the fixed fees detailed above, the likely range of variable 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.
256. The following actions, as specified in enforcement agent law, should attract a variable fee: removal and storage. The fees for these activities need to be variable because there is no meaningful way in which to define or predetermine the amount that can be charged for them, as the activities themselves involve variables related to the location of the debtor, the size and value of the assets, and the costs of professional services.
257. As prescribed in enforcement agent law, payment of the debt by the debtor cannot be made while the act of removal takes place. For the purposes of charging for removal, and determining the point at which payment may not take place, removal is defined as starting when the agent is on the doorstep with the stated intention to remove the goods, and has the necessary equipment so to do.
258. In addition, the actions related to appraisement and auction/sale which are legally permitted by the Lord Chancellor may also be chargeable by the enforcement agent and should attract a variable fee, on the basis of the reasons outlined above.
259. We are aware that charging for removal and abortive removal has been an area that has been open to abuse by unscrupulous agents, front-loading variable charges under the heading of 'reasonable costs' to ensure profitability. We are concerned to ensure adequate protection for the debtor, who should not be faced with unreasonable and unpredictable charges. Accordingly, we propose that abortive attempts to remove goods should not attract fixed fees, and that any variable fee which attaches to them should only be invoked if the claim for fees for abortive removal occurs after the taking of legal control. It should be up to the regulator to indicate the number of times a fee can be charged in this instance.
260. We believe that effective regulation, which may include recommendations to the Lord Chancellor or a Code of Practice setting out the parameters within which variable fees may sit, and active monitoring of the charges made by enforcement agents, will minimise both the incentive and the scope for such abuse. Furthermore, the regulatory body should require that records of and receipts for the costs of and charges for all actions attracting a variable fee should be supplied to the debtor, kept by the enforcement agent for up to six years, and made available to any future regulator within that period.
261. It will be up to the regulator to advise the Lord Chancellor as to the limits within which variable fees may be charged, and to recommend the number of times they can be charged in any individual case.
262. We propose that the law should be changed to provide all licensed enforcement agents with the capability to offer the debtor the option of repayment by instalments, or to accept an offer by the debtor to pay by instalments, if such an action is agreed by the creditor. The enforcement agent will not be obliged or compelled to make or accept such an offer unless at the behest of the creditor. In such circumstances, the amount to be repaid will be the debt, the fees incurred up to the point at which the offer is made, and the fee attaching to payment by instalments. In this context, enforcement agents will not be acting as proxy debt collectors, but offering or accepting from the debtor a repayment plan which takes account of their financial situation as well as the needs of the creditor.
263. If the offer or acceptance of a repayment plan is made after the enforcement agent has taken legal control of the goods, the longest that any instalment plan can last will be 12 months, as this reflects the position in enforcement agent law where taking legal control will last for a maximum of 12 months. If the offer or acceptance of a repayment plan is made before the agent has taken legal control of the goods, the warrant should remain live until the debt and the associated fees have been paid in full. If the arrangement to pay by instalments breaks down, the agent should execute the warrant for the full amount of the debt.
264. We recognise that, while a uniform fee scale may be appropriate for the majority of cases, it may not adequately reflect the expertise and investment required to enforce against large debts. There is therefore a need for the up-front fee attaching to the enforcement of large debts, the amount of which exceeds a threshold to be determined by the regulator, to be calculated independently from the bandwidth put forward earlier in this section. We propose that in circumstances where the debt exceeds this threshold, the up-front fee should either be negotiable between the creditor and the enforcement agent, or proceed on a percentage basis relating to the amount of the debt above the threshold plus a basic minimum up-front fee.
265. We are concerned to ensure that the expertise required to enforce high value judgments, and to maintain a business capable of doing so, is reflected in the remuneration paid to undertake that enforcement. The principle of access to justice in enforcing a court judgment should apply equally at both ends of the debt spectrum - i.e., in relation to large as well as small debts. We see the need to maintain an enforcement system that does not push a creditor out of the enforcement market because a fixed fee scale would render it unprofitable for their judgment to be enforced.
266. As set out in enforcement agent law, debtors must be given written notice, by the enforcement agent or the creditor, that enforcement may follow and of the forms of enforcement that may be adopted, as well as the consequences of enforcement agent action, the costs involved and the complaints procedures available. This is the point at which notification of the cost of the debt plus the up-front fee will be made known to the debtor, as well as the range of fixed and variable fees that could follow, should payment not be made.
267. Further notice will need to be provided to the debtor at the point of entry to the premises and prior to starting to take legal control of the goods. Notice of the actual fees incurred up to this point, and an indication of the range of future fees to be incurred, will be provided to the debtor in accordance with this requirement in enforcement agent law.
268. As set out in enforcement agent law, the enforcement action should cease if the debtor pays the amount owed and the costs either before the enforcement agent takes legal control of the goods, or at any time before sale save during the process of taking legal control or removing goods from the premises. In these circumstances the fees owed that will constitute the enforcement agents' costs will be the up-front fee, plus the fixed fees for letter/s and visit/s in the case of enforcement action ceasing before the taking of legal control, or in the second scenario, the up-front fee, plus the fixed fees incurred up to and including that for taking legal control, plus the variable fees attaching to whatever activities have taken place prior to sale. At both stages all fees should be recovered first from any payment or proceeds of sale.
269. Enforcement agent law also proposes that if the debt is paid before entry the enforcement agent should not be able to proceed or to claim any fees. As mentioned above, if the creditor has accepted payment from the debtor but failed to inform the enforcement agent, then the up-front fee which has already been received by the agent will be permitted to be retained by the agent. This will be deemed to cover the actions undertaken by the enforcement agent prior to the point of entry.
270. Ideally, it should be clearly stated in contract that the creditor should not accept payment directly from the debtor once they have handed the matter over to the enforcement agent. If a warrant is recalled by the creditor once it has been handed to the enforcement agent, the up-front fee that has been accepted by the enforcement agent should be retained by him.
1. There should be an up-front fee, payable by the creditor, to initiate warrant enforcement action.42 Such a fee will apply across all enforcement sectors and all types of debt. There are three potential models for such a fee:
i. fixed fee;
ii. negotiable fee within a bandwidth (with a fixed floor and ceiling);
iii. a matrix of the two.
2. The up-front fee should cover the following elements:
i. take-up of a case by an enforcement agent;
ii. the setting up of a file;
iii. the use of licensed and reputable enforcement staff;
iv. 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.
3. The up-front fee should be recovered from the debtor when enforcement is successful.
4. 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.
5. 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:
6. There shall be no fixed 'abortive removal visit' fee.
7. 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.
8. 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.
9. 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.
10. 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.
23 Green Paper Towards Effective Enforcement (July 2001); National Association of Citizens Advice Bureaux (now known as Citizens Advice) Report Undue distress: CAB clients' experience of bailiffs (May 2000). The report is available on - www.citizensadvice.org.uk
24 The Home Office White Paper The Government's Proposals for Regulation of the Private Security Industry of England and Wales (March 1999) referred to a licensing system to regulate security industry personnel in the private sector such as wheel-clampers, door supervisors, manned security guards, private investigators, security consultants and security staff, sector by sector. It did not include but proposed extending the legislation to 'contracted court enforcement officers'; meaning private sector bailiffs under contract to magistrates' courts
25 These are county court bailiffs, magistrates' courts' civilian enforcement officers, Local Authority in-house bailiffs and Inland Revenue distrainors
26 See Magistrates' Courts The Approval of Enforcement Agencies Regulations (2000)
27 For definition of the term "irregular action" see Annex 3 - Glossary
28 Representatives from Child Support Agency (Department for Work and Pensions), Inland Revenue, Her Majesty's Customs and Excise, Office for the Deputy Prime Minister, Local Government Association, Court Service and chaired by the Lord Chancellor's Department
29 For definition of the term "common law" see Annex 3 - Glossary
30 Professor Beatson's conclusions on the ECHR compliance of the current legislation can be summarised as: although there are areas of doubt, the Strasbourg jurisprudence shows that a system of distress does not per se breach Articles 6(1), 8, 14 and Article 1 of the First Protocol to the European Convention on Human Rights ("ECHR"); the relatively broad discretion that can be exercised in the administration of most forms of distress may, however, make its exercise in a particular case vulnerable to a challenge based on lack of proportionality; the regime governing distress for rent may also be vulnerable to a challenge based on its lack of "lawfulness", which would mean that it fails to meet the condition in Article 8(2) that an interference with private and family life and the home must be, inter alia, "in accordance with the law"; the potential for challenge, particularly that based on lack of proportionality, means that it is desirable to remove uncertainties in the law and to clarify the grounds upon which distress can be levied and discretion in its administration can be exercised
31 For definition of the term "abandonment" see Annex 3 - Glossary
32 For definition of the terms "impounding" and "seizure" see Annex 3 - Glossary
33 For definition of the term "close possession" see Annex 3 - Glossary
34 For definition of the terms "illegal action" and "execution" see Annex 3 - Glossary
35 For definition of the terms "damages" and "conversion" see Annex 3 - Glossary
36 Beatson Report Recommendation (42) The interpleader procedure should be retained, but consideration should be given as to whether it requires modification in the light of the changes made by the Civil Procedure Rules
37 Beatson Report Recommendation (18) As a general rule only the goods of the debtor should be liable to seizure. Joint property should be liable to seizure but the distrainor should only acquire an interest in the debtor's share, and only that interest can be sold. If the entire interest in the goods is sold, the joint owner should be paid for his or her share out of the proceeds of sale before either the enforcement costs or the debt are satisfied. If, on an application made within seven days after the date of the execution of the warrant by the debtor or any person who owns a seized article the district judge is satisfied that the article is exempt from distress, an order releasing the article from the distress shall be made
38 For definition of the term "replevin" see Annex 3 - Glossary
39 Beatson Report Recommendation (44) The priority accorded to distraint for a debt owed to the Crown over any earlier distraint provided that the goods which have not been sold should not be removed. It is for consideration whether this should, in the interests of clarity in the context of bailiff law, be contained in legislation