The Minister of State, Ministry of Justice (Lord McNally)
My Lords, as explained by the noble Lord, Lord Beecham, this amendment raises the issue of charging orders. Noble Lords will be aware from the debate in Committee that the power to prescribe the minimum amount above which a charging order may be made already exists in Section 94 of the Tribunals, Courts and Enforcement Act 2007. It makes provision for the Lord Chancellor to make regulations that a charging order may not be made to secure a sum of money below a certain amount. It remains the Government’s intention not to exercise this power. There are several reasons for that.
The Government are committed to providing the right level of protection to genuinely vulnerable debtors. However, we must not do that at the expense of the effectiveness of the civil justice system. We have a duty to ensure that creditors have reliable methods available to them to enforce their debts and charging orders are a legitimate and proportionate option for them to pursue. It is essential to remember that a charging order does not compel a debtor to sell their property. That can be achieved only through an order for sale. Most creditors never apply for orders for sale; only 0.5% of the creditors who have applied for a charging order go on to place an application for an order for sale. Nevertheless, the Government have ensured that there are effective safeguards in place for debtors who are subject to such an order.
In November this year, following a public consultation on this subject, we laid before Parliament draft regulations which set a £1,000 financial threshold for orders for sale relating to Consumer Credit Act cases. These regulations are subject to the affirmative procedure so there will be a separate opportunity for your Lordships’ House to consider those. Responses to the Ministry of Justice consultation on solving disputes in the county court in 2010 indicated that £1,000 was the most appropriate threshold. Respondents to the consultation felt that a higher threshold would risk pushing creditors to seek more draconian methods of recovering their money, such as bankruptcy proceedings, which would expose debtors to a significantly increased likelihood of losing their homes, an outcome that none of us would wish to see.
We must also remember that orders for sale are subject to judicial discretion. The court must take into account all the circumstances of the case before deciding whether to make an order. That provides essential protection against disproportionate action. The consultation showed that a high financial threshold for the making of an order for sale would restrict judges’ discretion in individual cases—for example where a debtor has all their assets tied up in property including investment properties or stocks and yet owes a number of small debts to multiple creditors. It may be equitable to grant an order for sale to release some of that capital.
With the new order for sale regulations in place, creditors have the assurance that they can recover what is owed to them while debtors are not in danger of disproportionate enforcement action. The Government believe that these regulations are proportionate and an effective approach to achieving the necessary delicate balance between creditors and debtors. They therefore do not plan to introduce a financial limit on charging orders. In the light of that explanation I hope that the noble Lord will be prepared to withdraw his amendment.
Lord Beecham
My Lords, that is a very disappointing response, which echoes the response given by the noble Baroness, Lady Northover, in Committee in July. Neither she nor the noble Lord have explained why the coalition agreement, which is very explicit in terms of laying down a £25,000 threshold for an order for sale, which of course follows on from a charging order, has been abandoned. The noble Baroness said:
“In terms of the coalition's commitment to a threshold for orders for sale at £25,000, evidence in the consultation did not support a £25,000 limit”.—[Official Report, 2/7/12; col. 542.]
But we do not know—at least I do not know—what that evidence was and from where it was derived. It was presumably from the creditors. I cannot imagine that there would be significant evidence from those who owed money or those who advise those who entered into consumer credit arrangements who were in difficulties suggesting that £25,000 was too high a limit.
Furthermore, at the last count, the Government were at least contemplating a £1,000 limit. That is much too low in my submission but even that has been abandoned without any explanation. The Government are falling over backwards to help creditors in this position—many of them are not the most desirable organisations operating in the financial services world—at the expense of the worry and disturbance that can be caused to borrowers and their families and ultimately to the taxpayer, because in so far as these orders are enforced, homelessness and all the other social consequences will follow which will be a burden for the taxpayer.
It is extremely disappointing that the Government have caved in to pressure from the industry at the expense, I repeat, of very vulnerable people and the taxpayer at large. But as it is clear that the Government are not disposed to make any move consistent with their original policy, I feel obliged to beg leave to withdraw the amendment.
Lord McNally
“Disclosure of information to facilitate collection of fines and other sums
(1) Schedule 5 to the Courts Act 2003 (collection of fines and other sums) is amended as follows.
(2) Paragraphs 9A to 10 (disclosure of information by Secretary of State to court officer to help court decide whether to apply for benefit deductions etc) become Part 3A of the Schedule.
(3) Accordingly, after paragraph 9 insert—
“Part 3ADisclosure of information, and meaning of “relevant benefit” etc”.(4) In the heading before paragraph 9A, after “Disclosure of information in connection with”, insert “making of attachment of earnings order or”.
(5) For paragraph 9A (power of Secretary of State to disclose information to help court decide whether to apply for benefit deductions) substitute—
“9A (1) The Secretary of State or a Northern Ireland department, or a person providing services to the Secretary of State or a Northern Ireland department, may disclose social security information to a relevant person.
(1A) Her Majesty’s Revenue and Customs, or a person providing services to the Commissioners for Her Majesty’s Revenue and Customs, may disclose finances information to a relevant person.
(1B) The disclosure authorised by sub-paragraph (1) or (1A) is disclosure of the information concerned for the purpose of facilitating the making, by the relevant court or a fines officer, of any of the following—
(a) a decision as to whether to make an attachment of earnings order in respect of P,(b) a decision as to whether to make an application for benefit deductions in respect of P, and(c) such an order or application.(2) In this paragraph—
“finances information” means information which—(a) is about a person’s income, gains or capital, and(b) is held—(i) by Her Majesty’s Revenue and Customs, or(ii) by a person providing services to the Commissioners for Her Majesty’s Revenue and Customs in connection with the provision of those services,or information which is held with information so held;“social security information” means information which is held for the purposes of functions relating to social security—(a) by the Secretary of State or a Northern Ireland Department, or(b) by a person providing services to the Secretary of State, or a Northern Ireland Department, in connection with the provision of those services,or information which is held with information so held.(2A) The reference in sub-paragraph (2) to functions relating to social security includes a reference to functions relating to any of the matters listed in section 127(8) of the Welfare Reform Act 2012 (statutory payments and maternity allowances).
(3) In this paragraph “relevant person” means a person who is appointed by the Lord Chancellor under section 2(1) or provided under a contract made by virtue of section 2(4).”
(6) In paragraph 9B(1) (limits on onward disclosure)—
(a) for “9A(3)” substitute “9A”, and(b) for the words after “making” substitute “, by the relevant court or a fines officer, of such a decision, order or application as is mentioned in paragraph 9A(1B).”(7) In paragraph 9B(2)(b) (use of information otherwise than in connection with decision mentioned in sub-paragraph (1)) for “as is mentioned in that sub-paragraph” substitute “, order or application as is mentioned in paragraph 9A(1B)”.
(8) In paragraph 9B(3) (disclosures that are not unlawful)—
(a) in paragraph (a) (disclosure in accordance with order of a court etc) after “order of a court” insert “or of a tribunal established by or under an Act”, and(b) in paragraph (b) (disclosure of information previously lawfully disclosed) after “disclose” insert “or use—(i) any information which is in the form of a summary or collection of information so framed as not to enable information relating to any particular person to be ascertained from it, or(ii) ”.(9) In paragraph 9B(5) (offence of wrongful use or disclosure of disclosed information punishable on summary conviction by a fine not exceeding level 4) for the words from “liable” to the end substitute “liable—
(a) on conviction on indictment—(i) to imprisonment for a term not exceeding 2 years, or(ii) to a fine, or(iii) to both;(b) on summary conviction—(i) to imprisonment for a term not exceeding 12 months, or(ii) to a fine not exceeding the statutory maximum, or(iii) to both.”(10) In paragraph 9B after sub-paragraph (5) insert—
“(6) Sub-paragraph (5)(b) applies in relation to offences committed before the commencement of section 154(1) of the Criminal Justice Act 2003 (general limit on power of magistrates’ courts to impose imprisonment) as if the reference to 12 months were a reference to 6 months.
(7) A prosecution for an offence under sub-paragraph (2) may be instituted only by or with the consent of the Director of Public Prosecutions.”
(11) Omit paragraph 9C(2) and (4) (meaning of “benefit status” and “prescribed”).
(12) In paragraph 9C (interpretation etc of paragraphs 9A and 9B)—
(a) in sub-paragraph (1) for “This paragraph applies” substitute “Sub-paragraphs (3) and (3A) apply”, and(b) after sub-paragraph (3) insert—“(3A) “Relevant court” has the same meaning as in Part 3 of this Schedule.
(3B) In paragraphs 9A and 10 (as in the provisions of this Schedule which extend to England and Wales only)—
“fines officer” has the meaning given by section 36;“P” has the meaning given by paragraph 1.”(13) Paragraphs 9A, 9C and 10, as amended by the preceding provisions of this section, extend to Scotland and Northern Ireland (as well as to England and Wales).
(14) Accordingly, in section 111(1) of the Courts Act 2003 (subject to subsections (2) and (3), Act extends to England and Wales only) after “(3)” insert “and to section (Disclosure of information to facilitate collection of fines and other sums)(13) of the Crime and Courts Act 2013 (extent of paragraphs 9A, 9C and 10 of Schedule 5)”.”
Lord McNally
My Lords, I think that we all agree that the kind of issues raised by the noble Baroness, Lady Meacher, and the noble Lord, Lord Beecham, are of concern. The problem hitherto has been insufficient unanimity as to what should be done about bailiffs. It is vital that our proposals strike the right balance between providing effective enforcement and protection for the vulnerable in society, while not imposing unnecessary burdens on business. However, the Government have brought forward a significant programme of reform, focusing on addressing the power of bailiffs, the fees they charge, and better regulation.
I share noble Lords’ concerns about the inappropriate behaviour of some bailiffs and the unnecessary distress that this can cause to those who already find themselves in an often difficult and distressing situation. I assure the House that the Government remain committed to bringing forward effective proposals that protect the public by ensuring that bailiff action is proportionate. However, the need to protect debtors from the aggressive pursuit of their debt must be balanced against the need for effective enforcement. A workable means to enforce the payment of debts and fines is essential to both the economy and the justice system. Without assurance that it is possible, with due process, to recoup money from debtors unwilling to pay, it would be too risky for creditors to lend, and the effectiveness of the courts would diminish.
As the noble Baroness is aware, the Government launched a public consultation on bailiff reform in February this year, which set out proposals aimed at improving clarity so that both debtors and creditors know where they stand, strengthening protections for the vulnerable and ensuring that individuals can collect the money owed to them. Any regulation of bailiffs must comply with the general principles of regulation: it must be proportionate, accountable, consistent, transparent and targeted. While at its heart it must provide protection for consumers, it cannot do this by placing an undue burden on business. If we do not find this balance, we risk replacing one set of concerns with another.
As we indicated in the consultation paper, the Government’s preferred option is not to introduce an independent regulator. The Government’s response will address this in more detail, but we have received no new evidence to suggest that the creation of an independent regulator would be a proportionate response to the concerns that have been raised about the practice of some bailiffs. In addition, regulation costs money. Regulation would necessarily impose a cost on the enforcement sector and, as a result, the industry would recoup the cost through fees, with the risk of the cost being passed on to debtors.
The proposals set out in the consultation paper are intended to work as a package. Reforming the fee structure, addressing the powers of enforcement agents, tightening certification and introducing competence criteria and specific training will tackle the majority of abuses by rogue bailiffs. We need to make sure that the profession attracts the right people and that they can demonstrate they are fit to do the work, which will include providing a satisfactory CRB check and undertaking the necessary training. Bailiff standards must improve.
Since a bailiff on the doorstep may be the first time a person has had to face their financial situation, any training needs to cover not only what they can and cannot do but how to handle what could be very vulnerable people. It is important that they know how to assess the situation and decide which cases should be referred back to the creditor for their specific instructions on how the matter should proceed. That is the answer that the noble Baroness asked me to put on the record: where the bailiff faces a situation where they believe that they are dealing with a vulnerable person, they should refer back to reassess how matters should proceed. The consultation paper covered the issue of vulnerability and training, and I am working with Helen Grant MP, who has responsibility for these reforms, to ensure that full consideration is given to the level of CRB check, and the content, level and length of training a bailiff will need to undertake.
We are aware that reform in this area has been long and widely awaited. This subject attracts a great deal of interest and very diverse views. We have a responsibility to ensure that we have fully evaluated these views and taken them into account in our response. Many of the issues that have been raised today were either explored in the consultation or provided in a response. As I have explained, it is essential that our reforms maintain the value of enforcement while protecting those who find themselves in debt. This is a delicate balance and we need to make sure that we get it right.
The consultation response is being finalised and will be published in due course; I am afraid that that is as good as I can do on that. All that I can say in defence is that tomorrow we are having the Autumn Statement. I understand the impatience, which I share, and we will push ahead. In the mean time officials are working with all stakeholders to ensure improvements continue to be made in this area. Once the response has been published, we will work closely with stakeholders to deliver its recommendations. I hope that, having had the opportunity to raise the issue, the noble Baroness will be prepared to withdraw her amendment and await the Government’s proposals.
The Earl of Listowel
Before the Minister sits down, is it appropriate at Report to ask him one brief question? Does he expect pregnant women and mothers with children under the age of two to come within that criterion of vulnerability?
Lord McNally
I hesitate to respond to what is clearly a very emotive situation as laid out by the noble Earl, Lord Listowel. There is danger in all of these cases—and even the noble Lord, Lord Beecham, fell into it—of using illustrations in an emotive fashion. We are trying to get a balance. I suggest that what you are saying and the assurance that has just been given by the noble Baroness, Lady Meacher, come within some assessment of vulnerability which will require further guidance. This is not me laying down the law from the Dispatch Box. I am trying to make a common-sense assessment. I regret that I cannot start responding to various speculations in advance of the publication of the work that we have done.
Baroness Meacher
I thank the Minister for his response, but I have to say that it is deeply distressing that we are having this debate when we do not really know what we are talking about. We do not have even the response to the consultation. We do not know what the Government’s plans really are. We should be having significant amendments debated and completed at Report stage, yet we cannot do that.
Will the Minister make clear whether the consultation response, or indications about the key points in it, could be made available to us before Third Reading? That is one important point. Secondly, I hope to have a meeting with Helen Grant and obtain some information from her. I would like to reserve the right to bring something back at Third Reading, hopefully on the basis of some rather better information than we had today. As Lord Beecham said, I am aware of this matter going on for 20 years. I was involved in the bailiff issue 20 and indeed 30 years ago, when I worked at the CAB. It is not new. It is overdue and we are in grave danger of having too little too late. Will the Minister say whether he can produce some information before Third Reading.
Lord McNally
My Lords, I can only say that I can in due course—in so many different ways, in due course.