Money Advice Scotland Annual Conference & Exhibition 2016 Crieff Hydro, 2 nd & 3 rd June 2016

Gail Walker Policy Manager, Consumer Futures Unit Water and sewerage debt: balancing income maximisation with protecting vulnerable consumers

Who provides water and sewerage services to Scottish households? –Scottish Water (Water Services legislation 2002/06) Who bills customers and collects payments? –Local authorities (Collection of Unmetered Charges by Local Authority) (Scotland) Order 2014 (previously the Billing and Collection Order) Empowering debt recovery –As for unpaid Council Tax (The Council Tax (Administration and Enforcement) (Scotland) Regulations 1992; Local Government Finance Act 1992 Scottish Provisions Incentivising debt recovery –Local authorities (Collection of Unmetered Charges by Local Authority) (Scotland) Order 2014 (previously the Billing and Collection Order) Scotland: water and sewerage billing and collection

Research into water and sewerage debt Previous research (2008 to 2014) by predecessor consumer organisations Missing evidence!

TPD and Water Direct Traditional debt recovery: TPD for w/s debt New Water and Sewerage Services to Dwellings (Collection of Unmetered Charges by Local Authority) (Scotland) Order 2014 (previously the Billing and Collection Order) Allows local authorities to bypass summary warrant and legal fees Allows local authorities to apply directly to DWP for a) TPD for w/s debt and b) TPD for current charges per person 3 known local authorities applied for Water Direct Will benefit some in debt to better manage budget

Profile of an individual in debt Living on low income Unstable working patterns: in and out of work / zero hours contracts Multiple debts Overpayments: benefits, tax credits Disabilities / mental health issues Life changing circumstances: loss of employment / illness

The case for debt Individual circumstances + Governance and Legislation + Debt recovery practices = Outcomes: Debt/ vulnerability What are the priority outcomes for local authorities? Increasing revenue? OR Achieving a debt free status for the individual? To what degree are debt recovery practices informed by individual circumstances?

Aims of CAS research Target low income consumers to better understand: The causes of water and sewerage debt – relationship between local authority debt recovery practices and individual circumstances The impact of local authorities’ debt recovery practices on individual circumstances The degree to which current debt recovery practices support individuals to recover from debt The degree to which current debt recovery practices compound individuals’ indebtedness

Research Findings: consumers on Water Direct Very low / negligible awareness of liability to pay = indebtedness Late debt recovery intervention by LA = greater indebtedness No assessment of ability to pay carried out before DWP application Deductions greater than 10% of income (£73 / £8.50 per week) Small deductions can have significant consequences – tip the balance Other unintended consequences Triggered an increase in those seeking support - Increase use of foodbanks Aggravating existing health conditions Access to debt relief can be unaffordable

DWP Guidance DWP guidance notes (Third Party Payment Creditors / Supplier Handbook March 2015 p7) states: ‘The local Third Party Deduction team or Universal Credit Service Centre in DWP will: Agree to third party deductions with the creditor and customer, and obtain relevant details to set up new Creditors / Suppliers on the third party payments scheme’ Sets out a joint, mutually agreed approach.

Water Direct: Examples from England and Wales Greater transparency of Water Direct One of several options available to English companies to set up debt repayment and keep support current payments A tool to support and empower customers Supporting customers to get debt free for w/s charges

What next for Water Direct? Further roll-out of Water Direct A clear understanding of the impact that Water Direct can have on vulnerable consumers when no insight into circumstances is applied Further roll-out should be informed by the experiences of vulnerable consumers Identified and agreed processes to protect vulnerable consumers

Water Direct: what do consumers need? Prevent debt occurring Greater awareness of their liability to pay by providing increased and early notification of charges Information that empowers them and helps them to make informed choices Timely, clear and effective engagement mechanisms especially with those at most risk if falling into debt Support debt recovery Establish a person’s ability to pay Non-pursuit of debt for those unable to pay Improve partnership working between LAs and frontline agencies

General principles of debt recovery To ensure a balance between maximising income and protecting vulnerable consumers: –Proactive and early engagement –Debt recovery based on ability to pay –Use simple and engaging communication –Standards for third party debt recovery based on customer service and customer care –Range of payment frequencies and methods

CAS report on debt Sink or Swim report: consumers experiences of water and sewerage debt -or-swim-consumers-experiences- water-and-sewerage-debthttp:// -or-swim-consumers-experiences- water-and-sewerage-debt

Contact Details Gail Walker, Policy Manager Consumer Futures Unit Citizens Advice Scotland

Workshop Session Key Principles: 1.Prevention of water and sewerage debt occurring 2.Measures that support customers’ recovery from debt Questions: 1.What are the issues / barriers to improvement? 2.What potential action could be taken and how?