Time for the MoJ to require High Court bailiffs to refund people wrongly charged for VAT

By Peter Tutton, Head of Policy, Research and Public Affairs

We’ve blogged a number of times now on problems with bailiff firms, calling out the pressing need for effective independent regulation.

This week’s issue is the clarification that perhaps as much as £36 million in VAT has been wrongly charged by High Court Enforcement Officers (HCEOs) to people who should never have been charged for it in the first place.

In 2014 regulations were introduced to control the fees that bailiffs (including HCEOs) can charge people they recover debt from. The regulations do not include an explicit power for HCEOs to add VAT to these fees, but HCEOs have continued to do so in the absence of a clear policy statement to the contrary.

Five years on and the Government has now issued the clearest and most unequivocal statement, via a response to a Parliamentary Question in the House of Lords, that it is creditors who should be charged for and pay the VAT on fees, not the people subject to HCEO enforcement. This should put to bed once and for all the ambiguity and misinterpretation that had been allowed to persist since the regulations in 2014 made this practice non-compliant.

Clarifying the rights of people in debt

It’s important that anyone who’s wrongly paid 20% more on the enforcement fees they were charged by High Court bailiffs since 2014 should now be refunded by the firms who have wrongly charged it. But there’s no guarantee that these people will be aware or able to seek a refund by themselves.

The Ministry of Justice must insist that HCEOs go back through their books and pro-actively identify people wrongly charged and make the necessary refunds.

We should also reflect that this isn’t the way that regulation should work. When rules exist, they should be properly monitored and properly enforced. It’s not good enough for firms to mark their own homework or for consumer protection to be left to ambiguous legislation for so long.

This is particularly true in the case of a highly intrusive and expensive form of debt enforcement which has real potential to cause harm to highly vulnerable people.

We strongly urge the next Government to to move forward quickly and introduce the effective independent regulation of the bailiff sector that’s needed. As this latest episode testifies, the systems and processes aren’t currently in place to ensure that bailiff enforcement achieves the standards of fairness and consumer protection demanded by public policy in other areas of debt recovery.