Thurrock Council charged an illegal £400 fee for administering a council tax payment plan it had agreed as an alternative to making a man bankrupt.
The Ombudsman said: “the Council was at fault in charging the £400 fee. There is no legislation which allows for the fee to be charged…. The fee was introduced without reference to officers, members or the Council’s legal department and there appears to have been no scrutiny to ensure that the policy was legal.” The Council had charged this fee to 178 people and could potentially have generated a total of £71,200.
The Ombudsman was concerned that other councils might be charging this fee, and wrote his report because it raised issues that were of a wider public interest.
The Council took the first step towards making ‘Mr North’ (not his real name for legal reasons) bankrupt for council tax arrears, by serving a statutory demand. As an alternative to being made bankrupt Mr North was then given the opportunity to make an agreement with the Council to pay the arrears in instalments. Mr North was told he would have to pay a £400 fee to cover the administration costs of the instalment arrangement. The fee had been introduced as part of a range of measures introduced by the Council to improve the collection of council tax; the collection of council tax was contracted out to a private company which was also responsible for recovery action.
Mr North agreed to pay by instalments but challenged the amount of the fee and whether the Council had the authority to make a charge. The Council maintained that it was appropriate to make a charge for the cost of administrating the payment plan. Eight months after Mr North requested a breakdown of the fee, the Council provided an explanation of how the £400 had been accrued.
Mr North did not accept that the Council was entitled to charge the £400 and he thought the amount of the charge was excessive and did not reflect the actual costs incurred.
Soon after the Ombudsman started to investigate the complaint, the Council accepted that there was no basis on which it could make the charge. It immediately stopped charging the fee and took steps to reimburse everyone who had paid it. The Council also decided to offer a goodwill payment to everyone who had paid the fee.
The Ombudsman also found that the Council had taken too long to deal with Mr North’s request for a breakdown and it had missed out on an opportunity to assess the legality of the fee when he first queried it. It had also failed to ensure that policies were properly scrutinised and monitored, and failed to monitor the actions being taken by the private company.
In accordance with the Ombudsman's recommendations, the Council:
- paid Mr North the £40 goodwill payment being given to everyone who had paid the fee, plus an additional £60 to reflect his time and trouble in dealing with the complaint;
- introduced a procedure to ensure that all policies that were introduced were properly scrutinised and implemented; and
- review the way that the private company dealt with complaints.
LGO satisfied with Council's response: 7 June 2010