Summary: Ms X complained about Council’s method of recovery of a large overpayment of council tax benefit. We have found the Council to be at fault because there was uncertainty about whether Ms X was told the overpayment would be taken from her bank account by direct debit. This caused considerable distress to Ms X. We have also found fault with the content of the demand letter. To remedy the injustice, the Council has agreed to pay Ms X £150, apologise and review its practices in this area.

The complaint

1. Ms X complains that the Council withdrew a significant sum of money from her bank account without prior notice to recover an overpayment of council tax benefit.
2. This caused significant distress, particularly as Ms X is a single mother and was unable to pay her bills or feed her children.

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The Ombudsman’s role and powers

3. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
4. The Valuation Tribunal deals with appeals against decisions on council tax liability and council tax support or reduction.
5. If we are satisfied with an organisation’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

6. I considered Ms X’s complaint and the documents she provided.
7. I made enquiries with the Council and considered its response.
8. Ms X and the Council had an opportunity to comment on my draft decision. I considered their comments before making a final decision.

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What I found

Council tax reduction (CTR)

9. Each council has its own council tax reduction (sometime called council tax support) scheme, offering help with meeting council tax costs to those on a low income. Eligibility for these schemes is means tested.
10. If a council decides it has given someone too much CTR, it can ask the claimant to pay it back.

What happened

11. Ms X was previously entitled to CTR. In March 2021, the Council told Ms X she was no longer eligible. Ms X disputed this. The Council asked her to provide more information about her income and earnings.
12. The Council reviewed the evidence submitted by Ms X and adjusted her account. It decided Ms X had been overpaid CTR for the previous year and therefore owed £1700. In June 2021, the Council wrote to Ms X telling her £1700 would be collected from her bank account by direct debit. Ms X says she did not receive this letter.
13. The overpayment was withdrawn from her account in July 2021. Alarmed by this unexpected withdrawal, Ms X contacted the Council. She was told to contact her bank to make a direct debit indemnity claim. Ms X says the Council only told her about this option when she became upset. This process allows banks to refund payments withdrawn without approval of the account holder. Ms X told her bank what had happened and credited the money back into her account the same day.
14. The Council also offered to refund the money, after the bank had done so.
15. Ms X complained to the Council about this. She says it caused significant distress as she was left worried about how she could manage without the equivalent of a month’s wages. She says the Council should have made more effort to warn her or tell her straight away that she could contact her bank.
16. The Council did not uphold her complaint because it said it had written to her before the withdrawal and was legally entitled to recover the overpayment in the way it did. Disappointed with this outcome, Ms X brought her complaint to the Ombudsman.
17. In response to the Ombudsman’s enquiries, the Council:

• explained it was unable to prove the demand letter was posted to Ms X explaining the debt would be taken from her account;
• apologised for the distress caused to Ms X;
• offered to make a payment of £150 to acknowledge this distress;
• said the impact of the withdrawal had been mitigated by the bank’s indemnity scheme; and
• reviewed its internal practices to ensure large debts are not routinely recovered by direct debit.

Analysis

18. The focus of Ms X’s complaint is that she was not told in advance about the Council’s intention to seek recovery of the overpayment from her bank account. Understandably, she asked the Council to prove the demand letter had been sent.
19. Her entitlement to CTR has already been dealt with and in any event is outside the Ombudsman’s jurisdiction.
20. The Council outsources the printing and posting of letters to an external company. It has confirmed it is unable to provide evidence of posting. The Council has said this does not mean the document was not sent, but there is insufficient evidence to demonstrate the document was issued.
21. As a general rule, we do not normally expect Council’s to provide evidence of posting. However, in the case the Council’s response to my enquiries accepts there is a possibility it was not issued.
22. Ms X is clear she did not receive the letter. If she had, she says she would have contacted the Council. This, together with the Council’s own doubt, leads me to conclude, on balance, there is uncertainty about whether the letter was sent to Ms X. This is fault and I accept this caused significant distress to Ms X.
23. To the Council’s credit, it has now acknowledged this distress and offered to make a payment of £150 to her. This is in line with our “Guidance on Remedies”. I consider this, together with an apology, remedies the personal injustice to her.
24. The Council has also accepted it should introduce a different system where large overpayments are involved. I welcome this.
25. I also have concerns about the content of the demand notice, even if it had been received by Ms X. While I do not dispute the Council’s right to reclaim such overpayments, we expect it to be done in the right way. I do not consider this happened in this case and is fault.
26. Where the Council intends to withdraw such a significant amount of money, the Council should make sure this is made clear. Other than the small heading “Reason for bill - CTR Overpayment”, it may be difficult for customers to interpret the Council’s intention. The letter refers to direct debit collection by instalments and yet the Council reclaimed the whole amount. It is also in very small print and, in my view, does not adequately alert the recipient to the significance of the proposed action.
27. For this reason, I also recommend the Council should review the content of all demand letters where any money is to be withdrawn by direct debit to ensure customers are properly aware of this action.

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Agreed action

28. The Council has agreed to take the following action within four weeks from the date of my final decision:

• Apologise in writing to Ms X.
• Pay Ms X £150.
• Review its practices for withdrawing overpayments by direct debit, including the content of notification letters.

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Final decision

29. I have found the Council to be at fault and made recommendations to remedy the injustice caused to Ms X. The Council has agreed with my recommendation and I have therefore completed my investigation.

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Investigator's decision on behalf of the Ombudsman