Summary: Miss B complains the Council deducted money from her earnings without notice. She says this left her in financial hardship and the Council did not properly consider her circumstances. The Ombudsman finds fault in how the Council managed the recovery of housing benefit overpayments from Miss B. This caused injustice to Miss B and we recommend the Council apologise, pay Miss B for distress and time and trouble and remind its officers of guidance on use of direct earnings attachments.

The complaint

1. The complainant, who I refer to as Miss B, complains the Council served a direct earnings attachment (“DEA”) on her employer, asking it to deduct money from her wages. The deductions were to recover an overpayment of housing benefit. Miss B says the Council did not tell her it was deducting money from her wages. She says this means she lost the opportunity to raise concerns about her ability to afford the deductions.
2. Miss B says she complained to the Council and asked them to agree to reduced deductions. She says the Council at first refused to meet with her and did not properly consider her financial difficulties.

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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. We cannot question whether a council’s decision is right or wrong simply because the complainant disagrees with it. We must consider whether there was fault in the way the decision was reached. (Local Government Act 1974, section 34(3), as amended)
5. If we are satisfied with a council’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 reviewed the information provided by Miss B and spoke with her about the complaint, then made enquiries of the Council. I sent a copy of my draft decision to Miss B and the Council for their comments.

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What I found

Law and guidance

7. The Welfare Reform Act 2012 (“the Act”) says an overpayment of certain benefits can be recovered by deducting the amount directly from the person’s earnings.
8. The Act applies to councils in the case of housing benefit. Councils may recover overpayments of housing benefit by serving a DEA on the person’s employer. The employer is then legally obliged to deduct the necessary amount directly from their employee’s earnings. Councils no longer need to apply for a court order to do this and must only serve written notice.
9. The Social Security (Overpayments and Recovery) Regulations 2013 (“the Regulations”) say that councils must serve a notice on both the employer and the person who owes the debt, before making any deductions. The notice must specify, among other things, the rate at which deductions will be made.
10. The Department for Work & Pensions (“DWP”) has produced guidance on DEA for employers (“the Employer’s Guidance”). The amount employers deduct from each pay slip must be in line with the table set out in the Employer’s Guidance. Responsibility is on the employer to calculate the amount being deducted. Councils will not have any direct involvement in how this is calculated.
11. Employers will calculate the rate based on the person’s income. It must not treat certain types of earnings as income. For instance, it must not treat the reimbursement of expenses incurred ‘wholly and necessarily in the course of someone’s employment as income’.
12. The DWP has also produced guidance for staff who deal with housing benefit (“the HB Guidance”). The HB Guidance says it is good practice to send an initial ‘Letter Before Action’ to the debtor before initiating a DEA. This gives the debtor the opportunity to make payment arrangements before a DEA is started. It says DEA’s are intended as a last resort recovery option and Council’s should bear this in mind.

Background

13. Miss B is a single parent, who works part time for a company. Her hours and earnings can vary from month to month. Her company recently relocated and provides her with an additional payment once a year to cover her annual season ticket.
14. Miss B received housing benefit between 2013 and 2017. In July 2016 the Council reviewed Miss B’s earnings and found these had changed, resulting in an overpayment of around £2,800. The Council sent an invoice to Miss B and deducted amounts from her continuing housing benefit against the invoice.
15. In July 2017 the Council reviewed Miss B’s entitlement based on information received from HMRC about her earnings. It found it had overpaid Miss B around a further £250. In September 2017 another review showed a further overpayment of £470 but the Council later wrote this amount off. A final review following information from HMRC in October 2010 showed an overpayment of around £40.
16. Due to changes in Miss B’s income she no longer qualified for housing benefit from November 2017. Miss B appealed against this but was not successful. At this time Miss B still owed money in relation to the three outstanding invoices of around £2,000, £240 and £40.
17. The Council wrote to Miss B in December 2017 to tell her she no longer qualified for housing benefit. It also sent an email, in which it said Miss B would need to contact the Council’s overpayments team to discuss repayment of any outstanding amounts. Miss B did not contact the overpayments team.
18. In April 2018 the Council sent notice of a DEA, to recover the invoices of £240 and £40, to Miss B’s employer. The Council did not send notice of the DEA to Miss B.
19. The Council sent a notice saying Miss B must contact the overpayments team within the next fourteen days. It sent this after it had sent the DEA notice to the employer. Miss B did not contact the Council within the timeframe.
20. Miss B’s employer deducted the following amounts from Miss B’s earnings over the next two months (approximate figures):
• May 2018 - £240
• June 2018 - £40
21. Miss B’s employer calculated the figures based on the rates set out in the Employer’s Guidance. The Council was not directly involved in calculating the amounts to be deducted.
22. Miss B contacted the Council in May 2018 when she received her payslip in which it deducted £240. She told the Council she did not know it was going to take the money and she could not afford to lose this amount. She asked to meet with someone from the Council to discuss her financial situation. The Council did not agree to meet but sent her a financial questionnaire to complete.
23. Miss B raised the matter with her MP who asked if it was normal to take repayments in this way without notice. The Council said it could not notify Miss B of the amount to be deducted in advance because the rate of deduction will be determined by the employer with reference to the legislation.
24. Miss B filled in the financial questionnaire and sent this back in June 2018. The form showed monthly income of nearly £1,400 and expenditure of over £1,700, so a deficit of over £300. Miss B provided supporting documents, including payslips and evidence of other debts she owed. She offered to pay £5 a month toward the debt, but later clarified she meant £20, and said this was all she could afford.
25. The Council said certain elements of the listed income and expenses did not appear accurate. The Council understood Miss B received a higher amount in tax credits. Miss B had listed her TV license as £20 a month when the normal fee was £12.50. She listed her loan as £200 a month when the document provided showed it was £85. Her listed gas and electricity bills were £40 higher than average and she had not provided supporting evidence.
26. The Council said it would not consider the other debts in her expenses, as the evidence Miss B provided showed she was not making regular payments towards these debts. It also said Miss B had not provided all the documents requested in her call to the Council in May 2018. The Council sent another questionnaire for Miss B to complete.
27. In July 2018 Miss B submitted the further financial questionnaire. In this questionnaire Miss B listed a higher tax credit income. Her total listed income was around £1,650. However, she also listed a higher expenses of nearly £2,200, so a shortfall of around £550. The Council asked Miss B to provide bank statements for the previous four months so it could consider the request. It received these in mid-August 2018.
28. In September 2018 the Council wrote to Miss B and said it could not prove financial hardship from the information provided. It could not establish that Miss B was paying her household bills and found non-essential spending. The Council then served a further DEA notice on the employer for the remaining £2,000. The employer deducted the following amounts from Miss B’s earnings over the next six months:
• October 2018 - £80
• November 2018 - £555 (£325 of which was refunded)
• December 2018 - £75
• January 2019 - £135
• February 2019 - £130
• March 2019 - £155
29. The amount in November 2018 was high because that month her employer paid her the extra £1,600 towards her annual season ticket. It also paid a £760 ‘gross up’ amount. The gross up is also for the rail fare. The rail fare is tax deductible and the gross up covers deductions taken from the added income, so Miss B received the full amount needed for her ticket.
30. Miss B said she could not afford to buy her rail ticket because of the high deduction. She said the Council should not have included her rail fare payment as it was not income and was necessary for her to get to work. An adviser at the Council said he thought the fare should not have been included. On review, the Council said the employer was correct to include the fare as this was a taxable income and not a reimbursement of expenses, which would be exempt. However, the Council agreed, at its discretion, to not include the £1,600 rail fare and refund £325 of the money the employer deducted. It still included the £760 gross up.
31. Miss B could not afford to buy the rail ticket despite the refund and had to borrow money to do so. In December 2018, Miss B emailed the Council to say the £760 was where her employer had overpaid her in the previous year. A few days later Miss B submitted a complaint. In this complaint she said the gross up was for her train ticket.
32. The Council responded to Miss B’s complaint. It said it did not write to Miss B about the DEA when it took this action but had, in the past, told her a DEA was possible if she did not keep up-to-date with payments. The response did not address the gross up issue. The Council’s stage two response in January 2019 said it had correctly calculated the refund from the £1,600 payment but again did not mention the gross up.
33. In April 2019 the Council invited Miss B to a meeting to discuss her finances. The meeting took place at the start of May 2019. Miss B provided evidence of her various debts. The Council agreed to cap the amount that can be recovered from each of Miss B’s pay slips to £85 a month. The Council recorded that Miss B said she was confident she could pay this amount back. Miss B said she agreed as it was better than the situation before but that she still cannot afford the £85 a month.

Findings

34. There are three main issues I have investigated:
• Whether the Council gave Miss B the right notice of the DEA
• How it considered Miss B’s complaint about the deduction in November 2018
• How it considered Miss B’s claim of financial hardship

Notice

35. The Council is at fault for not giving Miss B notice of the DEA. The law says councils must give this notice and the Council accepts it did not do so.
36. This fault occurred twice. The Council did not serve notice on Miss B in April 2018 in relation to the first DEA or in September 2018 in relation to the second DEA. Miss B complained in May 2018 that it had not told her about the DEA so, if it was a genuine mistake the first time, the Council should have known the second time it was a legal requirement to serve a notice on Miss B.
37. Due to the lack of information Miss B received, she may not have known two separate DEA’s were served on the employer and was clearly confused as to why money was taken in May and June but then not again until October 2018.
38. The fault, however, goes further than simply forgetting to send the right notice. The HB Guidance is clear that DEA’s are a last resort option for recovery. It says it is good practice for councils to send an initial Letter Before Action before taking any action to put in place a DEA. It is clear from the HB Guidance that councils should try to reach a preferable agreement with debtors to pay back the overpayments and only consider a DEA if this is not successful.
39. In this case, I accept that in one letter the Council sent to Miss B about the end of her entitlement, it said she should contact the Council about any outstanding overpayments. However, there was a lot of correspondence going between the Council and Miss B at that time, along with ongoing requests for reviews and resubmissions of Miss B’s claim for housing benefit.
40. The Council also sent a letter to Miss B in late April 2018, three weeks before the money was taken form her account. That letter told her to contact the overpayments team and the amount outstanding. However, it did say anything about enforcement action. It sent a reminder in mid-May, but this was on the same day the employer deducted earnings.
41. There is no evidence the Council, at an early stage, sent any clear correspondence to Miss B setting out what she still owed, who to contact, what options there were for repayment and what action the Council might take (such as a DEA) if she did not get in contact. The Council did not follow up when Miss B did not get in contact. It did not send a notice that it had served a DEA. Its two reminders came after it served the DEA and did not say anything about the possibility of this course of action. The second reminder was sent on the same day the money came out of Miss B’s account, making it redundant. That raises the question why, if the Council was going to send two reminders, it served the DEA before doing so, with the money due to be deducted before both had been sent. It seems the Council used the DEA as almost the first port of call to recover the overpayments (after Miss B’s housing benefit stopped) not as a last resort.
42. Miss B should have responded to the letter in April 2018. However, she first became aware of the DEA when her employer unexpectedly deducted £250 from her earnings. It is my view this caused significant injustice to Miss B. It meant she lost the opportunity to raise concerns about her overall financial situation at an earlier point and try to agree a suitable repayment plan. It meant that she found herself suddenly £250 worse off one month and unable to meet other expenses, with no chance to prepare for that eventuality. This would have caused distress and unnecessary additional time and trouble bringing a complaint against the Council.
43. I also have concerns about the Council’s responses to Miss B’s complaints. Miss B repeatedly complained that it had not told her about the DEA or given her an opportunity to agree a repayment arrangement.
44. The Council did not at any point accept it should have sent her notice before setting up the DEA. Instead, its responses give the impression it did not need to give her notice because it had told her in 2017 it could take this course of action. However, that was a year earlier, while Miss B was still paying through deductions from her housing benefit. It in no way satisfies the notice requirement set out in the Regulations.
45. The Council did, or at least should have known, at the point of responding the complaint, that it should have given Miss B notice. It is not clear then why the Council was not transparent about this in its responses.
46. The Ombudsman’s ‘Principles of good administrative practice’ report sets out that a key principle is putting things right. This includes acknowledging mistakes and apologising where appropriate.

November 2018 Deduction

47. It was Miss B’s employer who calculated how much it would deduct from her earnings in November 2018. The employer took into account both the rail fare and the associated gross up as part of Miss B’s income for that month. However, the Council did make a decision about whether the employer was correct to do so and if it should exercise discretion to refund part of the amount deducted. It is these decisions I can investigate.
48. The first issue is whether the Council is right to say the employer should have included the rail fare and gross up as income. The Employer’s Guidance says it should not consider reimbursements for expenses incurred wholly and necessarily for work as income. However, the Council says this does not cover the type of payment Miss B received.
49. Reimbursements for expenses are normally not taxable. The relate to things such as accommodation, food and travel expenses for a journey. Miss B’s payment was for travel solely for her commute, but I cannot say it is the same as the type of reimbursement referred to in the law. It is an extra, taxable income the employer has decided to give Miss B to assist with her travel costs. I therefore cannot find fault in the Council’s decision that it should not have been automatically disregarded.
50. The Council exercised its discretion to refund £325 of the deduction. This is the amount Miss B would not have paid if the employer did not consider the £1,600 as income. It did not consider the gross up. I accept this is because Miss B at first indicated the gross up was in relation to arrears of her earnings. However, Miss B later did tell the Council it was in relation to the rail fare and the Council did not review or factor this into its decision. I therefore find fault in how the Council considered this issue, although I recognise the Council received unclear and conflicting information on this point.

Financial Hardship

51. I do not find fault with how the Council considered Miss B’s financial circumstances or requests for a reduction in her payments. Miss B asked to meet someone in person. However, it would not normally be necessary for a face to face meeting to establish whether the person is in financial difficulty. The Council can make this decision by reviewing the financial questionnaire and supporting documents to calculate the person’s income and expenditure.
52. In this case, Miss B provided confusing and widely varied information to the Council about her income and expenditure. The amounts she put on her financial questionnaire did not match the evidence she provided, and she did not always provide complete evidence.
53. The Council acted appropriately in asking Miss B to fill in the questionnaire and provide supporting evidence. It reviewed all the documents properly and reach informed decisions, which it explained clearly to Miss B. It requested further evidence where necessary.
54. The Council eventually did agree to meet with Miss B and following on from this meeting it capped the amount Miss B should pay. I cannot say the Council should have met with Miss B at an earlier time as there was no fault in the way it handled the matter up until that point. It was at the Council’s discretion to meet with Miss B and cap the payments as it had not received clear information from Miss B to show she could not afford existing repayments.
55. However, I do note that were it not for the fault above, Miss B would have had the opportunity to make a voluntary arrangement with the Council for repayments and raise concerns about her finances before a DEA was in place.

Consideration of Remedy

Notice

56. The Council did not follow the correct procedure when issuing the two DEA’s.
57. The first has now been settled. I do not consider it would be helpful to recommend the Council refund the money it deducted as Miss B would still owe the money and only have to pay it back again.
58. The second still has payments outstanding. I have considered whether the Council should revoke the DEA and discuss a voluntary payment arrangement with Miss B. Part of the injustice is that Miss B lost this opportunity and such a remedy might suitably address that injustice.
59. However, the Council has now agreed a cap and it is unlikely talks about a voluntary arrangement would result in a better result for Miss B. If Miss B and the Council could not agree on a different voluntary payment arrangement, the Council could simply serve another DEA correctly and Miss B would be in the same position.
60. I understand Miss B still says she cannot afford the £85 a month cap. However, she did agree to this during the meeting and I cannot tell the Council to accept a lesser amount. It would, again, not be helpful for me to recommend the Council revoke the remaining DEA.
61. I recommend the Council apologise to Miss B for not serving notice on her of the two DEAs and pay her £150 for distress and £150 for time and trouble. I also recommend the Council remind its employees of the HB Guidance and that DEA’s should be used as a last resort when it cannot reach an arrangement for recovery. The Council may deduct this money from any housing benefit overpayment Miss B owes.

November 2018 Deduction

62. I cannot recommend the Council repay money that was lawfully deducted. However, I recommend the Council consider whether, in view of confirmation from Miss B’s employer that the gross up was also for the rail fare, it will exercise the same discretion for the gross up payment as it did for the substantive rail fare amount.

Agreed action

63. The Council has agreed to, within a month of this decision:
• Apologise to Miss B for not sending her notice of the two direct earnings attachments
• Pay Miss B £150 for distress
• Pay Miss B £150 for time and trouble
• Provide evidence that it has reminded officers in its overpayments team of the DWP’s ‘Housing Benefit overpayments guide: Recovery of overpayments’, including that direct earnings attachments should be used as a last resort and it is good practice to send a letter before claim first
• Consider whether to exercise discretion not to include the gross up of £766 in the deductions for November 2018 as it did for the £1,600 amount. Provide Miss B with detailed reasons for its decision

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Final decision

64. The Council is at fault in how it managed the recovery of housing benefit overpayments from Miss B. It has agreed to apologise, pay Miss B for distress and time and trouble and update remind staff of guidance around direct earnings attachments.

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Investigator's decision on behalf of the Ombudsman