Purpose of This Policy

To prescribe a comprehensive policy for the methods by which Tamworth’s staff will deal with benefit overpayments and their recovery.

Background

What are Overpayments?

The Housing Benefit and Council Tax Benefit regulations describe overpayments as any amount of benefit paid, by cheque, BACS or credit to an account, to which there is no entitlement.

Why do They Occur?

Most occur as a direct result of changes in circumstance being reported late to the Council.  They can also occur as a result of third party information about a claimant e.g. from landlords, from information gathered by Investigation Officers or even when officials make mistakes e.g. Council staff, DWP staff, Pension Service staff or HMRC staff who process Tax Credits.

The Rules

The benefit regulations dealing with overpayments are complex, requiring separate decisions on causes, recoverability as well as methods and persons to recover from. Unless dealt with properly, overpayment decisions can lead to improper debt creation and financial hardship for claimants, large volumes of debt being written off by the Council, under or over claims of Government subsidy or possible disqualification of subsidy and financial losses to the Council itself.

POLICY REQUIREMENTS

1.      Awareness Training on Overpayments

It is policy to provide overpayments awareness training to all Benefits staff. This training includes understanding what types of changes of circumstance customers have a duty to report to the Council, as well as the likely impact on their benefit claim. This will help ensure that customers are made aware of the changes that need to be reported and that to avoid overpayments occurring, they need to provide details promptly.

It is also policy to provide publicity information for claimants and landlords on how to prevent overpayments occurring, their duties to report changes of circumstance and their rights to challenge overpayment decisions.

2.      Identification of Overpayments

Benefits staff are authorised to identify all overpayments and attach the reason/cause for their creation in accordance with DWP guidelines. For example claimant error, fraud, other error, technical error, DWP error, HMRC error.

In cases where overpayments occur as the direct result of more than one cause, the debt is apportioned between the causes, e.g. based upon when information was provided to the Council.

Where evidence exists that the original cause was wrong or needs changing, that benefit staff are authorised and empowered through training to amend an overpayment reason, for example from claimant error to fraud.

Workflow is prioritised to ensure that changes in circumstance that result in the removal of entitlement, i.e cancellations of benefit are normally actioned within 24 hours of receipt.

Where the overpayment arises as the direct result of the mistake by an official the following will take place:-

• Errors by DWP/HMRC staff are referred to them for confirmation before causes are added.
• Errors by Council staff will be allocated as Local Authority error.
  

3.      Decisions on Whether the Overpayment is Recoverable or Not

It is policy that the Benefits staff are authorised and empowered to make decisions on the recoverability of all overpayments in accordance with the benefit regulations.

These rules provide that some overpayments will be deemed recoverable, for example Payments on Account (urgent payments where HB Regulation 93 requires payment within 14 days of receipt of the claim) for Private Rented non Local Housing Allowance cases.  Council Tax Benefit overpayments caused by reductions in the value of the Council Tax due will also be deemed recoverable.

All other overpayments are legally recoverable except for “Official Errors”, being mistakes by any official of the Council, DWP, Pension Service or HMRC involved with the claim. These overpayment cases are subject to an additional test under the regulations. This test requires that where there is a “reasonable expectation” on behalf of the person receiving the money (or any notice of its payment direct to an rent or Council Tax account) that they were being overpaid, that these types of overpayments can also be recovered by the Council. An important legal precedent in this area requires that the decision should take into account the information that the Council supplied to the customer and whether they would have understood it clearly.

The Benefits team are authorised to make decisions on the recoverability of official errors, under the reasonable expectation test, detailed above.


4.      Calculating the Amount of the Overpayment

This policy confirms that  Benefits staff must to calculate all overpayments in accordance with the benefit regulations.  This means: -

starting with the gross amount due - being the weekly amount overpaid times the number of weeks overpaid.

then reducing the gross amount by: -
any actual award of benefit properly payable for the same period as the overpayment; or
any underlying entitlement, up to the full amount overpaid, for the same period,

to identify the net amount due.

NB. Only where the customer makes a valid claim will the first adjustment be appropriate and only in cases where the customer provides all requested proof of income and capital for the period of the overpayment, will the second adjustment be made.

The Benefits staff are also permitted to make further adjustments to overpayments in individual cases where;-

• The diminishing capital calculation rule should apply - for failure to provide correct details about the value of capital held; or
• The customer has made payments on to a rent or Council Tax account above an incorrect (erroneous) liability i.e. because they knew they would need to pay something, despite having an account which currently does not display the correct amount actually payable.

5.      Making the Decision to Recover the Overpayment

Despite there being clear subsidy incentives to encourage recovery of all overpayments, as the decision is a discretionary one (see section 75 Social Security Administration Act 1992), it is important that each decision is made on its individual merits.

Benefits staff are permitted to continue making decisions to recover overpayments as authorised by the legislation.

In cases  such as:-

• A claimant who is suffering from severe financial hardship and recovery may cause the customer to lose their home, because of rent arrears; or
• A claimant who has died with no funds in their estate, the Council may decide not to recover any recoverable amounts and will pass the debt immediately for write-off action, see later policy details.

6.      Persons from Whom Recovery will be Sought

Benefits staff are authorised to recover overpayments from all ‘prescribed persons’ identified within the benefit regulations. These are:-

• Claimants themselves where they have received benefit monies
  
• The claimant’s partner, if that person is claiming benefit now, on the understanding that the claimant and partner were members of the same household both at the date of the overpayment occurring and when recovery is sought.
  
• Landlords, in cases where they have received Housing Benefit payments directly and the decision is made that they did contribute to the cause of the overpayment.
  
  However the landlord will not be responsible in cases where he/she has notified the Council of a fraud case which stops Public Monies being wasted on this claim, if he/she notifies the Council in writing of the change of circumstance information instead of the tenant.

Benefits staff will also be permitted not to pursue the landlord in cases where they believe the recovery should be sought directly from the tenant. This will normally be in an instance where the landlord would have no knowledge of the change that led to the overpayment.

Additional prescribed persons are: -

• Appointees in cases where benefit monies have been paid directly to them on behalf of the claimant
  
• A “blameless tenant” in accordance with the requirements of section 16 of the Fraud Act 1997 - see details under Methods of Recovery below
  

7.      Debt Recovery Strategy - Methods and Rate of Recovery

Councils should actively pursue recovery of all legally recoverable overpayments to protect Public monies using all the proper remedies available to it.

Policy confirms that Benefits staff are authorised to recover overpayments using all the following methods;-

• Deductions from ongoing benefit. This is the primary method of recovery and one of the most effective. From April 2011 these figures are £10.20 per week for non-fraud overpayments and £13.60 per week for fraud cases. This amount can be added to by a further 50% of any earned/ unearned income disregards that apply on the claim. In all cases where benefit is resumed, any overpayments outstanding will be recovered at source from ongoing benefit entitlement.  Up to date records are kept at all times to ensure debt balances are accurate.

Retrospective deductions can also be made in addition to ongoing  deductions and arrears payments of benefit can be offset against any outstanding overpayments.

Benefits staff are authorised and empowered to set and revise the level of ongoing recovery in individual cases where appropriate, and in particular to avoid severe financial hardship.  The current minimum deduction level is £3.50 per week.  Initial recovery action will however be initiated at the maximum rate levels pending communications from individual customers.

• Issue of a sundry debtor invoice. This method of recovery will apply to all debts, where the tenant is no longer on benefit (hence deductions cannot be applied) or when landlords have been overpaid and there are no blameless tenants (see below) that can be used for ongoing recovery.
• 
  Benefits staff are authorised to recover overpayments using the Debtors system and continue recovery action to County Court stage, where the sum involved is greater than the value of court costs (currently £35 minimum). Debts of less than this amount should not proceed further, but be passed for write-off action (see below).
• Blameless Tenant recovery. This effective method of recovery introduced by the Fraud Act 1997 allows the Council to reduce the amount of housing benefit payable to a tenant who was not responsible for the original overpayment. However as the blameless tenant has also asked for his/her benefit to go direct to the same landlord, deductions are lawfully permitted.  To avoid the landlord taking recovery action for unpaid rent against the blameless tenant, the rules require that the landlord be clearly notified that this is treated as a valid discharge of the blameless tenant’s rent.

Benefits staff are authorised to use this method in all relevant cases, provided that the appropriate notice is issued to the landlord.

• Recovery via the Council Tax account. Excess payments of Council Tax Benefit can lawfully be recovered by clawing the benefit back from the account and creating Council Tax debt. The debt is then treated as normal Council Tax due and is recoverable via the Magistrate’s court.
  
  Benefits staff are authorised to use this method for all Council Tax Benefit overpayments.
• Recovery from Council Tenant rent accounts. Benefits staff are authorised and empowered to recover overpayments directly from a rent account, where monies have been paid to a rent account over and above the rent due at the time, for the period of the overpayment.  Where a rent account is prepaid, Benefits staff can recoup overpayments to the value of the prepayment, subject to written authorisation being obtained from the tenant,  This is because overpaid housing benefit cannot be treated as unpaid rent for the purposes of actions to regain possession of council houses as part of the recovery process.
• Recovery from the ongoing Housing Benefit payable by another Authority. Whilst many tenants move inside the Tamworth area, some move from one local authority area to another. Where they have previously been overpaid this can mean that recovery of the debt becomes problematic or impossible. To avoid wasting public monies it is lawful for the Council to enter into arrangements (normally reciprocal) with other Councils to recover overpayments from the current award being paid by that other Authority.  Such recoveries will normally be at the full deduction rate of £10.20, or £13.60 per week, unless lesser amounts are negotiated individually with the other Authority. As mentioned earlier this is one of the most effective recovery options, means safeguarding public monies, as well as providing an improved subsidy return for the Council.

Benefits staff are authorised to enter into arrangements with other Local Authorities to optimise overpayment recovery.

• Recovery from other Social Security benefits.   Local Authority benefit overpayments will fall as a low priority for recovery by the DWP.  This is because they will recover their own overpayments and any social fund loans first, but it is another lawful route for recovery and should be used as a viable option before any write-off is considered. NB. There is currently no corresponding right to recover from Tax Credits administered by HMRC.
  
  Benefits staff are authorised and empowered to use this method of recovery and to work closely with the Debt Management Service to optimise recovery.

8.      Notification of Overpayment Decisions

Asking people for money is a difficult task, so when the Council makes decisions on overpayments it is required by the benefit rules to fully explain its decision and why the overpayment debt is repayable. Schedule 9 of the Housing Benefit Regulations 2006 and corresponding Council Tax Benefit Regulations gives the composite requirements of such decision letters, including third party letters to landlords who owe monies. Clearly the better quality the letter the more likely customers will understand why they owe the Council money, leading to a higher success of recovery.

Benefits staff are required to provide clear legal decision letters on all overpayment decisions, which not only incorporate all Schedule 9 requirements including underlying entitlement and appeal rights, but are drafted in a clear and unambiguous manner, which fully explains the reason for the debt.

9.      Priority of Recovery

Whilst it is important to recover all overpayment debt, the Overpayment recovery team should always prioritise recovery of overpayments caused by deliberate intent to gain or increase benefit entitlement. In these cases where fraud has been proven and an Administration Penalty is accepted by the customer, priority should always be given to recovery of the Administration Penalty amount. This action is taken and monitored by the Overpayments/Investigations Support Officer.

The hierarchy of overpayment recovery is that after recovery of any Administration Penalty and fraud overpayments, the current oldest debt should then take priority for recovery.

Last updated 30/03/11