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What is virtual enforcement?

23 October 2020

In July 2020, Just launched Virtual Enforcement offering creditors such as local authorities, utility providers and solicitors a new way to enforce judgements for unpaid debt.

Enforcement action is traditionally considered a last resort when attempts to resolve unpaid debt have failed. Debtors subject to enforcement action have often avoided repeated demands for payment from the creditor themselves and their debt recovery providers.

In most cases, the order that the enforcement agent is instructed upon, is not to recover payment, but to take control of the debtor’s goods and sell them to recover the debt. This remains the public perception of bailiffs.

In modern times, however, enforcement agents actually spend more time and effort trying to get debtors to engage before this happens and instead organise a debt repayment plan. This can be agreed by mutual consent with control of goods (on paper) to secure repayments.

Traditionally, a physical visit is required to in order to agree to such a repayment plan. However, our solution allows a debtor to schedule a video call with an enforcement agent replacing the need for a physical house visit to confirm any repayment plan.

This has a number of advantages for all parties.

What are the advantages of virtual enforcement?

Virtual enforcement solutions allow qualified enforcement staff to work remotely when seeking to collect on unpaid debts. This has the following advantages:

  • Virtual enforcement visits cost less to undertake reducing the overall cost of enforcement which is traditionally passed to the debtor.
  • Each virtual visit takes place at a mutually agreed time making them more convenient on both sides and far less intrusive than a traditional house visit.
  • Virtual enforcement encourages responsible debt resolution with an increased compliance stage before enforcement action takes place.
  • Our virtual enforcement solution is underpinned by open banking, which is designed to assess a debtor’s ability to pay and identify vulnerability from the outset.
  • As a remote solution, virtual enforcement offers a Covid-19 secure alternative traditional enforcement which adheres to social distancing requirements.

Just has estimated that the effective use of virtual solutions could reduce the costs of enforcement by up to £700 and eliminate the need for physical visits in certain cases.

A debtor requiring more time to pay, or a period of forbearance, is now able to achieve this without the need to let an enforcement agent through their door.

How does virtual enforcement work?

We developed our virtual enforcement solution after extensive consultation with industry stakeholders including Citizens Advice and the All-Party Parliamentary Group for Debt and Personal Finance.

Our solution – the first of its kind – allows enforcement stage one of the process to take place over a video call, enabling enforcement agents to secure goods against payment plans without having to attend a debtor’s property which, by law, triggers additional fees.

Debtors will be able to arrange suitable payment plans and arrange a time and day for a virtual visit to take place to secure the arrangement against goods but without the distress of having an enforcement agent turn up and enter their home.

You can find out more about the different stages of the enforcement process below.

What are the four stages of debt enforcement?

The Taking Control of Goods (Fees) Regulations 2014 stipulates a four stage process for enforcement, with fees assigned to each stage.

Compliance stage - The process starts with the compliance stage. At this stage a formal Notice of Enforcement is sent by an AHCEO to the debtor seeking repayment in full.

Enforcement stage 1 - If the debtor fails to make contact with the AHCEO or requests to pay by instalments during the Compliance Stage, an enforcement agent will attend their premises to take control of goods.

This stage is known as Enforcement Stage 1 and the fixed charge at this point is £190 plus VAT (£228) plus 7.5% of the sums to be recovered over £1,000, again plus VAT.

Enforcement stage 2 - If the debtor refuses either to make any payment or to enter into an acceptable instalment arrangement, then the matter moves to Enforcement Stage 2.

If a payment arrangement, with a signed controlled goods agreement, is subsequently broken, the EA will re-attend the property either under Enforcement Stage 2 or the Sale or Disposal Stage dependent upon the circumstances so far.

The fee for Enforcement Stage 2 is a flat £495 plus VAT (£594).

Sale or disposal stage - Should enforcement get to the point where goods actually need to be removed, the enforcement progresses to the Sale or Disposal Stage.

The fee for this stage is £525 plus VAT (£630) plus 7.5% of the sums to be recovered over £1,000, again plus VAT. The costs of removal are normally included in this sale stage fee.

Court fees - There is also a £66 court fee for transferring a CCJ to the High Court for enforcement, which results in the award of the writ of control. If successful, this fee is recovered in full from the judgment debtor.

Read our Myth-buster on virtual enforcement

What is the legal status of virtual enforcement? 

In July 2020, for the first time in history, Just launched the sector’s first ever virtual enforcement solution to enable effective, socially distanced debt collection during periods of national lockdown.

We believe that reducing the amount of debtor interaction at the door, and taking it into an environment using the right technology, is a thoughtful and modern approach to enforcement.

We are also proactively seeking to confirm that our solutions are fully compliant with the The Taking Control of Goods (Fees) Regulations 2014.

The Ministry Of Justice has said there’s nothing in the legislation that expressly permits or prohibits virtual enforcement visits but did acknowledge that that if virtual enforcement was to be challenged and taken to court, it would be for the judiciary to make any decision.

Consequently, we are currently seeking to establish that virtual enforcement solutions are fully compliant and can be offered at no additional cost as a replacement to stage one enforcement visits.

Read about our upcoming court hearing on virtual enforcement