The DWP have suspended recovery of certain debts for three months. This is a temporary measure due to the Coronavirus outbreak. The announcement was made on 3rd April 2020.
Which debts are being suspended?
Deductions from Universal Credit, DWP legacy benefits (ie IR-ESA, IB-JSA and Income Support), and agreed repayment plans of the following debts are being suspended
- Overpayments of benefits
- Social Fund loans
- Tax Credit debts
NOTE: This does not include debts recovered by a Local Authority from an on-going HB award, or by HMRC from an on-going Tax Credit award.
In a recorded message on its Debt Management telephone line, tells claimants:
'... we are stopping recovery action associated to benefits overpayments, tax credits debt being managed by DWP, and social fund loans for a temporary period.
We will no longer start to recover any new debts and will be suspending repayment of any debts already being recovered. This includes deductions for the repayment of benefit overpayments, tax credit debt and social fund loans from all benefits, direct debit plans, and repayments made to employers.
You do not need to speak to an adviser to ask us to do this, we have arranged this on your behalf.
If you currently make repayments through a bank standing order, please contact your bank to cancel your arrangement. If you currently make repayments by bank giro credit, please suspend these payments immediately. If you currently make repayments through online banking, please suspend these payments immediately.'
In a further announcement on 7th April, the government said that deductions from benefits through the
- Eligible Loan Deduction Scheme
have also been suspended ‘until July 2020 at the earliest’ due to the Coronavirus.
The Eligible Loan Deduction Scheme is an initiative to increase the supply of affordable credit for people on low incomes, such as credit unions and community development finance institutions. Where someone falls into arrears with their repayments, lenders can apply to the DWP to make deductions.
More info here.
How soon will DWP benefit claimants see their deductions stop?
We don’t know!
This is an administrative change – not a change to legislation (as far as we are aware) – so a claimant does not have the legal right to have these deductions stopped.
How quickly their deductions stop will depend on whether the computer systems can remove the deductions and if not, when someone makes a manual adjustment to their award. Information we received from a DWP Partnership Manager said,
'Many activities will cease immediately but others may take a longer to implement.'
What about deductions for Advance Payments?
Deductions will continue to be taken to recover Advances.
What about Third Party Deductions?
Originally there was no official announcement about a policy to suspend deductions for non-DWP debts, eg rent arrears, Council Tax arrears, court fines etc. - despite many reports that this was happening.
On 30 April the DWP External Affairs dept stated they are suspending Third party Deductions until 10 May.
"An unprecedented number of Universal Credit applications have been made since March. The Department has rightly prioritised the processing of these claims to ensure people get the support they need during the coronavirus outbreak.
This means prioritising our resources and as a result of this we’ve made a decision to pause deductions from existing UC claimants, on behalf of third parties. This includes deductions taken on behalf of landlords relating to rent arrears and service charge arrears. This activity has been paused for one month only, while we work through the huge number of new claims. All deductions will resume on 10 May as normal."
They also said, in a statement to Inside Housing magazine on 29 April, that they are in the process of explaining the changes to claimants via their online journal and to third parties, including housing providers who collect arrears via this method. Andin a statement to stakeholders:
" Third party payments that have been suspended include: Rent arrears, Service Charge arrears and Council Tax arrears. Direct payments for rent will continue and are not affected by this temporary pause
Will this suspension continue beyond 10 May?
It seems unlikely, as on 27 April, Mims Davies, in a parliamentary written answer, said,
'We have no plans to remove sanctions or deductions incurred before the COVID-19 outbreak for those self-isolating.
Deductions are already capped at 30% to not overburden the claimant. Should we suspend deductions there is a risk that some claimants will be unable to pay their outstanding arrears from Third Party’s, potentially resulting in eviction or a loss of services'.
Why are they DWP suspending some deductions?
The government announcement says,
The change means many claimants will see an increase in the amount of money they receive in benefits during the outbreak.
It will also allow the department to move a significant number of staff to front line roles, so it can focus on getting money to those who need support, following a significant increase in claims over the last two weeks.
The DWP are moving staff from other departments to help with claims processing due to the surge in claims (the BBC reported on 9th April 2020 that 1.2 million claims had been made for UC in the previous 2-3 weeks). So we assume staff from the Debt Management Dept are being re-deployed on claims processing.
Will it reduce the financial burden on UC claimants?
For many claimants – yes.
However, what is not clear is if deductions for rent arrears or fines would increase as a result of the DWP/HMRC debts not being recovered.
Deductions from Universal Credit are subject to rules on maximum amounts – normally no more than 30% of the claimant’s Standard Allowance should be taken in deductions. But if one type of deduction ceases, that could allow for higher deductions for another debt.
The minimum level for rent arrears is 10% and the maximum is 20% of the standard allowance. The minimum level for court fines is 5% of the Standard Allowance and the maximum is £108.35 per month.
As the policy's aim is not to increase the financial burden on claimants, we certainly hope that this would not happen.