Issues with local and UK government creditors
The CFS is currently not required to be used across central and local government organisations. In 2019, only 23 per cent of councils in England and Wales used the CFS in their debt collection process. They often use a non-standardised income and expenditure form. These are not publicly accessible therefore little information is available about spending and how disposable income is defined.
This can result in repayment rates being set by local and UK government creditors, which are unaffordable for the client. Often these types of creditors will look at a client’s income and not their realistic expenditure.
Due to this, government organisations will not take into account that clients may have multiple governmental creditors that will compete for payments from a client who is unable to cover even one of the government creditors. HRMC states they expect 50 per cent of an individual’s disposable income to be put towards their ‘time to pay’ arrangement, which may be unreasonable if the client has other priority debts.
For example, if a client owes both council tax and rent to the local council, the different departments will both be looking for 50 per cent of a client’s disposable income, leaving the client at risk of being unable to pay other creditors.
Creditors are advised by the FCA’s Consumer Credit Sourcebook and the Lending Standards Board to accept a CFS and use it as evidence when considering a client’s repayment offer.