§ The Parliamentary Under-Secretary of State for Work and Pensions (Mr.Chris Pond)I am today announcing that contracts have been signed with four private sector companies to provide debt collection services to the Department for Work and Pensions (DWP). The contractors are Commercial Collections Services, Eversheds, Legal and Trade Collections and the Lewis Group.
The contractors will provide support with two categories of debt: benefit debt and commercial debt. They will act as recovery agents, earning commission on amounts recovered and passed to DWP. The ownership of the debt will remain with DWP at all times.
The contracts will offer support to our existing debt management operations rather than replacing or outsourcing them. There will be no job reductions in DWP as a result of this announcement. So DWP will continue to handle negotiation and civil enforcement of debts in-house. The cases transferred will be those where DWP has been unsuccessful.
The contractors will adhere to strict contractual controls on their behaviour and DWP will put robust contract management processes in place to ensure compliance. Contractors will also have to adhere to the codes of conduct of their own supervising bodies (e.g. the Credit Services Association or the Law Society) and also the Office of Fair Trading (OFT).
Benefit debt includes overpaid benefits, where the overpayment is caused by customer error, and outstanding social fund loans. The debts transferred will be those where the debtor is not currently in receipt of a 78WS DWP benefit, they have refused to repay voluntarily and DWP has been unable to obtain full recovery. Each debtor will be given the opportunity to make an arrangement to repay their debt before their case is transferred to one of the contractors.
DWP has a number of categories of debts owed by commercial organisations including:
money owed by insurance companies by way of compensation for NHS costs following Road Traffic Accidents and repayment of Social Security benefits following compensation awards;recoupment from employment tribunal awards—where employers are required to repay social security benefits paid to employees following, for example, unfair dismissal;amount owed through contracts such as European social fund, training and general supplies.As with benefit debt, the organisations owing money will be given the opportunity to make an arrangement to repay DWP before the case is transferred to the private sector for collection.
There are three main purposes to this exercise:
to reduce the debts outstanding to the Department;to reinforce the message that debts have to be repaid, especially those that arose as a result of fraud;to learn from the private sector and increase the efficiency and effectiveness of DWP's Debt Management organisation.The contract will be for an initial two-year period to March 2006, with the possibility of extension. First cases will be transferred towards the end of April 2004 with each Contractor receiving an initial tranche of 50,000 cases. After this initial allocation there is no guarantee of additional cases being referred.