Councils sending in bailiffs 'the norm'

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The StepChange report says that the number of people seeking help from the charity who have council tax arrears has tripled in just four years - making it a faster growing issue than payday loans.

The amount people owe has increased as well, from an average of £675 in 2010 to £832 in 2014.

But as more people are having trouble meeting basic costs, 65% of those who've contacted their council about getting behind with payments have faced tough demands or the threat of enforcement to get them to pay up.

Different standards

Part of the issue comes from the methods different companies are allowed to use to collect money owing.

Any organisation regulated by the Financial Conduct Authority - from banks to credit card providers to payday lenders - is supposed to act in a fair way when it comes to getting their money back.

While that doesn't rule out interest or fees for late or missed payments, it does mean creditors must also be open to negotiating affordable payment plans - although the FCA have just published a less than complimentary review of the collection methods used by the high cost credit market, which includes payday lenders.

Utilities providers are also obliged to offer affordable repayment options for anyone struggling - and water companies can't cut anyone off, even if they've never paid a bill.

There's more on what different organisations can and can't do when people don't pay in our guide here.

Councils, however, aren't allowed to charge late fees or charge interest on outstanding payments. Instead they have access to some serious enforcement tools including bailiffs and the threat of prison.

There's nothing in the law to say they have to treat those who don't pay fairly - but it would be reasonable to expect some form of openness to negotiation regarding making up the shortfall.

After all, it's in no one's interests to have to chase late or missed payments, and it would seem far easier for everyone involved to make alternative arrangements - including rescheduling payment dates or amounts, or organising a payment holiday.

Computer says no

But even when people contact their local authority to talk about the problem, help seems to be lacking.

Some 26% of people StepChange spoke to about their council tax arrears said they got in touch with their council first, while 41% said they got in touch as soon as the council contacted them.

Previous research from StepChange shows that a third of people who get in touch with their creditors are offered little support, if any at all - and that half of those who owed their council money say their council did nothing to help them.

Among those that did offer some support, around a quarter suggested an affordable repayment plan, just under 15% suggested people get debt advice, and just over 10% advised people apply for council tax benefit.

Less than 8% took into account the debtor's personal circumstances when dealing with the issue.

In fact, as mentioned above, 65% of those who got in touch with their council about their arrears were told to pay the full bill in one go, or threatened with bailiff enforcement or court action.

As well as the obvious stress this can cause, the tough tactics don't do anything to help the debtors' financial situation.

Around nine out of 10 people faced with bailiff action were charged at least £75 for letters about the intended enforcement, and 58% said they were charged at least £235 for the visit itself.

Some 15% said they were also charged an extra £110 on top of those fees for the seized goods to be sold - but only the money from the sale is put towards the arrears.

That's a potential £420 in charges, on top of the money they already owe - which isn't likely to help anyone get a grip on already difficult finances.

The cost of paying

Of those who were told they had to pay up or face enforcement action, 47% fell behind on other bills in order to meet the costs, and 49% agreed to payment plans they knew they couldn't afford.

Almost a quarter of people had to borrow from friends and family to meet the shortfall, around 14% took out payday loans - and 16% said they didn't take any action at all, because they knew they couldn't pay the bill.

Among those who weren't faced with punitive action or demands for payment, a third still fell behind on other bills, and just under 40% agreed to unrealistic payment plans.

But the number borrowing from friends and family halved, and just 4% took out a payday loan to cover the cost.

In both cases a large proportion of people sought extra debt advice - but as StepChange point out, by the time a demand has been made there's less that can be done to prevent enforcement action and prevent people getting into further debt.

Personal circumstances

Because of the different approaches to reclaiming money owed, and the lack of interest in personal circumstances shown by many organisations, the charity say too many people are at risk of being financially derailed by one or two temporary setbacks.

Bereavement, having children, stress-related illness and other health issues can make even the most resilient of households temporarily vulnerable - and that should be taken into account if they have financial trouble.

FCA research has shown people in vulnerable situations are more likely to be adversely affected by poor practice, such as failing to take into account personal circumstances when chasing payment.

To that end they've told banks they need to do more to support vulnerable people - but StepChange says councils would also do well to take heed: as we've already mentioned, fewer than 10% of people surveyed said their council asked about their circumstances.

That included 18% who had children at home, 4% who were ill or physically disabled, 6% with stress or mental health issues, 9% who were caring for another adult and 4% who had recently been bereaved.

As well as calling for improved treatment of people in such vulnerable situations, StepChange want the same protection brought in for people who admit they're having temporary financial problems as exists for those who've declared themselves insolvent.

In Scotland it's already the case that people with temporary or solvable debt issues, including council tax arrears, have statutory protection. That protection involves freezing any threat of enforcement action from the moment they seek debt advice.

In England and Wales, however, councils face being named and shamed if they don't collect enough of their taxes "in year".

That pressure pushes many towards collecting money owed by set dates rather than in a way that's better for households and the council's coffers combined.

And yet cracking the whip doesn't seem to be working for anyone. StepChange say council tax collection rates fell by 0.4% in the 2013/14 collection year - only the second drop in 20 years.

The evidence then, would suggest that carrots are far more effective than sticks when it comes to getting people to pay what they owe.

And with the total social cost of debt thought to be around £8.3 billion nationwide, it could be that the odd red face at the council is far better for the economy than threatening people to make them pay on time.