Overpayments

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Overpayments
Housing Benefit Training
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What is an overpayment?
Overpayment means any amount which has been
paid by way of Housing Benefit and to which
there is no entitlement under these Regulations
and includes any amount paid on account under
regulation 93 which is in excess of the
entitlement (Reg 99, HB Regs 2006/Reg 80,
HB(SPC) Regs 2006). The corresponding
regulations for Council Tax Benefit, Reg 82 and
Reg 67 refer to excess benefit rather than an
overpayment but the meaning is essentially the
same an amount that was awarded to which there
was no entitlement,
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What causes an overpayment?

• Overpayments arise from revisions and
  supersessions of existing claims which result in
  a reduction in entitlement. Revisions are
  changes going back to the date of an original
  decision, while supersessions take effect from a
  later date.
• For example
• The initial award decision is revised due to a
  mistake on the initial claim
• The initial award decision is revised as it was
  made in ignorance of a material fact
• The award decision is superseded due to a change
  which has taken place since the original decision
  was made.

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Prevention of overpayments

• How does the LA prevent overpayments occurring?
• Ensure the claim is initially assessed correctly
• Encourage claimants to notify them of reportable
  changes
• Prioritise changes in circumstance which reduce
  benefit
• Ensure correct identification of documents
• Suspend or partially suspend payments where
  information is needed to reassess the claim

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Calculating an overpayment

• LAs should look to ensure the changes are
  treated correctly and are made effective from
  the correct dates. Most changes are effective
  from the Monday following the change, but some
  are not, for example
• Adverse non-dependant changes for the 65 and over
  group are deferred 26 weeks,
• Annual Rent Officer Decisions are effective on
  the Monday following receipt if they are lower
  than the last one,
• Changes in rent are effective on the day of the
  change
• An award of Tax Credit arrears is counted as
  capital and disregarded for 52 weeks

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Calculating an overpayment
Underlying entitlement Has the overpayment been
calculated taking into account any underlying
entitlement? Underlying entitlement is an
accounting device to reduce any overpayment by
an amount the customer would have been eligible
for if the true circumstances were known. it is
not a payment of Housing Benefit or Council Tax
Benefit. When an overpayment is created the
claimant should always be asked to provide
details of their case to allow an assessor to
calculate their correct entitlement. Late
notifications of an advantageous change can also
be used to reduce the overpayment.
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Calculating an overpayment

• Underlying entitlement
• The application of underlying entitlement has
  its limitations
• Any underlying entitlement taken into account has
  to be within the overpayment period,
• If the notified change would increase the
  entitlement above the level of benefit awarded
  the extra is not paid. However the total
  overpayment could be reduced further using an
  increased award within the overpayment period.
• Underlying entitlement is not applied where the
  customer vacates the property (although LAs can
  sometimes offset arrears due at the new address
  against an overpayment at the old).

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Calculating an overpayment
Underlying entitlement The DWP advise that once
a request for underlying entitlement has been
made the normal one month time limit applies to
the return of the information. However recent
Commissioner decisions suggest underlying
entitlement applies outwith the normal time
limits.
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Calculating an overpayment

• Diminishing Capital rule
• Where legally recoverable overpayments have been
  caused by using incorrect amounts of capital,
  and the period of the overpayment extends over
  14 weeks, LAs should apply the diminishing
  capital rule. The overpayment calculation should
  account for capital reducing had the correct
  level of benefit been paid
• The calculation is usually revised every 13 weeks

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Calculating an overpayment

• Diminishing Capital rule
• For example
• An overpayment arises when it comes to light
  that the claimant has capital of 17,000.
  Benefit has been in payment for 26 weeks at
  120.00pw, and the overpayment is initially
  calculated as 26 weeks x 120 3,120.
• However, the diminishing capital rule should be
  applied
• Week 1-13 HB payable nil and overpayment
  1,560 (13 x 120),
• _at_ Week 14 capital is reduced to 15,440
  (17,000 1560),
• This gives the claimant a notional entitlement
  of 95.3 per week.
• Week 14-26 HB payable 95.3 and overpayment
  321.1 (13 x 24.7).
• Total net overpayment will be 1,560 321.1
  1881.1

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Allocating the subsidy classifications

• Subsidy codes
• As important as getting the calculation right is
  ensuring the correct subsidy code is applied.
  The subsidy the LA receives can vary from nil to
  100.
• The codes are

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Is the overpayment recoverable?
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Why is it recoverable?

• There are two instances where the LA is bound by
  the regulations to recover
• Payments on account to which the claimant is
  subsequently not entitled must be recovered
• CTB excess payments which are caused by a
  reduction in the liability (i.e. discount
  awarded) must be notified to the claimant
• In all other instances the LA will have to first
  decide whether the overpayment can be recovered
  except where benefit has been posted as rent
  rebate. In which case Reg 100(4) allows recovery
  from the date of revision

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Is the Overpayment recoverable?
Was the overpayment due to official error?
No
Yes
Could the claimant (or the person to whom payment
was made) reasonably have been expected to know?
Recoverable
Yes
Unrecoverable
No
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Factors to be taken into account

• When deciding whether to recover an overpayment,
  the LA should consider
• Cause of the overpayment
• What notification was sent with the payments
• Who was it paid to and how
• When it was paid in relation to the overpayment
  period
• The circumstances of the claimant

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Who should the LA recover from?

• Recovering the overpayment
• Once the LA has established that the overpayment
  is correct and recoverable, it now has another
  series of decisions to make
• From whom can the overpayment be legally
  recovered?
• From whom should the overpayment be recovered?
• Should the LA actually seek to recover the
  overpayment?

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Who should the LA recover from?

• The effect of R(H)6/06
• For overpayment decisions made prior to the 10th
  April 2006, the LA had a legal choice from whom
  it could recover. Once it made that choice it
  could only be challenged at a Judicial review.
• The choices were
• The claimant
• The person who received the payment
• Any person (e.g. an appointee) who misrepresented
  or failed to disclose a material fact which
  resulted in the overpayment
• The claimants partner

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Who should the LA recover from?

• The effect of R(H)6/06
• For overpayment decisions made prior to the 10th
  April 2006, the LA had a legal choice from whom
  it could recover. Once it made that choice it
  could only be challenged at a Judicial review.
• The exceptions were
• If Reg 101(1) applied, in which case the LA could
  not recover from the landlord/agent.
• In Reg 101(4), instalment recovery cannot be made
  from the claimants partner, unless they were
  partners during the period of the overpayment and
  at the time of recovery.

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Who should the LA recover from?

• The effect of R(H)6/06
• Subsequent to this decision, the regulations
  have been amended. The new regulations apply to
  overpayments post 10th April 2006
• The Reg 101(1) exemption preventing recovery from
  the landlord no longer applies when the
  overpayment arises due to the claimant vacating
  the property.
• Reg 101(2)(a) now limits recovery to the person
  who caused the overpayment or could have known it
  was occurring even where payment has been made to
  a third party.
• Reg 101(2)(b) also allows recovery from the
  claimant and/or partner, as well as the person
  the HB was paid to, where there is a no fault
  overpayment to be recovered.

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The discretion to recover

• LAs have the discretion not to recover a
  recoverable overpayment. When making the
  decision to pursue recovery the LA should
  consider
• The LA finances
• The circumstances of the claimant
• Age, health, ability to pay, amount of the
  overpayment
• There will also be additional local factors to
  be taken into account such as corporate
  Write-Off policies and the LAs Anti-Poverty
  Strategy. However, the final decision rests with
  the LA and is not subject to an appeal.

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Notification and Appeal Rights

• The Decision Notice
• The LA should provide claimant/affected party
  with
• Confirmation that it is a recoverable
  overpayment,
• The reason why it is a recoverable overpayment,
• The amount, how it was calculated and the period
  it relates to,
• The decision of the LA to recover,
• The decision on the possible targets for recovery
  (subject to appeal),
• The decision on the actual target for recovery
  (not subject to appeal).

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Notification and Appeal Rights

• The Decision Notice
• R(H)6/06 also affects how LAs should draft
  decision notices. Where there are multiple
  possibilities for recovery
• The LA should advise all the legal targets for
  recovery action of the overpayment,
• LAs should issue a single decision to all parties
  from whom an overpayment can be recovered,
  advising that there is an overpayment
  recoverable from them,
• Where recovery is NOT recoverable from the person
  it was paid to (as per Reg 101(1)), they should
  be notified of this.

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Notification and Appeal Rights

• The Decision Notice
• The LA should provide claimant/affected party
  with
• The right to a written statement,
• The right to an appeal within the given time
  limits (normally one calendar month),
• The right to make full repayment or negotiate
  some other arrangement within 28 days.
• In addition, LAs are required to notify
• The proposed amount of instalment recovery (if
  applicable)
• The method of recovery if a CTB overpayment

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Notification and Appeal Rights

• The Decision Notice
• The LA must ensure that ALL the affected
  parties are notified in accordance with the Regs
  and given the appropriate appeal rights
• Decisions subject to appeal
• Is the overpayment correct?
• Is the overpayment recoverable?
• Can we legally recover from the persons
  identified?
• Decisions not subject to appeal
• The method of recovery
• From whom the benefit should be recovered

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Taking Recovery Action

• Managing the recovery process
• The DWP advise that no recovery should take place
  until the calendar month for Appeals has lapsed.
• LAs should seek to maximise the rate of recovery
  while having regard to the affected persons
  individual circumstances.
• LAs should seek to maximise the speed at which
  overpayments are recovered by utilising all the
  recovery methods available to them.
• LAs may ask persons to voluntarily pay back
  unrecoverable overpayments as long as full
  notifications are sent which also advise them
  that the overpayment is unrecoverable.

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Taking Recovery Action

• Managing the recovery process
• Claimant is still in receipt of HB
• By deduction from ongoing HB payments.
• By withholding arrears of HB.
• Claimant is no longer in receipt of HB from the
  LA
• Invoice
• From deductions from certain DWP benefits
• Court action
• applying to another LA where the claimant is in
  receipt of HB
• recovery from a deceased persons estate
• Recovery from a blameless tenant

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Taking Recovery Action

• Administrative Penalties
• These are used as an alternative to prosecution
• It is equivalent to 30 of the recoverable
  overpayment,
• Has to be made with the agreement of the person,
• They can withdraw from that agreement within a 28
  day period.
• Once agreed
• The person is immune from prosecution
• If the person later defaults on payments the LA
  cannot revise its decision not to prosecute
  although they can take civil proceedings to
  recover the debt
• If the claim is reviewed and the overpayment is
  affected the LA has to reconsider its original
  decision