The Department for Work and Pensions is being forced to rethink a scheme to pay debts and bills directly out of a person’s benefits without discussing it with them first.

The Court of Appeal has confirmed that the current guidance on the Third Party Deduction (TPD) scheme issued by the DWP is unlawful because it says there is no point in finding out whether a claimant’s personal circumstances affect whether deductions should be made, since it only makes a difference in very few cases.

The court said this is very close to saying that the interests of the claimant are irrelevant, which is precisely the opposite of what the regulations demand.

The decision was in response to Work and Pensions Secretary Mel Stride’s appeal against the findings of a judicial review brought by benefit claimant Helen Timson.

The review found in her favour last September and the appeal was heard in April. Now the Appeal Court judges have ruled unanimously that the way the DWP operates the scheme is unfair.

Lord Justice Edis said:

The submission of the Secretary of State… comes down to the proposition that because only in very few cases can the personal circumstances of the claimant or their family make any difference, there is no point finding out what they are.

This is very close to saying that the interests of the claimant are irrelevant, which is precisely the opposite of what the regulations say.

The Secretary of State can only make a TPD direction after forming an opinion or being satisfied about the interests of the particular claimant and family under consideration.

The regulations therefore require that their interests are assessed in the light of all relevant information which must include anything they wish to say on the subject. After forming that judgment the Secretary of State may make a TPD direction.

He added:

In my judgment, the regulations, by framing the decision-making as they do, require a consideration of the interests of the individual claimant and their family.

Under the guidance, however, the decision-maker has the option of contacting them, or of investigating their benefit records, but the guidance allows a decision to be made where the claimant or their family has been given no opportunity to supply information beyond what the utility company puts in the spreadsheet.

This appears to me to be obviously unfair.’

This is an important victory for anybody who might be affected by deductions in the future – and the High Court judgment recorded that there were more than 250,000 deductions in respect of water, electricity and gas debts last year.

In the midst of a cost-of-living crisis, it seems reasonable to expect the relevant utility firms to make increasing numbers of TPD requests in the foreseeable future.

This judgment means no deductions may be made without first discussing the extent of any hardship they are likely to cause with the claimant. This may lead to the request being turned down.

But it isn’t all good news: the judgment applies to deductions for utility charges from legacy benefit (non-Universal Credit) only. The DWP can make deductions from benefit for other things which don’t have the same statutory requirement to be in a person’s ‘interests’ (e.g. for council tax, fines, and child support) and so will not be caught by this judgment.

Source: Bindmans client success in Third Party Deductions Scheme appeal

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