Where a landlord has a current tenant claiming Job Seekers Allowance or Income Support and there are rent arrears, it is possible to claim a small amount to be paid from the JSA or IS direct to the landlord. This is called “third party deductions”.
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What are ‘third party deductions?
Benefit customers should normally meet their household expenses from their income, like everyone else. But in some cases, the Department for Work and Pensions (DWP) can deduct money straight from a customer’s benefit to clear debts. These are called ‘third party deductions’.
The third party deduction scheme is for a vulnerable minority of benefit customers who have got arrears of essential household costs and haven’t budgeted for their debts. Third party deductions are only used if there’s no other way to clear the debts without putting the welfare of the customer or their family at risk.
Third party deductions can’t be made on request simply for the creditor or customer’s convenience. They must show that all other attempts to budget properly have failed (such as payment plans, and changing the frequency or amounts of payments).
Why are third party deductions used?
The main use of third party deductions is as a last-resort protection for vulnerable customers in debt. By helping people with debt management, it helps them become more responsible with their finances. Third party deductions are only made where it is in the interest of the individual or family – to avoid the severe hardship caused by eviction or disconnection of utilities, and preventing imprisonment for the non-payment of council tax or fines.
Creditors (including landlords) must always first [am4show have=’g1;g5;’ guest_error=’guest’ user_error=’renewal’ ]take reasonable action to help their customer with arrears.
How the scheme works
Under the scheme, DWP deducts a set amount from the customer’s benefit and pays it direct to the creditor until the debt’s cleared. Deductions are usually to clear arrears of housing, fuel and/or water costs.
The amount DWP can deduct is regulated. At September 2009, the rate is £3.25 per item. If there’s more than one deduction, the maximum amount DWP can deduct is £9.75 (three deductions).
Once a debt is paid off, a third party deduction will usually end. In some cases where the customer obviously can’t manage their money, a deduction may continue to cover ongoing costs. This only happens if there’s no alternative. For ongoing fuel or water costs, DWP can change the amount deducted based on the current amount used by the customer and billed by the supplier.
Who can apply and how to apply
Two groups can apply to the scheme:
- customers (or their appointees), and
- creditors, suppliers or landlords.
There’s a standard application form for creditors to request third party deductions (see below). Send the completed form to the centre for the area where the customer lives – the pension centre for Pension Credit and the benefit delivery centre for all other benefits.
How DWP decides about third party deductions
To decide whether or not third party deductions are appropriate, DWP will consider:
Is the customer getting one of the specified benefits?
- Is there a threat of court action, eviction or disconnection?
- Are there outstanding arrears?
- Is the customer or their partner liable for the debt? A customer or their partner will normally be liable for the debt if named on the bill, whilst they remain a couple. There may be occasions where we can’t make third party deductions, for instance deductions may not be made if the debt is the responsibility of a partner who has left the customer (unless the partner is eligible for third party deductions in their own right),
- Is it in the interests of the family?
- Will the customer be left with sufficient amount of benefit (10p benefit) in order to qualify for passported benefits?
- Does the debt take priority over other debts?
- Are three third party deductions already being made?
Further Guidance
Further guidance (where this article was taken from) is available via a useful DWP publication here. This guidance also contains a standard suggested application letter.[/am4show]
