HB paid into the wrong bank account…

Here’s a scenario - a shared owner claims housing benefit for the first time in years.  He supplies new bank account details to the LA as the account he previously used for HB payments is overdrawn and so he has opened a new account as part of a debt management plan.

He double checks that the LA have the correct current account details, they assure him they have.  Then they pay backpay of housing benefit into his old account where it is swallowed by his debt.  Now he has rent arrears.

The LA tell him they have lawfully paid the benefit as it was paid into an open account, which the claimant should have closed (I am not sure that he could have closed the account if it had a debt on it?) and so refuse to consider making another payment.

Is the LA correct?  I don’t know whether they could reverse the transaction but apparently they won’t budge.

Thanks if anyone has any suggestions.

This factsheet from Bristol Debt Advice Centre suggests that you may need to make representations to your client’s bank unfortunately, under something called First Right of Appropriation - most of what I’ve read suggests, however, that one is supposed to notify such a state of affairs prior to benefit payments going into the account, so not sure how that squares with your client’s circumstances?

First Right of Appropriation

I would assume you could also lodge a complaint of maladministration with Local Government Ombudsman? However, the LGO say that they usually expect people to use councils’ complaints procedures and to exhaust all stages of those procedures before coming to them. They consider that a ‘reasonable opportunity’ is 12 weeks from the date when someone first made a written complaint to a council.

Which doesn’t really help in the here and now with rent arrears I’m more than aware. Hopefully some bright spark may have other ideas?

thanks Paul, I was just looking up first right of appropriation as you replied - but you are right - it is something to do before payment is made.  I’m waiting for more details of what he has done so far around contacting the bank before I try to help him sort this out.

Reg 91 (as made, at least) says HB shall be paid “in such manner as is appropriate, having regard” to “the reasonable needs and convenience of the person entitled thereto”. Perhaps the failure to do so (claimant clearly specifying a different account, etc..) might add to a complaint? But it’s admittedly difficult to get from that, to the LA agreeing that a payment wasn’t effectively made, and so should be made again.

Perhaps a detailed complaint or approach to the LA might at least prompt them to consider their own alternative solutions, eg a payment/loan from a local homelessness prevention fund or some such.

(If the account is indeed still open, can the tenant not run up a further overdraft in order to pay the rent? )

Unfortunately, even if the LA made the payment in error, they can’t make a duplicate HB payment for the same period. Comm E Jacobs, as then was, confirmed this on decisions such as CH/1821/2006 and R(H) 2/08, albeit in different circumstances.

I think the best option, as stated above and in the decisions by Judge Jacobs, would be to complain but also try appealing to the banks sense of customer care, explaining the situation and clearly stating that the claimant really shouldn’t have to be made homeless because of his ignorance of his first right of appropriation.

I know some banks have done this before under their customer relations policy.

here are links to -

CH/1821/2006 (reported as R(H)1/08) -

http://www.osscsc.gov.uk/Aspx/view.aspx?id=2168

and R(H)1/08 -

http://www.osscsc.gov.uk/Aspx/view.aspx?id=2167

The LA is misinformed in saying he should have closed the account.  As it is in overdraft, he can’t - the bank won’t close it.  He should ask them to confirm that & make it part of the complaint.  To my mind, a clear case of maladministration for ther LGO if the LA won’t put it right.

At a stretch, CH/765/2008 might just about allow a second payment to be made:

http://www.osscsc.gov.uk/Aspx/view.aspx?id=2591

This was a case where the Council made a decision to pay a large sum of HB arrears to the claimant’s landlord and that fact was recorded, but due to an administrative error they somehow managed to send the money to the claimant instead.  R(H) 1/08 relied on the offsetting principle: where a decision is revised (in that case from a decision to pay Person A to a decision to pay Person B) arrears arising from the revision must be offset against any amount already paid under the original decision.  In CH/765/2008 the offsetting principle did not apply because the decision was not being revised - the original decision was that the landlord should be paid but the Council had not acted in accordance with the decision.

In this case it sounds like the Council intended to pay HB to the claimant’s new account and it also sounds as if he had made a big point of this and particularly asked them not to pay into the old account.  Further, it sounds like the Council took that on board and intended to do as the claimant asked ... then due to a clerical blunder they went and did something else instead.  Therefore the HB can still be paid in the manner originally decided, because it hasn’t been paid in accordance with the decision yet.

That may be a strained application of CH/765/2008 but if the Council agrees with it they can make a payment and, depending on their performance in avoiding making official error overpayments, get up to 100% subsidy on the “overpayment” (although they could get 0% - there is a sliding scale).  Whereas if they just paid compensation they wouldn’t get any subsidy on that.

If the claimant made a great deal of effort to have the payments made to the correct account, there’s legitimate grounds for a complaint and altbhough HB may not be payable in respect of the same period, a compensation payment of an equivalent sum would appear to be appropriate.

On a practical level, a letter to the bank explaining the situation, mentioning first right of appropriation and the hardship that followed, not his fault etc. may be sufficient to convince the bank to pay the money into another account. Naturally, they don’t like it, but again, if they refuse, complain etc.

First right of appropriation is best used in advance, but can work in retrospect, just can take longer to convince the bank. The fact it came from the LA is indicative that it wasn’t the proceeds of Auntie Mabel’s estate but payments made out of a statutory duty.

Hope this one was resolved.

I think there is some mileage in CH/765/2008, but in my view the bank are acting unlawfully in garnishing the HB because S187 of the Social Security Administation act 1992 provides:

Certain benefit to be inalienable

187.—(1)Subject to the provision of this Act, every assignment of or charge
on–
(a) benefit as defined in section 122 of the Contributions and Benefits Act;
[(aa) jobseeker’s allowance;]
[(ab) state pension credit;]
(b) any income-related benefit; or
(c) child benefit,
and every agreement to assign or charge such benefit shall be void; and, on the
bankruptcy of a beneficiary, such benefit shall not pass to any trustee or other
person acting on behalf of his creditors.

Housing Benefit is clearly an income related benefit and S187 provides for it to be inalienable.

The Council ought to point this out to the bank and ask for the money to be returned