Fine collection and our business planning

Happy New Year everyone, and wishing you the very best for 2019.

This time last year I wrote about the role that the collection of fines played within our business planning considerations.  We got a number of comments and further questions during 2018, so I thought it might be helpful to expand on this in a bit more detail, and to publish updated figures.

The first thing to say is that fines can only be issued by a Code Adjudication Tribunal (CAT). Once it has determined that the Code has been breached on a Track 2 (i.e. most serious) enforcement case brought to them the PSA Executive, the CAT has a range of sanctions at its disposal, including fines. The purpose of issuing a fine could be, depending on the individual case, to:

• remove the financial benefit from a service provider
• act as a deterrent to others who might be considering similar non-compliant action.

One comment we often hear is: why does the CAT issue fines if we know there is little or no chance of recovering the money – isn’t it just a waste of time?  The role of the CAT is to determine whether or not breaches of the Code have occurred and where appropriate impose sanctions that fit the nature of the offence. Likelihood of collection of a fine is not a matter for the CAT to take into consideration in setting the level of sanction. 

It’s the PSA Executive’s role to pursue any sanctions imposed by the CAT. Sometimes we’re able to secure part recovery of a debt, and are therefore ensuring some punitive sanction is applied. Indeed, our work with our debt recovery solicitors can identify monies or tangible assets that may be pursued to pay a fine, and we revert to the courts where necessary to ensure that no-one is able to easily avoid our enforcement action.

Additionally, where an issued fine is not paid in full by a provider, services are suspended until such time as full payment is made. If full payment is not made the PSA Executive will usually raise a case against the provider for breach of sanctions, recommending that the company or individuals behind it are prohibited from the market. These further sanctions are often imposed by the Tribunal and represent an effective tool in deterring non-compliant behaviour, including in respect of fine sanctions.

Where fines are issued and subsequently collected, they are used to offset the amount of levy required from industry to fund the PSA budget (as set out in our annual Business Plan and Budget).  The crucial point here is that our funding is not dependent on the collection of fines, and clearly the decision-making process of the CAT cannot and does not take this into account.  Put simply, the amount of fines collected only affects the levy that industry funders have to pay.

As I mentioned last year, our chasing of debts can (and does) take years in certain cases. Therefore the idea of an annual collection rate is a little misleading, unless of course we have closed all of the debt collection processes for cases in a specific year. In any case, the most important thing is that we have reasonably exhausted all possibilities to recover the money – that way we have pursued fairness on behalf of healthy service providers and our industry funders.

As you can see from the updated table below, the amount of bad debt arising varies across years and reflects a combination of different factors - including the Code in place at the time and the varying nature of the organisations in breach of the Code.

*this table excludes the impact of any financial year-end accounting adjustments

I’ll aim to provide an update again next year, where we will see how much of the outstanding debt we have been able to recover.  In the meantime, as we go through 2019, we will continue to maximise the recovery of fines within our ability.