Councils are worse than banks when it comes to dealing with hardship among ratepayers, an ombudsman’s report says.

Victorian Ombudsman Deborah Glass says there’s nothing new about council heavy handedness around unpaid rates.

However covid has highlighted ratepayer hardship as an issue councils will need to deal with going forward.

Her investigation found some cases of fair and reasonable practice among the state’s councils 79 councils – all of which had a hardship policy.

‘Paternalistic and punative’

However community advocates described them as “paternalistic, punitive and judgemental”, and the ombudsman found that only one in three councils made their hardship policies public.

Others had policies that didn’t reflect actual practices, and some didn’t tell residents they had hardship policies even when the resident said they couldn’t pay.

Councils also refused to exercise their right to grant waivers and deferrals and charged penalty interest to people in hardship.

“The public sector is expected to act in the public interest more than the private sector – but in dealing with hardship, local councils lag behind utility and other companies, including banks,” Ms Glass said.

“We would be rightly concerned if our bank was doing more to meet its social obligations than our council.”

Debt collectors

Rates, which in 2019-20 ranged between $1,227 and $2,000, account for 34 to 79 per cent of council revenue, the report found.

Before covid, around one in 10 Victorians experienced some form of financial difficulty.

Under Victorian laws, councils have discretion to waive or defer rates in cases of hardship. However the Local Government Act doesn’t define hardship, leaving it up to councils to decide who qualifies.

Councils sued ratepayers for unpaid rates more than 7,000 times in 2018-19 and sold or transferred land for unpaid rates 28 times.

Ninety-seven per cent used debt collectors and ten per cent charge penalty interest.

It should be a matter of concern that banks and utility companies sometimes do more to meet social obligations than local councils.

Deborah Glass

Almost all councils offered interest waivers, but “a handful” limited the amount of interest they would waive.

The Ombudsman also reported cases where rate payers had accumlated huge amounts of interest, including one woman who found herself $47,000 in debt for rates and ongoing interest.

Finance officers conflicted

The report notes  that councils rarely employ officers with experience in financial counselling or hardship applications.

 The advocacy group Ratepayers Victoria also told the ombudsman that finance officers have an inherent a conflict of interest between compassion for ratepayers and protecting their budget for Council.

Ms Glass  makes a number of recommendations including  setting minimum standards for hardship relief for all councils and requiring them to publish hardship information on websites and rates notices.

She also proposes a cap on penalty interest rates and having a clear and consistent definition of hardship.

“Good practice is not consistent across all councils, and the sector as a whole is falling behind the private sector and government tax agencies,” Ms Glass said.

“It should be a matter of concern that banks and utility companies sometimes do more to meet social obligations than local councils.”