Guidance

A guide for water suppliers

Updated 12 September 2024

1. What is a third party deduction

The third party deduction scheme is designed to protect claimants in receipt of income-related benefits. It is used when a claimant has arrears of essential household outgoings and has failed to budget for these bills. Other methods to recover the debt must have been tried, for example negotiating different ways of paying and managing bills. There must be a threat of enforcement action before consideration is given to applying for a deduction.

It is the responsibility of the Water Supplier to ensure their customer knows they are requesting a deduction from their benefit.

2. Why a third party deduction is taken

Third party deductions act as a safety-net to protect claimants when they have debts for essential household bills. They are only taken when it is in the interest of the individual or family. In the case of water debt, this is to prevent the extra costs of court action and subsequent effect on credit scores.

Water suppliers should take reasonable action to recover the arrears before applying for deductions.

The following benefits may have a third party deduction:

• Income Support
• income-based Jobseeker’s Allowance
• Pension Credit
• income-related Employment and Support Allowance
• Universal Credit – information on applying for deductions from Universal Credit

3. How the scheme works

We deduct a fixed amount to clear the arrears. The amount is deducted from the individual’s benefit at source and paid directly to the supplier until the debt is cleared.

An additional amount is taken to cover current consumption costs. This is to prevent further debt accruing and to help with budgeting in the future. This figure should be an average amount based on annual usage.

Where there are 2 billing agents, one for water supply and one for waste water, the water debt is cleared first, then the arrears for sewerage. There can’t be two deductions for water debts running at the same time.

Once a debt is paid, a third party deduction will usually end. In some cases where the individual repeatedly mismanages their money, a deduction may continue to cover on-going costs.

Where there is more than one debt, we can take a maximum of 3 deductions at any one time. The Department for Work and Pensions (DWP) will apply the priority order when more than 3 applications are made.

For changes to current usage we will alter the sum deducted based on the current amount used by the claimant. This must be confirmed by a meter reading, not an estimate.

4. Debts covered by the scheme

The types of debt covered by the scheme are rated in a priority order. This reflects the degree of risk to the individual or their family by the enforcement action that may result from non-payment. The order is:

1. housing costs for specific mortgage arrears
2. miscellaneous accommodation costs; care homes, private hospitals
3. hostel charges
4. rent arrears including service charges
5. mains fuel costs; gas and electricity
6. water charges; water then sewerage if two debts
7. Council Tax and community charge arrears
8. fines
9. Child Support maintenance under the old scheme
10. refugee integration loans
11. eligible loans

5. What can be included in the debt

The total debt may include any legal or other costs incurred to recover the arrears.

6. Who can apply

Two groups can apply to the scheme:

• the claimant or their representatives
• the creditor or their billing agent

Use the industry standard application form from Ofwat to apply for a third party deduction. Please contact Ofwat if you don’t know how to find your application form or if you don’t already have one. Alternatively contact thirdparty.deductions@dwp.gov.uk

Send the completed form to the DWP benefit or pension centre that deals with the claimant’s benefits. The claimant’s benefit award letter contains this information.

7. Personal Data Items

We must be able to identify the claimant from the details on the application for deductions. This should include the following where possible:

• claimant’s name
• address
• date of birth
• National Insurance number, if known, although applications will be accepted without this
• name and address of the creditor making the application
• the AP number of the creditor
• the customer reference number
• type of benefit being paid to the claimant, if known
• other payment methods which have been tried
• amount of the debt
• any figure to cover current consumption

We may need further information before making a decision, normally where the claimant has made the application, for example:

• the amount of the debt
• the weekly current consumption costs
• any other information needed to process the application including details of:
  • an application for a charitable trust grant
  • an application for a repayment scheme incentive
  • access to Watersure or any other social tariff
  • any disputes

You will receive either confirmation that the deductions have been put in place or rejected by the DWP. The customer will also be sent a notification informing them that deductions will be taken from their benefits.

8. Minimisation, Accuracy, Retention and Reuse of Data.

Accuracy Statement

To comply with UKGDPR, you must ensure that data provided to DWP is accurate and up to date. Should you require to update any of the above information then contact DWP, telephone: 0800 169 0310

Data Retention

DWP will retain records of any applications for deductions for three years from start date. This is to keep a record of evidence to support the deduction from benefit.

DWP Third Party Deductions Scheme does not reuse the data supplied for any other purposes.

Purpose Limitation

The data shared is related to the processing of Third Party Deductions only. DWP will use this data to help customers clear debts accumulated for previous and/or ongoing water usage.

Data Minimisation

DWP does not require any further information than that listed in section 7 and no other detail should be presented. This is the minimum amount of personal data to achieve purposes for which it is being shared.

Integrity and Confidentiality of Information

DWP manages its information in line with the framework set out by the Personal Information Charter. In accordance to agreed governance both parties will ensure all data is being shared in the most secure ways ensuring all security standards/measures are adhered to

Further information around how DWP handles personal data can be found in the Personal Information Charter.

Accountability and Governance statement

DWP confirm that they can demonstrate compliance with UKGDPR data protection principles this same legislation applies to Water Companies and they should be able to demonstrate compliance with this law.

The processing covered in this document is already mentioned in the organisations existing central record of processing activities

9. Permission for Deductions

Most third party deductions are imposed but there are some occasions where consent is needed from the individual. This applies where the total amount of all deductions including any amounts to cover current costs, exceeds 25% of the main benefit, including any Child Tax Credit and Child Benefit in payment. We will identify these cases and ask for consent. Consent only applies for the following debt types:

• housing cost arrears not covered by the Mortgage Interest Direct scheme
• rent and service charges
• fuel costs
• water charges
• integration loans
• eligible loans

10. How we decide if a third party deduction is appropriate

We will consider:

• if the individual is receiving one of the specified benefits in section 2
• if there is a threat of enforcement
• if there are outstanding arrears
• if other methods of repayment have been tried and failed
• if the individual or their partner is liable for the debt - an individual or their partner will normally be liable for the debt if named on the bill; there may be occasions where we cannot make third party deductions, for instance deductions may not be made if the debt is the responsibility of a partner who has left the household
• if a deduction is in the interests of the family
• if the individual will be left with sufficient amount of benefit (10p benefit) to qualify for other linked benefits such as prescriptions, Housing Benefit and local Council Tax Reduction
• if the debt takes priority over other debts - if there are already 3 other deductions for arrears in place, we will check the priority list in section 4; if the new request is for a higher priority debt, the lowest priority deduction will be stopped
• if permission is needed - if so, we will take action to ask the claimant for their consent

11. Payments

Payment are made into a nominated bank account every 4 weeks in arrears. It may take up to 6 weeks before the first payment is received. We can take a maximum of 3 deductions at any one time.

A payment schedule will be issued detailing the Customer Reference Number, National Insurance Number and the amount of deductions.

Information on payment queries

12. Legal Basis

Legal Power/Gateway

Third Party deductions is legislated for in Schedule 9 of the Social Security (Claims and Payment) Regulations 1987 and the Social Security (Council Tax) Deductions from Income Support 1993.

Under UKGDPR the lawful basis for this processing activity is Article 6(1) (e) – Public Task. It is not expected that special categories of personal data would be shared by the supplier, but if such data is processed by the DWP when making a decision on the supplier’s request, DWP would rely on Art 9(2) (b) – processing is necessary for exercising specific rights of the controller in the field of social security.

Water Companies must keep records of their own processing activities making note of the legal gateway and lawful basis used, as determined by them. The following chart summarises the rights of data subjects under the UKGDPR when with public task is used as a legal basis:

Right to:	Applies?
Right to be informed	Yes
Right of access	Yes
Right to rectification	Yes
Right to erasure	No
Right to restrict processing	Yes
Right to data portability	No
Right to object	Yes
Rights related to automated decision making including profiling	Yes

The Personal Information Charters/Privacy Notices apply to all rights.

13. Data Controller Relationship

The Data Controller Relationship for this initiative has been determined to be ‘Controller to Controller’.

This has been applied as both the water supplier and the DWP have different purposes to process customer data and make decisions independent of one another. The water supplier will be the Data Controller and be responsible for obligations under the data protection legislation until the customer’s data is received by DWP, at this point DWP will become the Data Controller of that personal information.

14. Data protection notice

The DWP information management policy is designed to ensure that DWP retains only those documents and data which support business objectives; saves money by reducing information storage costs; protects against allegations of selective document destruction and manages our information risks.

15. Further Information

Customers can request access to the personal information we hold about them through contacting the DWP directly. This is called the ‘Right of Access’. DWP will respond to freedom of information request obligations.

Freedom of Information Requests can be made in writing or by e-mail.