Consumer finance expert Martin Lewis has criticised the ‘grotesque’ methods authorities use to recover council tax and urged the Government to change the law on debt collection.

The Money and Mental Health Policy Institute, a charity founded by Mr Lewis, has launched a campaign urging ministers to end the ‘council tax trap’ that means people can face a ‘whirlwind’ of debt collection activity, fees and charges after missing just one payment.

It said two million people with mental health problems in the UK had fallen into the ‘trap’.

In England and Wales, 71 of the 100 biggest councils share information on how they collect debt – and 87% use the full strength of the law to demand that people pay the full year’s council tax within three weeks of missing a first payment.

Mr Lewis said the practice was like ‘a caricature of the worst loan sharks’.

He said the collection system, which then allows councils to apply to a court to send in bailiffs if the full payment is not made, ‘could not have been designed better to accelerate distress’ for people in debt.

The Money and Mental Health Policy Institute called on the Government to bring council tax debt collection at least in line with consumer creditors, who often wait three to six months before demanding full repayment of an overdue debt.

But Mr Lewis pointed out that councils were already free to take a fairer approach, and urged them to protect people in vulnerable circumstances from harm before escalating debt collection.

A spokesperson for the Local Government Association said: ‘Councils strive to ensure they have fair council tax collection policies and should always try to work with people who are struggling to meet their council tax bills.’