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It could be blatant and callous profiteering, is my comment!
The LA should not impose an admininistrative penalty unless they would otherwise be prosecuting, and it knows this. If your LA would seriously prosecute a first time housing benefit claimant for making a mistake from ignorance, on a 400 quid overpayment (when the costs of prosecution would be higher) there is something seriously wrong. It may be because the LA is given financial incentives to do so, and it would be nice if someone who knows about subsidies and stuff would clarify!
Many people here have often suspected that LAs sometimes issue ad.pens when they actually do not have a suitable case for criminal prosecution (and therefore should not be issuing ad. pens!) but the risk of resisting is not the adviser's, it is the clients. The risk, in calling the LA on it, is that the LA would prosecute rather than admit it was trying it on.
There are serious risks for society if the LAs get away with this, but they are lacking in short term imperatives to be of interest to LAs.
This is an extract from Hansard, 1997 - referring to c/circs, but i think the intention is clear enough...
http://www.parliament.the-stationery-office.co.uk/pa/cm199697/cmhansrd/vo970204/debtext/70204-09.htm
"As I explained to the Committee, it is not the intention that failures to notify caused by a genuine mistake should be treated as cases of fraud and prosecuted. In a case where a person is genuinely unaware of the relevance of a change of circumstances, the intention is that the safeguard of "reasonable excuse" would apply, and that, ultimately, the courts would decide what that constituted. Additionally, the legislation would operate within the framework of the Department's prosecution policy, which is to prosecute only where prosecutions are clearly in the public interest.
We therefore believe that the defence of "reasonable excuse" provides all the safeguards needed, should proceedings be brought. Nevertheless, concerns were expressed in Committee, especially by the hon. Member for Southampton, Itchen (Mr. Denham), about the scope of the offence, particularly where it could be the underlying alleged offence for an offer of an administrative penalty under clause 15.
In practice, we would not expect a prosecution or an administrative penalty offer in a case where the claimant genuinely did not know that a change of circumstances needed to be reported. However, having reflected on the points made in Committee, the Government consider that it would increase confidence in the prosecution and penalty arrangements if the offence were amended to underline the policy intention.
The amendment therefore introduces an additional safeguard by adding to the offence of failing to notify the same test as applies elsewhere in section 112--that the person knows that he is required to notify the change of circumstances. That will ensure that only fraudsters can be offered penalties, and people who have simply made a mistake cannot be brought into the penalty regime. I hope that the amendment will allay the fears that were expressed.
I propose to retain the test of "reasonable excuse", for the reasons that I explained when the matter was discussed in Committee. I want to exclude, for example, someone who had had to go to hospital and had not notified the change, even though he knew that he should have made that notification."
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