On 1st November, the Registry Trust published the statistics for CCJs in the third quarter of 2016, saying:
Consumers in England and Wales are facing a decade-high level in the number of CCJs. … There was a year on year increase nearing 50 percent in the third quarter of 2016, with more than a quarter of a million (256,847) judgments registered against consumers in England and Wales.
This article looks at the possible reasons why the numbers are rising. The first point is this isn’t a temporary blip. There has been a steady rise in the number of judgments every month since April this year, going up to September’s total of over 93,000 consumer CCJs.
The after effect of the 2008 crash?
18 months ago I looked at why CCJ numbers had gone up in Q1 2015. I argued this wasn’t because debt collectors were more ready to to go to court, instead the increase was because a lot of debts defaulted in 2008-10 were coming up to the six year statute barred point. I still think that reason was correct then.
There were significant numbers of people who got into financial problems in 2010-12, as prolonged wage freezes, reduced hours and welfare cuts started to bite. But to argue that this cohort of debt problems is much larger than the ones resulting from 2008-10 doesn’t seem plausible.
Unpaid payday loans?
The peak for payday loans was probably 2010-2013 and many customers ending up defaulting on their final loan. Although the timing looks possible for these to be feeding through to CCJs now, I haven’t heard of this happening on any significant scale, let alone many thousands per month for the last six months. If this is a factor, it is a small one.
The insolvency figures are up so perhaps times are just tough?
The Q3 individual insolvency statistics in England and Wales showed a large increase, though a lot less than the CCJs figures are showing. Much of the jump in insolvencies has resulted from not from macro-economic woes but insolvency-specific reasons: the ending of many DMPs and moving bankruptcy applications online. The increase in insolvency in Scotland was much lower, so a simplistic diagnosis of “tough times” doesn’t seem likely.
Easier to trace debtors?
Someone suggested to me that the credit reference agencies were getting much better at piecing together credit records from different addresses. That’s true, it is now harder to hide from your debts than five or ten years ago. But I don’t think it can account for the very recent rise in CCJs.
Lots of CCJs people are unaware of?
The Mail has been running an campaign recently pointing out this issue:
Banks, utility companies and parking cowboys are obtaining hundreds of thousands of CCJs every year at an office building in Northampton over alleged debts of as little as 1p. More than eight in ten are uncontested, with victims saying warnings are often sent to old addresses, which means they cannot challenge them.
This is a serious problem for those affected – and really there is little excuse for it because it is now much easier to trace people and make sure the court papers are sent to the correct address. But the numbers are not tens of thousands a month and I haven’t seen any evidence saying that the problem has got dramatically worse recently. This can’t account for the new CCJ statistics.
Debt collectors are going to court more readily?
I have heard a couple of reasons suggested as to why debt collectors may be taking more court action:
- collection rates are falling. This may be because increased regulation (treating customers fairly, looking out for vulnerable customers etc) is makes it harder to collect debt, or because there are more people with very low Disposable Income. A CCJ may make a debtor who has been ignoring letters get in contact and it is then there if their situation later improves.
- cost of buying debt is falling. Anecdotally some debt sales are going through for less than a penny in the pound. This leaves debt collectors with more margin to afford the court court costs of CCJs.
I don’t think the other “external” reasons can account for much of the recent CCJ increase, even when they are all taken together. It does feel as though there has been a change of policy by some, possibly many, debt collectors so that they are now taking more debtors to court for a CCJ.
Practical implications if you are in debt
Don’t panic if you get a letter saying your debt has been sold to a debt collector. Although this article says debt collectors are more likely to take you to court for a CCJ, this is much less likely to happen if you make an arrangement to pay. It’s a good idea to get some good advice on your options, especially if you have more than one debt. Doing this now may prevent any problems with CCJs in the future.
You need to act if you are already being taken to court for a debt, don’t ignore any court forms. If you can only afford to pay a little every month, then make an offer to the court, see What to do if you get a Claim Form.
If you have a letter saying you have a judgement against you, read What to do if you have a CCJ to see what your options are.