Registry Trust has published the statistics for CCJs for the first quarter of 2017. They are shocking, with almost 300,000 consumer CCJs, the highest number for ten years. The details are:
- 298,901 CCJs were registered against consumers in England and Wales from January – March 2017;
- this is an increase of 35% on the same quarter in 2016;
- the average size of a CCJ fell to £1,495;
- this is a historic low and 17% down on Q1 2016;
- the size of CCJs has been falling for the last eight years. In 2008 the average was more than twice as high at £3,662.
As the graph below shows, CCJs have been rising for the last year.
So what has caused this large increase?
People are borrowing too much?
This is the popular explanation in the press. See this from the Guardian for example:
The figures highlight growing alarm over rapid increases in household spending over the last two years fuelled by extra borrowing.
The recent increases in credit card debt and car finance are large and worrying. But unless there is another crash, they aren’t going to show up in CCJ statistics for at several years. It takes time for over-borrowing to turn into a default, then for the creditor to go to court.
Times are just tough – the insolvency stats are also up?
The Q1 2017 individual insolvency statistics in England and Wales also showed an increase, though less than the CCJs figures are showing. But the ending of many DMPS in 2016 and the huge differences between the three different types of insolvency suggests that something more than macro-economics is driving these figures. So it’s not clear they have much relevance for the CCJs numbers.
More debt coming up to the statute barred point?
Two years 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 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.
But it doesn’t seem likely that this can explain the increase in CCJs over the last year. 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 it’s hard to argue that this cohort of debt problems is much larger than the ones resulting from 2008-10, so you wouldn’t expect CCJ number to be increasing now.
Defaulted payday loans?
The peak for payday loans was 2010-2014 and many customers ending up defaulting on their final loan. So we are now coming up to six years after a lot of payday loan defaults. But I haven’t heard of large numbers of payday lending claims coming to court – if this is a factor, it is a pretty small one.
It’s getting easier to trace debtors?
Credit reference agencies are getting much better at piecing together credit records from different addresses so it’s now harder to hide from your debts than five or ten years ago. But I don’t think it can account for the very large jump in CCJ numbers.
Are debt collectors going to court more readily? Or sooner?
I’ve heard a couple of reasons suggested as to why debt collectors may be taking more cases to court:
- collection rates are falling. This may be because increased regulation (treating customers fairly, looking out for vulnerable customers etc) 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 costs of CCJs.
There is also the possibility that court action is being taken earlier. Registry Trust chairman, Malcolm Hurlston, said in February:
Taking together the increasing number of judgments and their declining value, we see that people whose commitments may be out of control are being identified earlier in the lending cycle.
It’s not clear to me that is right. I don’t see how the Registry Trust could detect it from its own data, you would have to get debt collector data to quantify this. And it doesn’t explain why the average size of the judgments is falling.
I don’t think the other “external” reasons can account for much of the continued CCJ increase, even when they are all taken together.
It does feel as though there has been a change of policy by some debt collectors so that they are now taking more debtors to court for a CCJ and going after much smaller debts.
How will the debt pre-action protocol affect this?
In March 2017 it was announced that the Debt Pre-Action Protocol will go live on October 1st 2017. This will add another step to the procedure for applying for a CCJ and in some cases prolong the times and the work required by the creditor in supplying additional information. Anticipating this, debt collectors may try to get more court cases started before October.
I wouldn’t be surprised if the numbers carry on rising for the next couple of quarters.
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. 100,000 CCJs a month sounds scary, but a debt collector is much less likely to go for a CCJ if you have an arrangement to pay in place. So 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.
If you get a Claim Form, don’t ignore it, even if you can’t afford to pay the whole debt, 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.