Registry Trust, which operates the public register of County Court Judgments (CCJs), has announced that the number of consumer CCJs in England and Wales increased to 209,629 in the first quarter of 2015. That is an increase of over 20% on the same quarter in 2014. At the same time, the average size of a consumer CCJ fell 7% to £2,171.
So there are more CCJs and many of them are for smaller amounts – is this a cause for concern? It is a continuation of recent trends: 2014 consumer CCJ numbers were well up on 2013 and the average size of a CCJ has been falling since 2009, when it was over £3,600. The number of personal insolvencies (bankruptcy, IVAs, debt relief orders) has been dropping recently, so it’s worth looking at why CCJ numbers are going in the opposite direction.
January is always a peak month for CCJs as few go through in December. But as this is comparing the first quarter with the same quarter in 2014, that can’t explain the increase.
Are creditors more likely to sue?
Malcolm Hurlston, who chairs the Registry Trust, has suggested that the increase results from “a different business model”, pointing out that a higher proportion of consumer debt has now been sold by the original creditor.
This would suggest that the debt buyers are more likely to go to court for smaller amounts of money than the original lenders would be. If you are in financial difficulties, this will sound alarming because having your debt sold on to a debt collector is a very common experience. But there is another possible explanation for the increase in CCJs.
Is it the overhang from the 2008/9 crash?
A large number of current credit card and loan problems resulted from the 2008/9 crash. Unemployment, reduced hours and reduced income for small businesses happened over the next year or two after bank failures made the headlines.
Many large debts will have quickly resulted in CCJs or insolvency. But for small debts, lenders aren’t usually anxious to rush to court as it’s often better to wait until the debtor’s situation improves.
However there is a legal limit on how long lenders can wait. If there haven’t been any payments to a debt for six years, the debt may become “statute barred” and the creditor may be unable to take court action to enforce it. So it always has been common for a debt collector to go to court in the fifth year. Which takes us to 2014 and 2015 for the 2008/9 crash problems and explains why the size of these CCJs tends to be smaller.
If this argument is correct, there isn’t any need to blame nasty debt collectors for the rise in CCJs or a change in the business model of banks – if banks and debt collectors had carried on behaving exactly as they always have done, we would still be seeing more CCJs for smaller amounts now because we are coming up to the 6 year point for these debts.
UPDATE – CCJs jumped a lot more in 2016/17 – and I think there are different reasons for this.
Does it matter why CCJs are increasing?
I’m not sure its possible to determine which explanation for the increase in CCJs is correct just by looking at the statistics. But if you are thinking about your own debts, it’s all rather abstract and not very relevant to what is likely to happen to you… For more information about CCJs, including what to do if you are sent court forms or if you can’t afford a CCJ payments, read CCJs – common questions and problems.