Government Addresses Unfairness in County Court Judgment Process (Plus some Tips on CCJs and Credit Ratings)
The Government is looking into the current process for issuing money claims in the County Court. In particular, it wants to review the circumstances in which County Court Judgments (CCJs) are made against people without their knowledge.
What is the process of issuing money claims?
If a debt claim is left unresolved, the person or business who claims you owe money (the creditor), may issue a money claim in the County Court to recover the debt.
When a money claim is served on you, there are several options:
- you could pay the full amount due, (although note that you will also have to pay the claimant’s court costs);
- you could defend the claim because you disagree with it. In this case, you will need to acknowledge service and served a defence. The matter will then continue to trial. If the creditor succeeds in their claim, a CCJ will be entered against you; or
- you could do nothing – in which case, if you do not serve a defence and the trial goes ahead without a defence and your participation, a CCJ “in default” of your defence, might be entered against you.
Any CCJ must be treated very seriously and dealt with promptly: it could affect your credit rating negatively.
Why is the government consulting on the CCJ process?
Unfortunately, some rogue creditors have been deliberately serving money claims on consumers using the incorrect address. This means that innocent consumers are left unaware of the money claim against them. They therefore do not respond to the money claim in time or at all.
As a result, a CCJ is entered against them “in default” and without their knowledge. In other words, judgment is entered simply because they have not responded.
The “debtor” might not find out about the judgment for months or even years. Quite often, they only find out when they apply for a loan – and their application is rejected. At this point, they find that a CCJ has been registered and is responsible for their poor credit rating.
Our experience of this rogue practice
We are aware of this practice of exploitation having had personal experience of it in our own work for clients. It has gone on for long enough and the government consultation is not before time.
We are aware that some companies buy up what are commonly referred to as “toxic debts” at low prices. They then issue money claims on those debts, despite many of them being outside the limitation period for bringing a claim.
Often there is no supporting documentation provided with the claim. These companies work on the basis that the “defendant” will simply pay up to avoid any further involvement in court proceedings. Unfortunately, many such defendants do just that – especially where the claims are relatively small (such as for parking fines).
How do County Court Judgments affect credit ratings?
When certain CCJs are given, they are recorded on the Register of Judgments, Orders and Fines. CCJs remain on that register for six years from the date of registration – unless the CCJ is set aside or cancelled.
CCJ registrations will only be removed from the register if:
- they were entered in error;
- payment was made before the court proceedings started; or
- payment was made within one month of the judgment being entered.
Lenders use credit rating agencies to evaluate the risks involved in giving a loan to a potential debtor (whether an individual, company or business). The agency assesses the potential debtor’s ability to pay back the debt. Effectively, it is a calculation of how likely the potential debtor is to default on the loan.
If the applicant’s credit rating is poor, the individual/company or business’s application for a loan – such as a mortgage or business loan - might be rejected. This can have a devastating effect for both individuals and businesses.
What is the government proposing?
The government have set out their proposals to end rogue money claim practices in their consultation: Default County Court Judgments: A consultation on ensuring the process works fairly, for both creditors and debtor. The proposals include:
- striking a CCJ from the register immediately once unknown debts are resolved and a judge agrees the person was unaware;
- better protecting consumers who do not receive mail because it is sent to an old address;
- introducing a government information campaign providing a centralised, trusted source to raise awareness and help people deal with unresolved debts.
(Source: the government press release)
What can you do if a CCJ has been entered against you?
In certain circumstances, (for example, if you have a defence to the claim), you can apply to the court to set aside the CCJ. However, you must take action swiftly.
Click on the following links for more guidance:
- Dealing with court claims or County Court Judgments (CCJs)
- A checklist to help you deal with CCJs
- If you’ve received a money claim, read this: Has someone served a court claim form document on you?
- Have you received a County Court Judgment? Can you do anything?
How can we help?
If you’ve just found out that a County Court Judgment has been served on you, our Commercial Litigation Team can help you weigh up your options and decide what action to take.
For more information on setting aside a CCJ or responding to a money claim, contact Chris Burke on 0161 684 6941 or make an enquiry.Subscribe to our newsletter
Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.
This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.