The government has started a consultation on potential reforms to the default County Court judgment procedure. This follows concerns that some creditors are intentionally using old or incorrect customer addresses, depriving customers of the chance to defend debt claims and resulting in automatic judgments being entered against them which may affect their credit rating but may not come to light until years later when they apply for credit.
The government wants to ensure that the process for debt recovery strikes the right balance between the right of a creditor who is owed money to seek to recover it through the County Court in England & Wales and the right of an individual customer to know (as far as is reasonably possible, following attempts by the creditor to engage with the customer) of any claim against them and have the chance to defend that claim.
A creditor starts a claim by issuing a claim form and providing the court with the customer’s current or last known address for service of the claim form. The customer has 14 days to reply (or 28 days if they return the acknowledgement of service requesting further time to file a defence). If the customer has not responded or filed a defence within the 14 or 28-day period, the creditor can obtain a default judgment. The record of that County Court judgment (CCJ) will remain on the Register of Judgments, Orders and Fines for six years unless the judgment is set aside or reversed, or paid in full within one calendar month.
There were over 1.1 million CCJs in 2016/2017, of which the vast majority - 85% - were default judgments. It is inevitable that sometimes customers will be unaware that they are subject to a judgment, but the government is concerned that in some cases this may be happening because creditors deliberately use addresses for customers that they know to be old or otherwise incorrect. This, they say, deprives customers of the chance to defend claims and results in them having to suffer the consequences of enforcement action as well as damage to their credit rating.
The government has launched a consultation until February to hear views as to the effectiveness and appropriateness of the current system. Of particular interest are views on limiting the circumstances in which a customer may have a default judgment made against them without their knowledge. The consultation has three principal aspects:
- It sets out proposals for informing customers of their rights and responsibilities, for example what they should do to keep creditors updated with their contact details;
- It seeks views on a policy proposal to remove an entry in the Register of Judgments, Orders and Fines if a customer immediately pays a judgment in full once it is brought to their attention, provided they satisfy the court that they were unaware of the claim and judgment when originally issued and entered; and
- It seeks data on instances where a CCJ has been entered against a customer without their knowledge because a creditor has deliberately used an old or otherwise incorrect address.
The consultation, Default County Court Judgments: A consultation on ensuring the process works fairly, for both creditors and debtors can be accessed via this link.
Following analysis of the responses to the consultation, the government will consider whether any changes are needed and, if so, take steps to implement those changes. It is anticipated that any changes will apply to all money claims.
A large proportion of creditors using the County Court are small and medium size businesses and larger organisations chasing relatively small debts. They are reliant on a robust and efficient court process to have any chance of recovering money that is genuinely owed. Reforms, if implemented, must balance the needs of the customer against those of the creditor.
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