In the first three months of the year there was a 35% rise in the number of county court judgements (CCJs) issued compared to the first quarter in 2016. There were nearly 300,000 judgements filed against individuals in England and Wales between January and March 2017.
That number of CCJs issued is the highest figure in a three month period for more than 10 years and it has sparked fears over household debt, consumer borrowing and rising inflation.
CCJs are issued by the court on behalf of a creditor who is owed money by an individual. Individuals will then have 30 days to pay the debt; if it is paid in this time, the CCJ will removed from the credit record, however if it remains unpaid it will stay on the credit record and further action is likely to be taken.
As inflation has risen and wages have slowed, it has put a significant amount of pressure on household finances. As there is currently a high level of personal debt held by consumers, a squeeze on household finances could significantly limit many people’s affordability for debt repayment. This has prompted anti-poverty charities to warn that the number of people taken to court for not paying their debts may worsen this year.
This also backs up recent warnings from the Bank of England and debt charities regarding squeezed household finances and dangerously high consumer debt levels as lending from banks, credit card firms and car leasing companies rises.
Chief executive of the Money Advice Trust, Joanna Elson, commented on this latest warning sign for consumer debt; “It is worrying that the number of CCJs issued has been increasing so dramatically. The sharp spike in the first quarter follows a general increase we’ve seen in recent years and… There’s a strong chance that this trend will continue as people feel rising inflation levels eating into their wages.”
Over the past eight years, the average value of a debt pursued with the issuing of a CCJ has fallen drastically from £3,662 in the first quarter of 2008 to £1,495 in Q1 of 2016. These figures have prompted some, including chief executive of Citizens Advice Gillian Guy, to call on creditors to offer flexible repayment methods before taking court action.
Malcolm Hurlston, chairman of the Registry Trust who collected the information regarding CCJs, commented that portfolios of debts are being sold to third parties as an efficient way of collecting debt; it is thought that banks are the most likely lender to sell on debts, particularly smaller ones.
A CCJ can have knock on effect for a person’s financial position, not only now but in the future, which is why people such as Ms Guy are asking for other alternatives to be considered first. The issuing of a CCJ can not only affect a credit rating but it can make it more difficult to secure mortgages or re-mortgage, secure a rental tenancy or obtain any kind of credit.
As well as financially having an effect, the stress and anxiety can seriously affect people as they try to deal with debt repayments and the consequences of a court judgement. How to deal with the issues surrounding rising consumer debt and the effects it can have as well as increasing inflation levels is of big concern for the Bank of England and debt charities right now.