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The Parliamentary Under-Secretary of State for Justice (Dr Phillip Lee)
It is a pleasure to serve under your chairmanship, Sir Edward. I congratulate the hon. Member for Islwyn (Chris Evans) on securing this debate. He has for many years had a strong interest in consumer finance, to which this debate is allied.
I recognise that concern has been expressed about the number of county court judgments that are made against individuals and businesses, the majority of which are entered without a defence being provided by the debtor. Last year, 745,235 county court judgments were entered in default of a defence. That figure represented 85% of the total number of county court judgments entered. I was concerned to read the reports in the Daily Mail that money claim forms have been sent to out-of-date addresses, despite the fact that the individuals and businesses concerned had updated all their records. The paper said that the knock-on effect was that those individuals and businesses had been unable to obtain credit.
Although many default judgments will be made because defendants simply do not have a defence to the claim, the Ministry of Justice is investigating the number of default judgments that were made because the defendant did not receive the claim, and the reasons why that occurred. We will then consider whether any steps should be taken to ensure that the system is not open to abuse. That will include working across Government and with the authorities responsible for regulating the businesses that use the county court to recover debts.
Seeking a county court judgment should be a creditor’s last resort, when all other attempts to recover the debt have failed. Unfortunately, we know that debtors often fail to engage with creditors, for a variety of reasons. If the court system required debtors to acknowledge a claim, it would have serious repercussions for creditors, particularly small and medium-sized enterprises, which would be unable to recover money that was owed to them.
Those who experience debt problems represent a broad spectrum of society, from people experiencing debt as a consequence of deprivation, poverty or other circumstances, through to those who have deliberately refused to pay for products and services used. Some of those facing court action are in difficult situations because they themselves are owed money that has not been repaid. In addition, the Daily Mail’s investigation highlighted instances in which individuals had county court judgments entered against them without being made aware that they owed the money in the first place.
The current rules on county court judgments seek to strike a balance between the needs of claimants—many of whom are individuals, small businesses and public bodies —who must have recourse to an effective legal process to regain money owed, against the rights of defendants to be informed of a claim against them. The court rules do not require the claimant to make sure or prove that a claim is received by the defendant. That would be very expensive for claimants and the system would be open to abuse by individuals and businesses that are seeking to avoid paying their debts. The court rules also do not require the court to verify that the defendant’s address is correct.
More than 1.1 million county court money claims are issued each year. It would be impossible for Her Majesty’s Courts and Tribunals Service to process claims quickly if they had to verify address details in every case. The onus is on the parties to provide the correct information. Claimants must sign a statement of truth confirming that the details in their claim, including the address of the defendant, are true. Anyone who deliberately provides false information to the courts faces prosecution. Individuals and businesses must update creditors such as utility companies, and public authorities such as the Driver and Vehicle Licensing Agency, about any change of address.
Safeguards exist to protect defendants. If somebody discovers that they have had a county court judgment issued against them but they do not owe the claimant money, they can apply to the court to have the judgment set aside. If they are successful, the CCJ will be removed from the register of judgments and the individual’s credit rating should be restored.
I shall now respond specifically to some of the points made by the hon. Member for Islwyn. He asked about the disproportionate impact of CCJs on credit ratings and the difficulty of removing judgments from the register. As he said, the judgment will be removed from the register if it is paid in full within a month. If the judgment is paid after a month, the debtor can get the record marked as satisfied in the register. It will stay on the register for six years, but people will see that it has been paid.
The hon. Gentleman asked about the 1p judgments for parking that were mentioned in the Daily Mail. The documents were obtained by the newspaper under the Freedom of Information Act, and showed that those county court judgments were made. We have discovered that the figures provided were the result of data entry error. Default judgments have not been issued for nominal sums, such as a penny. A money claim cannot be issued for less than £25. On top of the amount owed, a claim may also include issue and a claimant’s solicitor’s costs.
On the concern that proof of service is not required, the rules were introduced following a consultation in 2006, and strike a balance between creditors and debtors. Before their introduction, there was great expense for both claimants and defendants in ensuring that claims were served.
On the question about action taken before the issuing of a claim, claimants are encouraged to contact defendants before taking action, which will always be the last resort. An existing protocol that encourages early engagement with a debtor is being revised, with the assistance of the credit and money advice sectors, to provide debtors with a further opportunity to engage with the claimant.
The vast majority of organisations responsible for bringing county court claims are large debt recovery agencies, utility companies or parking companies. It is important to balance the needs of businesses to recoup money owed to them with the need to give people a chance to defend themselves against money claims. The Ministry of Justice is working with the Department for Business, Energy and Industrial Strategy and the Department for Communities and Local Government to look at what more could be done to protect people from the potentially damaging effects of having a claim entered against them about which they knew nothing.
We hope that businesses will engage with the Government on what more can be done to ensure that claims are pursued only after the right checks have been carried out. The Ministry of Justice will continue to provide support and analysis on the court side of this issue, and will report back in due course. I thank the hon. Gentleman for the opportunity to discuss this subject.
Question put and agreed to.