County Court Judgments

Calum Kerr Excerpts

Wednesday 16th November 2016 Westminster Hall

[Chris Evans]

Absolutely. As a member of that all-party parliamentary group, I pay tribute to the hon. Gentleman’s chairmanship. He knows my interest in real-time credit scoring and that I think the situation is in desperate need of reform. I have always said that such reform would be a win-win situation: a win for the lenders because they would know to whom they were lending, and a win for the consumer because lenders would drive down their prices. I have been campaigning for real-time credit scoring since I came into Parliament, and I thank him for fully supporting the campaign, but that is for another day.

I recently had a lucky escape from a CCJ. In the past three years, I was involved in a minor collision outside my home here in London with a vehicle owned by the taxi firm Addison Lee. When Addison Lee got into dispute with the insurance company, rather than negotiating with the insurance company, it went over the top of it and tried to issue me with county court proceedings. Had I not received the documents in time, a county court judgment would have been registered against me, even though it was my belief that the insurance company was dealing with the claim. Luckily, I was fortunate enough to be able to act straightaway and seek legal advice, which prevented the CCJ, but people with similar cases have not been so fortunate.

My second key concern is that some people served with CCJs do not receive any notification if they have moved house. The only legal requirement for the service of court documents to an individual is merely a last known residence. There is no legal requirement per se for the court documents to be delivered or received. Indeed, court documents are considered validly served even if they are returned to the court marked undelivered. The result is that some people are unaware that there is a CCJ against their name until they apply for credit, such as when buying a car or a house.

The Daily Mail investigation raised the poignant case of a young couple from Northern Ireland who were told that they could not take out a mortgage on a new home because one of them parked for 20 minutes in a restricted airport carpark. The CCJ claim was sent to an old address, so the couple were completely unaware of it. Ultimately, the couple had to pay £200 to satisfy the CCJ and get the mortgage. I hardly think parking in the wrong parking bay is sufficient cause to turn someone down for a mortgage on a home. It is clearly important and in the interest of justice that those who are accused of owing money are given the best possible chance to defend themselves and respond to the claim. It is simply not acceptable that the courts are unable in some cases properly to inform those accused of owing a debt of the accusation and, more importantly, of their rights.

The third major concern about CCJs is the huge and often disproportionate effect that they have on people’s access to finance. CCJs are recorded for six years on the register of judgments, orders and fines if they are not paid within one month. Credit rating agencies make significant use of that register when deciding whether to give credit in the form of loans, mortgages and other finance. A person subject to a CCJ, by default or otherwise, has several options. If they can pay within one month, the debt will not appear on the register or harm their credit rating. If they can pay in full but not within one month, the CCJ will be listed for six years and be marked “satisfied”. Ignored CCJs can result in charging orders, attachment of earnings orders and warrants of execution that allow bailiffs to seize property to the value of the debt. There are processes for setting aside CCJs or making counter-claims if the claimant owes money.

Those who need access to credit but have a bad credit rating due to a CCJ against their name sometimes turn to credit repair companies in search of quick fixes. That is usually a mistake, because there are no quick fixes, as the director general of the Office of Fair Trading made clear:

“County court judgments cannot be removed from credit files unless they have been discharged (within a month) or were incorrectly granted.”

Sometimes the only credit available to those with CCJs offers extremely unfavourable terms to the borrower, such as high-interest payday loans. Those issues paint a very negative picture of the effectiveness of CCJs, and of how they are used in general, the way they are issued and the disproportionate way they affect people.

Reform is clearly needed. Although it is perfectly legal and within creditors’ rights to make claims against debtors for even the smallest of debts—it is correct that debts must be repaid—can the fact that so many people are taken to court over small debts be justified? There is a case for creating a new mechanism that creditors can use to seek redress for debts owed to them below a set value, similar to that in Scotland, with small claims for debts of less than £3,000, summary cause actions for debts of £3,000 to £5,000, and ordinary actions for debts of more than £5,000. That would allow credit rating agencies to draw a more accurate and reliable distinction between serious debts that may demonstrate genuine inability or unwillingness to repay loans and mortgages, and minor debts that do not.

More emphasis must be placed on mediation between companies and debtors in advance of CCJ claims being submitted. CCJs should be a last resort for creditors. Creditors should be able to demonstrate that they have made every possible effort to recover their debts amicably and by mutual agreement before heading to court. Those two measures, alongside other reforms, would help to reduce the rapidly increasing number of CCJs, which are issued daily.

The way that CCJs are issued must also be reformed. Those who face the threat of court action for debts must be given all the information they need to know their options. At this point, it would be remiss of me not to pay tribute to the important and useful advice provided by Citizens Advice on this matter. The first responsibility should be with the courts, which should make every effort to explain people’s rights and options fully if they are threatened with a CCJ.

Without those improvements, we must consider the 14-day period in which a CCJ can be challenged to be too short. The vast majority of people served with a CCJ are not legal experts and must be given time to decide how to proceed. As it stands, the threat of high fees and fines, and the complicated nature of CCJs, can force people to submit and accept a judgment, even if they had the chance and legal right to oppose it. In my experience with Addison Lee, had I not sought legal advice and made a challenge, I would have lost out financially. I was able to take on Addison Lee only because the insurance company was willing to meet the costs of my challenge. It is important that everyone who faces the threat of a CCJ is given the best possible chance and the support they need to make a challenge, as I was.

Crucially, the courts must always be satisfied that the person who is threatened with a CCJ is aware of the process. It is not fair, right or in the interest of justice that someone can have a CCJ recorded against their name by default just because they did not receive any notification of it—it could even have been sent to the incorrect address. Without a requirement that the courts must be satisfied that the accused debtor is aware that a claim is being made against them and has received the court documents, cases such as those uncovered by the Daily Mail will continue to emerge.

Lessons can be learned from the Scottish system for delivering court summons. Documents are first sent by recorded delivery. If that fails, court documents are sent out with sheriff officers. Such a system would address the problem of unknown CCJs in the rest of the UK. Reform must be made to address the disproportionate impact that a CCJ can have on a person’s ability to access finance. Credit rating agencies clearly make use of the register of judgments, orders and fines. Debts settled within one month are not placed on the register, but is that one-month limit arbitrary? All debts, once settled, should be removed from the register entirely once they have been cleared.

My suggestion of a new kind of CCJ for small debts might make a difference if credit rating agencies viewed them as less damaging. Of course, even a minor debt should be expected to harm a person’s credit rating, but the size of the debt and the size of the loss of credit rating should be proportionate to one another. It seems madness that people can be turned down for financial products simply because they are in dispute with a mobile phone company or a car parking company. This debate is fundamentally about whether county court judgments provide a sense of justice to creditors and to debtors. As it stands, they do not, as they appear to lean too heavily in favour of the claimants. Why else would their use by creditors be expanding so rapidly? That is a particular problem.

The Government are, I believe rightly, attempting to increase home ownership and access to finance, but the expansion of CCJs will surely hinder that effort. It is clear that some people with CCJs recorded against them are unaware of the fact until they get a nasty surprise when they check their credit rating. I am an Opposition MP, but I am happy to say that the Government have done good work in standing up to payday lenders and trying to increase access to finance by making sure banks access the right people. However, all that will be lost because of this abuse of the county court judgment system. As long as it is in play, that work will mean absolutely nothing.

Although it is not possible to know exactly how many people have CCJs made against them without their knowing or being able to provide a defence, the fact that the situation is possible is a problem in itself. For the people affected, having a CCJ on their record can mean the difference between being able and not able to own their own home. In some reported cases, it has even prevented access to finance for something as simple as a mobile phone contract. The Government have to introduce reforms to rebalance CCJs and allow debtors to defend themselves properly.

Debtors must have the best possible chance of understanding the legal action being taken against them. More effort should be made to resolve debt issues without heading to court, and if court action is the only available course a distinction must be made between high and low-value debts. Those subject to CCJs must be given more time and information so they have the best possible opportunity to make a challenge and defend themselves. The Government must also take action to mitigate the impact that CCJs can have on access to finance, which is already a problem for so many. I fear that if the Government do not reform CCJs and take action to address the issues I have raised, more people’s lives will be ruined.

[Calum Kerr (Berwickshire, Roxburgh and Selkirk) (SNP)]

The hon. Gentleman is making a powerful case. I am not sure whether he is aware that the French philosopher Voltaire said, “We look to Scotland for all our ideas of civilisation.” Although I will not say we need to go that far in respect of this matter, does the hon. Gentleman agree that when there is best practice, or better practice, in other nations on these islands, it is incumbent on the Government to look at that and learn from it?

[Chris Evans]

I did not think that Voltaire would be mentioned in a debate on county court judgments; I congratulate the hon. Gentleman on getting that quote in. In politics, we have to realise that if something works and works well, it does not matter if it is not our idea; if it is a good idea, it should be rolled out. I am glad that the hon. Gentleman is here representing Scotland. He knows the system there, and it does work far better than the one we are discussing. It provides better justice for those who have CCJs against them and has a better system for ensuring that people receive the summons. That is something we should learn from.

I do not have much time, so I shall bring my remarks to a close. I welcome the Prime Minister’s comments last month about the ongoing investigation of the use of CCJs and the disproportionate effect they can have on the lives of the many people who have been caught out by them. I wait in anticipation to see what reforms are initiated to protect people from the predatory use of CCJs. I know the Minister well: he is a fair man with a strong sense of justice. I hope that today he finds a way to right the wrong done to so many people.