A Million Debtors Face Court Action
Up to a million households struggling with rising living costs and lured by offers of easy credit will face court action over their debts this year.
A total of 247,187 debt-related judgments against individuals were issued in that time – a 9.5 per cent rise on the same period last year. That represents the highest quarterly total since the summer of 1997 when 247,991 judgments were issued, according to trust statistics.
The numbers are expected to climb in the next six months as families labour under the strain of interest rate and cost of living rises.
The increase in court action is also attributable to the boom in consumer borrowing in the past five years, with household debt now topping the £1 trillion mark.
The Registry Trust is a not-for-profit company that operates the registry of court judgments and fines for England and Wales on behalf of the Department for Constitutional Affairs. A judgment can affect a person’s credit rating, ability to rent a home and even their employment prospects. It can remain on their credit file for up to six years.
The credit rating agency Experian said the average amount owing on a county court judgment last year was almost £2,500.
Experts said the latest rise showed many families were struggling to stay afloat financially. Some took huge mortgages because of rising house prices, and have borrowed heavily on credit cards to finance household spending. Interest rates, food costs, council tax, energy bills and other essential living expenses have all gone up.
Recent government figures disclosed a rise in the number of homes being repossessed, while the number of people becoming bankrupt or insolvent is at record levels.
Yesterday’s Registry Trust figures showed that many ordinary families are now affected by serious financial problems – even though they may not be on the brink of insolvency.
Peter Tutton, the national debt policy officer at the consumer charity Citizens Advice, said there had been “a relentless rise” in the number of people in serious debt turning to the charity for help. “These figures come as no great surprise,” he said.
Malcolm Hurlston, the Registry Trust chairman, said: “This quarter’s record numbers [of judgments] give a warning to unsecured borrowers that their credit ratings are at risk and further proceedings are only a step away.”
County court judgments are sought by creditors who are owed money and if a debtor does not pay up within a month of receiving the order the judgment will remain on their file for six years.
A judgment can also precede a charging order, which allows a creditor to take further steps to recover the debt, which may include appointing bailiffs.
Frances Walker, of the Consumer Credit Counselling Service, warned that the judgments could have wider implications than just impairing someone’s credit rating. Landlords and employers may also search the Registry Trust’s database before employing someone or renting them a property, she said.
Miss Walker added that the rise in judgments was caused in part by the huge increase in consumer borrowing in the past five years.
Credit card companies have been increasingly willing to lend large amounts to customers, leading to a £1.3 trillion “debt mountain”.
A spokesman for the debt charity National Debtline said: “The question is whether it is irresponsible lending or irresponsible borrowing. It is down to both. We would like to see more responsible lending.”
Mr Tutton, at Citizens Advice, said growing numbers of creditors go straight to court, rather than talking to debtors about repaying the money first.
“Our concern is that creditors are using court action rather than trying to negotiate with debtors,” he said.
He said proposals are being considered that will make it easier for creditors to obtain charging orders. These may encourage even more to use court action.
“Court action adds greatly to the costs and hardship people in debt face,” Mr Tutton said. “Creditors should always try to negotiate in line with industry standards before resorting to such action.”