More small debts are being taken to court

It seems like more and more people with small debts are being taken to court. Figures from the Registry Trust revealed that despite the number of County Court Judgements (CCJs) rising to a decade high between January and March 2017, the average value of a CCJ dropped to an historic low of £1,495. This is compared to the Q1 2008 average of £3,662[1].

Registry Trust chairman, Malcolm Hurlston CBE, said: “People who don’t pay their debts are increasingly likely to be taken to court.” While this might “seem like bad news on the surface”, he added, in actual fact this is “protective for the people concerned”.

CCJs on the rise

According to the Registry Trust, in the first three months of the year there were 298,901 CCJs issued against consumers in England and Wales. This is a 35% increase compared to the same time last year and suggests that debt may be becoming a real problem for people in the UK.

Figures from the Money Charity revealed that at the end of March 2017, people in the UK owed a whopping £1.529 trillion – up an extra £886.84 per adult[2]. While having some affordable debt can actually be a good thing, as we explain in ‘The difference between good and bad debt’, figures would suggest that maybe Brits are biting off more than they can chew when it comes to borrowing.

Why is consumer debt increasing in the UK?

Joanna Elson, the chief executive of the Money Advice Trust, told The Guardian in May that rising debt levels are likely the result of a number of factors[3]. These include an “overhang from the financial crash”, a “change in approach by some collection agencies” and an increasing number of people struggling to balance household budgets. She added that this situation is unlikely to change any time soon as “people feel rising inflation levels eating into their wages”.

A ‘credit boom’ in 2016 may also be behind the rise in CCJs. At the start of the year figures from the Bank of England showed that consumer credit (such as credit cards and car loans) increased by 10.8% in the year to November 2016, hitting £192.2bn[4].

Peter Tutton, head of policy at StepChange Debt Charity, said: “Previous experience shows how such increases in the levels of borrowing can leave households over-indebted and vulnerable to sudden changes in circumstances and drops in income that can pitch them into hardship.”[5]

Is there a reason behind the rise in smaller value CCJs?

Why smaller value CCJs are increasing in number may be more of a mystery. It seems, as Joanna Elson pointed out, there could be a change in the way some agencies collect. Similarly, the finger has been pointed at banks and building societies for taking debtors to court slightly earlier than in the past.

What does this mean for consumers?

It’s always important that you only ever borrow what you can afford. The second you take on debt that causes your finances to become ‘uncomfortable’, you know you’re dealing with bad debt and you could be at risk of defaulting on payments.

If you’re struggling with managing your money, check your credit report for free at Noddle to get a 360 degree view of your finances. There is also a lot of free advice available to help you get on top of things. Try Citizens Advice, Step Change Debt Charity or the Debt Support Trust, to name just a few.

You can also learn some tips for tackling debt here.

 

[1] https://www.registry-trust.org.uk/publications/category/42-statistics

[2]http://themoneycharity.org.uk/media/May-2017-Money-Statistics.pdf

[3] https://www.theguardian.com/money/2017/may/15/county-court-judgments-bank-of-england-mps-debt

[4] http://www.bankofengland.co.uk/statistics/documents/mc/2016/nov/moneyandcredit.pdf

[5] https://www.stepchange.org/Mediacentre/Pressreleases/BankofEnglandMoneyandCreditstatsresponse2017.aspx