Late last year plans were unveiled to protect consumers from unresolved debts, which can potentially cause long-term damage to people’s credit ratings (without them even knowing). Our Head of Collections, Harry Tumber has shared his views on the matter.
The recent consultation into the Issuance of County Court Judgments was launched by the Government in December. In case you are unfamiliar, individuals can receive a County Court Judgment if court proceedings are issued against them and they fail to respond.
The plans were developed to help tackle widespread concern about the potential adverse impact of a County Court judgment on individuals who:
a) Were unaware that a judgment had been made against them.
b) Had found out about them months or years later and that their credit rating had been damaged.
The announcement of the consultation follows concerns that companies are intentionally using outdated customer information to deprive debtors of the chance to defend themselves. The aim of this consultation is part of a wider reform from The Ministry of Justice, to ensure the debt recovery process is working fairly for both creditors and debtors.
The consultation period is open until the 21st of February 2018, where the government will hear views on the appropriateness of the current system, looking specifically into the overall effectiveness of the current system.
The proposal currently under consultation is that a judgment may be removed from the Register where:
- The court is satisfied that the defendant was unaware of the claim/judgment when originally issued/entered;
- The court is satisfied that the defendant has only just become aware of the claim and judgment; and
- The defendant immediately pays in full.
At stevensdrake, as part of our commitment to ethical collections, we always use our best efforts to ensure that contact attempts are made to the correct address. This can include the use of credit reference agency data and other third-party sources of information.
Since the launch of the Pre-Action Protocol for Debt Claims on 1st October 2017, prior to the issuance of proceedings individuals should have already received full details of the debt. If the Letter of Claim has been sent to an old address, either deliberately or otherwise, this will have costs consequences to the creditor at a later date should those proceedings be contested.
On the other hand, we feel that in the case where an individual has moved from the address they first provided to a creditor at the inception of the relationship or has moved again, there should be a reasonable expectation for the individual to have updated their address details. Otherwise, a creditor will be unaware of the inaccuracy and then where does the fault lie?
The other question is, how big is this problem? The consultation process is seeking formal evidence on the scale of the problem and is collecting views on how best to protect consumers and businesses. The Justice Minister’s comments on the situation were “debts should be paid, not exploited by a minority of cowboys who need reining in."
Our prediction is this is likely to be a small number of companies in specific industries. If through trend analysis it is identified that there are only a few companies who are the cause of complaints then compliance efforts should be focused on them, rather than a consideration of a wholesale change to the process. Such a large change to the process, will only arguably make it more difficult for those creditors who act responsibly to recover unpaid debts.
It will be interesting to see the results of the consultation period at the end of February. Watch this space for our response to the results of the consultation.