21st November 2017.
CCJs are Rising: What Does This Mean For SMEs and Consumers?
As we all know, a County Court Judgment (CCJ) is a court order that might be smacked down on you or your business, if you fail to pay back money you owe.
While seen in the collection industry as a last result, a lot of our debtors ignore all correspondence until a claim or judgement is issued. Entering into a Judgement will affect the debtor’s credit rating, so sometimes the threat of legal action can open the purse strings.
On the occasion that the threat hasn’t inspired the necessary panic, a CCJ is issued. The figures for which have spiked considerably in the third quarter of the year.
Scary Statistics
Figures that came out last week from the Registry Trust have shown a sharp increase in County Court Judgments (CCJs) against consumers in England and Wales. Figures for business CCJs have also risen for the first time in eight years.
It was reported that 317,793 consumer CCJs were registered in England and Wales, which is a rise of 24 percent compared with the previous year.
Some 24,698 business CCJs were issued in the third quarter of 2017, up a whopping 27 per cent on the previous year.
Across businesses and consumers, the average value of CCJs fell, indicating that increasing numbers of CCJs are being issued for lower amounts.
What does this mean for SMEs?
Businesses in the UK are currently facing many obstacles in pursuit of growth. The continued Brexit uncertainty, the skills shortage and the economy’s stalled growth, are all having their effect on business. While large companies may have the capital to overcome these, SMEs are struggling.
There are far lower costs involved in registering a CCJ as opposed to other insolvency proceedings, which could offer one explanation for the increase.
The whole process of CCJs has been made increasingly easier with new online accessibility. Research conducted by Experian back in 2015 found that rising numbers of small businesses were taking advantage of its simplicity to use CCJs to chase bad debt.
What does this mean for consumers?
Economists and policy makers disagree on what this rise in CCJs means for the UK consumer.
While there is a little doubt that the rise in CCJs highlights the large numbers of financial vulnerable individuals, Registry Trust believes the increasingly small monetary values of CCJs suggest more responsible lending.
Peter Tutton, the head of policy at debt charity StepChange, views these small values as indicators that banks are moving too quickly to prosecute people in financial difficulty, and that more aggressive enforcement is becoming an increasingly attractive option.
Registry Trust chairman, Malcolm Hurlston, insists that these Judgement for smaller sums are “protecting people”, and are preventing them from taking on further debts that they cannot afford to repay.
What now?
Now that consumer credit has dried up for the moment (see our recent news piece for more details), consumers should see this as an opportunity to reign in their spending. Particularly in the lead up to the Christmas season, and while unemployment figures stay low, consumers should try to keep a closer eye on their personal finances.
SMEs on the other hand should stop seeing CCJs as an easy fix to bad debts. The time and costs involved can make it quite a challenge and success is not always guaranteed.
Instead, businesses should improve their in-house credit control capabilities or outsource their debts to credit management companies like us at the Credit Protection Association.
Often, the added weight of a third party can be the push that’s needed to encourage a customer to settle any outstanding invoices.
Ella Bond 21st November 2017
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