England and Wales could learn from Scottish procedures to prevent county court judgments wrecking the creditworthiness of individuals who do not even know that an action has been brought, a parliamentary debate has heard.
Chris Evans, MP for Islwyn, said ‘there was a case’ for creating a three-tier mechanism through which creditors can seek redress for debts. He said there could be a small claims system for debts of less than £3,000, summary cause actions for debts of between £3,000 and £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… and minor debts that do not,’ Evans said.
The debate follows an investigation by the Daily Mail newspaper which discovered that ‘financially responsible’ people are having county court judgments obtained against them without their knowledge.
The judgments – which stay on a person’s credit file for six years – are issued against people who fail to pay a bill. But the Mail found that bills and claims are often sent to old addresses meaning these people have no chance to dispute the order or pay the debt.
In England and Wales last year, 750,235 CCJ’s were issued in default of a defence (85% of the total judgments issued).
Evans added that the 14-day challenge period in which a CCJ can be challenged is too short and that lessons could also be taken from Scotland by mirroring its procedure for ensuring judgments are delivered. Documents in Scotland are first sent by recorded delivery and if that fails court documents are sent out with sheriff officers.
Philip Lee, under secretary of state for justice, said the Ministry of Justice was ‘investigating default judgments’ where the defendant did not receive claim. ‘We will then consider whether any steps should be taken to ensure system not open to abuse,’ he added.