Almost 300,000 debt judgements were filed in the first three months of 2017 which highlights, and adds to, a growing sense of alarm at the Bank of England and amongst MPs regarding rapid increases in consumer spending which is being fuelled by extra borrowing. This represents a 35% increase compared to the first quarter of 2016 and is the highest quarterly figure of CCJs in over a decade.
How does this affect small businesses and everyday spending?
The rapid increase in the first quarter follows a general rise in recent years and is likely to be the product of a number of factors, such as; the hangover from the financial crash, more people struggling to balance household incomes; and a change in approach by some collection agencies. As more CCJs are filed against borrowers who were unable to pay their debts, anti-poverty charities have warned that there is potential for a negative multiplier effect caused by rising inflation and slowing wage growth eating into household finances. Over recent month’s charities, the Bank of England and MPs, have been united in warning that consumer debt levels were reaching dangerously high levels, citing credit card firms, car leasing companies, shops offering interest-free credit and increases in lending from banks as the main source of the boom in consumer credit. CCJs can cause significant long term damage to an individual’s credit rating. This, in turn, can make it more difficult to secure tenancies, more difficult for homeowners to re-mortgage and add to the levels of stress and anxiety experienced by a borrower.
How can this be resolved?
There are calls to ensure that creditors offer customers more flexible ways to repay their debts before proceeding to court. The Chief Executive of Citizen’s Advice, Gillian Guy, believes that “lenders must ensure that people can afford to pay back what they borrow” and believes new approaches by the Bank of England and the Financial Conduct Authority (FCA), chiefly concerning “looking into how robustly lenders are carrying out affordability checks,” are a step in the right direction but the figures suggest this is a rapidly deepening issue. If you are struggling with the mounting pressure from a CCJ, you can find out more regarding our services and support online.