This week we spoke to Denise Parkinson of Cash Protection Agency about the recovery of debts via the small claims procedure.
Here’s what she had to say on the subject.
Despite dizzying increases in court fees in recent years, the small claims courts are still not working as well as they should for claimants, and too many rulings in favour of the claimant go ignored by debtors who cannot or will not pay.
To enforce the court’s judgment, all too often you have to go back to court and charge the debtor all over again – as though the system is set up to assume that despite not paying you what they owed first time around, they can be relied upon to do so when the court tells them to.
It’s an expensive, slow and frequently toothless process, and the small claims courts’ failure to be fit for purpose is nothing new, sadly.
Failing on all fronts
The small claims court was originally set up to allow – as the name suggests – small claims to be made for sums of money that might not be worth pursuing through the pre-existing full-scale court process. It’s a nice idea and one that, on the face of it, should benefit individuals and small businesses without a specific legal expenses budget.
So where have the small claims courts fallen down over the years? Well, almost everywhere, unfortunately. In 2010, Consumer Focus found that more than half of all small claims were submitted through the County Court Bulk Centre, which meant they were not from individuals at all, but more likely from large organisations like banks or store card providers chasing debtors. A typical claim at that time could take as long as six months to reach a verdict – and only one in three users of the service thought this was reasonable.
More than a quarter of all users found the small claims court process intimidating, and roughly a fifth of claimants and defendants alike paid a lawyer to represent them anyway, despite the original concept of the small claims court aiming to prevent this from being necessary. And in a quarter of cases where the court ruled in favour of the claimant, the debtor still did not pay in full.
So why have we heard so little about this since 2010? Well, in the government’s 2010 Spending Review, Consumer Focus had its funding redirected to the Citizens Advice Bureau. In May 2013 it was renamed Consumer Futures, and on April 1st 2014 it was dissolved completely and merged with Citizens Advice.
The cost of court
Since Consumer Focus quietly faded from the scene in 2013, court costs have steadily increased – claims valued at over £1,500 went up in 2014 and claims over £10,000 went up again in 2015.
The biggest fee increase from 2013 to 2015 was for claims worth £200,000, which went from £1,080 to £10,000; a rise of 826 per cent in just two years. Further down the scale, claims for £1,500-3,000 rose by 21 per cent and for £3,000-5,000 by a hefty 71 per cent.
Remember, there is always the risk that you will lose your claim, but will still have to pay the court fee, or that you will win but the debtor will still simply not pay.
We would always suggest speaking to a no-win no-fee debt recovery agency before considering court action, as many debts can be recovered more quickly and cheaply, with a fee based on a percentage of the amount recovered.
There is still the option of taking the debtor to court if they refuse to pay, but a reputable debt recovery agency will also be able to advise you on whether this is the best course of action, and whether the time, cost and likelihood of winning your claim combine to make it worthwhile or not.