Financial Services Bill

Written evidence submitted by the Registry Trust Ltd (FSB07)

Clause 32 Debt Respite Scheme: Proposed amendments to the Bill

Registry Trust is the non-profit organisation which operates the Register of Judgments, Orders, and Fines. The data we process is an integral part of responsible and effective consumer and business lending in the UK.

We very much support the intention of the measures set out in Clause 32 of the Bill to amend and improve the legislation which created the Debt Respite Scheme (DRS). The DRS should provide much needed additional protection to consumers who are facing debt problems.

Proposed amendments

We propose three amendments to Clause 32. These amendments would complement the DRS and the work of debt advice charities, and provide further protection to consumers. The amendments are designed to:

· help consumers rebuild their finances if they have faced problem debts;

· help the FCA and other consumer protection regulators identify which creditors are treating vulnerable consumers fairly; and

· allow for a more effective mechanism for funding debt advice.

The three amendments to Clause 32 we propose are:

1. Creditors (claimants) on receipt of full settlement from a debtor for an outstanding county court judgment (CCJ) should inform Her Majesty's Courts and Tribunals Service (HMCTS) or where relevant, Registry Trust that this debt has been satisfied . That debt should be registered as satisfied on the Register of Judgments.

2. Creditors (claimants) on receipt of a partial settlement from a debtor for an outstanding CCJ should inform HMCTS or, where relevant, Registry Trust that this debt has been partially settled. That debt should be registered as partially settled on the Register of Judgments.

3. The public Register of Judgments should contain the name of the claimant on the judgment in addition to the name of the defendant. Where agents act on behalf of creditors, the name of the underlying creditor should be included on the judgment.

Purpose of the amendments

1. Creditors (claimants) on receipt of full settlement from a debtor for an outstanding county court judgment (CCJ) should inform Her Majesty's Courts and Tribunals Service (HMCTS) or where relevant, Registry Trust that this debt has been satisfied . That debt should be registered as satisfied on the Register of Judgments.

It is not well known that if a citizen repays a debt in full after receiving a CCJ from a claimant, s/he is required to inform the courts that the debt has been repaid in full, with proof of payment. Otherwise, the CCJ will not be marked as satisfied and the debt will remain as outstanding on the public register.

An outstanding CCJ can affect an individual or company’s ability to obtain credit. But that is not the only area where outstanding judgments can be detrimental. CCJs are also used by employers, insurance companies, banks, landlords and mobile phone network providers to make financial decisions. Judgment data was used in 224 million business decisions in 2018.

Despite the importance of ensuring CCJs are satisfied, the levels of judgment debt being marked as satisfied has rapidly decreased. Registry Trust data shows that in 2019, over 1.3 million CCJs were processed. Yet, in England and Wales (the largest jurisdiction), just 12% of CCJs were marked as satisfied. A further 7% were cancelled (where the debt was repaid in full within one calendar month from when the CCJ was issued).

It seems deeply unfair that citizens can have paid off their debt in full, but this is not marked on the register. There are a number of reasons why citizens might not inform the courts with proof of payment. They may not be aware of the need to do so or the process. They may be experiencing high levels of anxiety and may just forget to do so – there is a well-established link between overindebtedness and mental health issues.

The simple solution to this would be for the creditor (claimant) to inform the court service or Registry Trust [1] that full payment had been received. Ensuring CCJs are marked as satisfied is a small step that could have a big impact on consumers’ financial health and wellbeing. It could help bring consumers back into the mainstream financial system which will take on even greater significance as the economy recovers from the effects of the Covid19 pandemic.

2. Creditors (claimants) on receipt of a partial settlement from a debtor for an outstanding CCJ should inform HMCTS or, where relevant, Registry Trust that this debt has been partially settled. That debt should be registered as partially settled on the Register of Judgments.

There is a similar problem with partial settlement of debts. Many citizens have had to enter a debt payment plan to help them get back on their feet. They will be making strenuous efforts to pay back what they can.

But, within the current system there is no place for entering partial settlement information for settled judgments. If a lesser amount is accepted as full and final payment, that amount will continue to stay on a defendant's records, including their credit file, as an outstanding debt.

It seems deeply unfair that citizens are not being given recognition for making a genuine effort to repay their debts. Registering judgments as partially settled may help citizens get access to more affordable credit in future.

3. The public Register of Judgments should contain the name of the claimant on the judgment in addition to the name of the defendant. Where agents act on behalf of creditors, the name of the underlying creditor should be included on the judgment.

As it stands, Registry Trust can publish the name of the claimant for Scotland and Northern Ireland judgments but not for England and Wales. [1]

Registering the claimant name could have a number of benefits. It could be a useful ‘real time’ supervisory tool for the Financial Conduct Authority (FCA) and other regulators. It would allow supervisors to identify quickly which firms within their remit are most aggressive in using enforcement action, and compare their stated treating customers fairly policies against their practices.

This real time data could be particularly useful as we the economy recovers from Covid19 as it could help regulators monitor corporate behaviour when the current forbearance and consumer protection measures are wound down.

It could also be a useful input for determining the funding of debt advice based on the harm caused. Including the claimant name on the public register would help the Money and Pensions Service and other stakeholders identify with more precision which activities, sectors, and firms are responsible for causing financial problems for consumers.

November 2020


[1] For England and Wales, the court service would need to be informed. For other jurisdictions, Registry Trust would have to be informed.

[1] The Ministry of Justice specifies which data Registry Trust can include on the Register.

 

Prepared 24th November 2020