The government has signalled a potential move towards allowing creditors to enforce judgements using High Court enforcement officers. Adam Wonnacott explains what this could mean for motor finance
Last month the government provided its response to the Ministry of Justice consultation on Transforming Bailiff Action. The consultation includes draft regulations and other provisions designed to give effect to Part Three of The Tribunals, Courts and Enforcement Act (1997).
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The consultation document and, in particular, the government’s recent response has been the subject of considerable media interest. It has been welcomed by the advice sector because it seeks to address the issue of ‘aggressive bailiffs’ and also by the enforcement industry because it provides a viable fee structure and a new degree of legitimacy.
But what relevance does the consultation document have for collections in motor finance?
Part Three of the Act deals with ‘taking control of goods’, that is, the process of seizing of goods from a debtor under a liability order (usually for the payment of debts owed to local authorities) or under a County Court or High Court judgment.
This is quite different from the enforcement processes in motor finance, where most creditors use external agents to collect arrears or recover the security under a finance agreement.
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By GlobalDataThe reader might be forgiven for thinking that the consultation is of no consequence to collection processes in the consumer finance industry; but, in fact, hidden away on page 63 of the government’s response is a massive opportunity for lenders and one that should be seized with both hands.
The consultation gives consideration to making a change to the High Court and County Court Jurisdiction Order (1991) allowing judgment creditors to use High Court Enforcement Officers to enforce monetary judgments arising from CCA-regulated agreements. In recent years, High Court enforcement officers have been employed to great effect by utilities companies, local authorities and lately HMRC to recover judgment debts from consumers. Banks and consumer finance providers, however, have been forced to use an overburdened and increasingly under-resourced County Court bailiff service when seeking to enforce against goods.
As a consequence, many lenders have adopted the use of charging orders against property to enforce judgment debts.
In January, the OFT imposed requirements on one major lender in relation to its use of charging orders, indicating that while a lender is entitled to use charging orders, it must do so proportionately and not to secure relatively small amounts of debt.
Notwithstanding the OFT’s note of caution with regard to the use of charging orders, the suppression of mobility of the housing market has made it increasingly difficult to realise the benefit of charges against property. So, while the utilities sector and public authorities have an effective route for litigation and enforcement against the consumer, lenders are left in a rather less fortunate position of being able to obtain judgment, but having few options actually to enforce if necessary.
A change to the High Court and County Court Jurisdiction Order could address this imbalance. It would allow lenders to use High Court enforcement officers to enter into managed payment arrangements secured against the debtor’s goods – with the sanction of removal of goods if the payments are not made.
The government’s response to the consultation document noted that the majority of respondents were in favour of a change, with 100% of the respondents from the judiciary in agreement.
Creditors need recourse to an effective method of judgment enforcement and should have the same options as those that advance non-credit-based products and services to consumers.
The changes are shortly to be debated in government for completion this summer. The consumer credit industry would be well advised to seize this opportunity and to engage with the government as soon as possible on this issue.
Adam Wonnacott is sales director at the Burlington Group
