Interest charges on a Consumer Credit Judgment

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This factsheet deals with credit agreements regulated by the Consumer Credit Act 1974 only

1. Different types of claim
2. How to stop contractual interest on a CCJ
3. Time Orders
4. Paying off the CCJ
5. Using a Code of Practice
6. County Court Fees

Different types of claim

If a creditor sues you in the county court on an ordinary credit agreement under the Consumer Credit Act 1974, you may be sued for the full balance payable under the agreement. This would include the balance owed and all the interest payable under the agreement. Once you have paid the full amount owing on the county court judgment, that is normally the end of the matter and no further interest is payable.

Alternatively, the creditor may get a county court judgment that includes court fees and interest up to the date of judgment. Once you have paid the full amount owing on the actual judgment, as long as there is no clause in the original agreement that allows the creditor to claim interest after the county court judgment, that is the end of the matter and no further interest is payable.

However, some credit agreements allow a creditor to add contractual interest on to the amount of the county court judgment.

This has been confirmed as legally binding following a Court of Appeal case taken by the Office of Fair Trading against First National Bank. This means that, while you are paying the county court judgment, contractual interest may be charged on the amount that you still owe on the judgment. This may not be made clear to you by the creditor. If this is the case, when you have paid the original balance owed on the judgment, you will find that you have an extra amount that you may still owe the creditor, even though the judgment has been paid in full. To force you to pay this, the creditor would have to sue you again.

To work out whether you have paid the judgment balance, you should check your own payment record or contact the creditor to seek a written confirmation that the county court judgment amount has been paid in full.

You should phone us (0800 074 6918) for advice if:

• you are not sure whether your agreement allows the creditor to seek interest after the county court judgment
• you do not have a copy of your agreement
• your agreement does not appear to mention interest after judgment
• your creditor has told you that they will claim interest after judgment
• interest after judgment is mentioned in the particulars of claim which is the statement the creditor has to send with the county court claim form, giving details of their case.

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How to stop contractual interest being added to a County Court Judgement

You can try to stop any contractual interest being added by asking the county court to make a "time order". If the court agrees to make the time order, it can revise the rate of payment and alter the rate of interest, from that which is written in the agreement to that which it thinks is just and fair. This could mean a zero rate of interest, if the court agrees to make the time order in those terms.

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Asking for a Time Order before a County Court Judgment has been made

If a county court claim has been sent to you, this will arrive with a response pack (N9). This includes an Admission Form (N9A) which you can use to apply for a time order. The form asks for details of your income and outgoings. Make sure you fill in BOX 11 on the Admission Form to ask for a time order on the basis of your offer to pay the debt off in instalments. Also ask the court to amend the terms of your credit agreement so that no further contractual interest can be added to the balance by the creditor after the date of judgment. The form should be sent back to the creditor within 14 days.

The creditor passes the form on to the court which should consider your application and send you the county court judgment. This should say if a time order has been granted and what instalments you should pay. If there is no mention of your time order application, you can write to the court and ask for a "redetermination". You should do this within 14 days. There is no fee to pay. You can ask for a redetermination as long as the judgment has not been made by a district judge at a hearing. Phone us for advice.

Asking For A Time Order If A County Court Judgment Has Been Made
If a county court judgment has been made, you can ask for a time order to be made in one of two ways.

1) USE AN N244
You can get an N244 form from your local county court. On the N244 you need to ask for a time order to "reschedule" payment at the rate you can afford and also ask the court to stop any interest being added. This should be backed up with a copy of your personal budget, showing what you can afford and mentioning any relevant personal circumstances that affect your offer.

There will usually be a fee of £65 to pay with your application. If you are on a low income or certain benefits you may not have to pay the fee. See the section on fees at the end of this factsheet.

2) WRITE A LETTER
You can write a letter to the court, asking for the court to consider making a time order "on its own initiative". You should include an offer of payment that you can afford, backed up with a copy of your personal budget, asking for interest and charges to be stopped, showing what you can afford and mentioning any relevant personal circumstances that affect your offer.

Because a successful application is not guaranteed with either of these two routes, please phone us for advice if you are considering either option.

We have a factsheet on time orders in the county court we can send you. Phone us for advice.

IMPORTANT
It is very important that you fill in the reply form (N9A) within the time limit and make an offer of payment that you can afford. If you do not send back the form the court will probably make a judgment for you to pay the whole amount of money you owe immediately.

• If a county court judgment has been made, without a time order, it is important to check both the amount owing on the county court judgment and any separate contractual interest that is being added.
• Creditors may keep these two sets of figures in two separate accounts or add them together in one account, "to make it easier for customers". If all the information is held in one account, you need to get a separate breakdown of both how much is owing on the county court judgment and the amount of contractual interest that has been added. If you cannot get this information from the creditor, phone us for advice.
• Remember, if contractual interest has been added, you will not normally be sued for this until the county court judgment has been paid in full.
• Once you have paid the judgment balance, you should write to the creditor stating the judgment has been paid.
• You should then apply for a Certificate Of Satisfaction on the judgment from the court. There is a £15.00 fee to pay for a Certificate of Satisfaction. If you have any problems in obtaining this, phone us for advice.
• If you have had a charging order made on your property and you have paid the county court judgment off completely, the charging order should be removed from the Land Registry. If anything else happens, phone us for advice.

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Paying off the County Court Judgement and further action for added interest

When you think that you have paid the county court judgment in full, you should check this with the creditor (see comments earlier about how to do this). Where the county court judgment has been paid in full, you could choose to stop paying. You should write to the creditor explaining why you consider the judgment balance to be paid off. If you did not pay anything further, the creditor would be forced to sue you again to get more money back. If the creditor threatens to take you to court again phone us for advice.

If a further county court judgment is obtained for the extra interest, this will be registered on your credit reference file for a further six years, unless you pay the new judgment amount in full within a month of the judgment being made.

If you do continue to pay, the creditor will accept your payment as being towards the interest added onto the original judgment. It may be worth trying to negotiate a small settlement figure with the creditor instead. See below.

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Using a Code of Practice

The creditor may be a member of a trade association that has a code of practice. You may be able use this to negotiate an agreed settlement on the interest. This might take the form of a complaint about unfair behaviour by the creditor.

There are pros and cons to this approach. It is an alternative to seeking further action in the court. However, it may be a process that binds you to the outcome, even if you do not like the result, e.g. the

trade association may suggest a compromise figure between the amount the creditor wants and what you think you should pay. In addition, you may be barred from taking action in the court by choosing this route. If you are interested in this approach, phone us for advice.

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County Court Fess

DO I HAVE TO PAY A FEE FOR AN APPLICATION IN THE COUNTY COURT?
There will usually be a fee to pay with your application. You can ask the court not to pay the fee in some circumstances. The form you will need to fill in is called an EX160 'Application for a fee exemption or remission.' This form needs to go to the court with your main application. If the court agrees your application you will not have to pay the fee. If you pay a fee when you should have been exempt or would have qualified for a remission, then you have six months to apply to the court for a refund.

EXEMPTIONS
If you are on income support or income-based jobseeker's allowance (JSA) you can ask the court for exemption from the fee. You need to give the court proof that you are getting the benefit. You will be exempt if you or your partner are on the guarantee credit element of pension credit.

If you are on working tax credit you will be exempt from the court fee in these circumstances:

if you are also on child tax credit,

or

you receive the disability or severe disability element in your working tax credit,

and in either case

your gross annual income taken into account for working tax credit is £15,460 or less (from 6 April 2006).

You will need to show the court your tax credit award notice to qualify.

If you do not qualify under these rules for an exemption then you can ask for the fee to be remitted or waived by the court. See below.

REMISSIONS
Ask the court for the fee to be remitted (or waived) if it will cause you what the court calls " undue financial hardship". You can use the same EX160 application form. You may be on a low income or a benefit that does not automatically exempt you from paying the fee. Give as much information about your circumstances as you can. Explain your financial situation on the application form and any exceptional circumstances that apply in your case. The court can remit all or part of the fee depending on what they decide you can afford.

Remember: You can always Phone us for advice about any difficulty you are having in dealing with your debts

0800 074 6918

© Copyright National Debtline 1994 (updated May 2006)