[box border=”full”]80 per cent of small money claims go undefended[/box]
A new report from the Consumer Action Law Centre calls for changes to Magistrates Court procedures to protect consumers from inaccurate law suits and inappropriate judgments. Each year 30,000 to 40,000 Victorians sued in the Magistrates Court for small debts fail to lodge a defence, meaning the plaintiff succeeds without allegations being fully scrutinised—that’s a staggering 80 per cent of all small money claims..
‘Many people being sued for alleged debts in the Magistrates Court are particularly vulnerable—they may be being chased by multiple creditors, have low literacy levels, or be intimidated by our legal system. They may simply have missed the Court’s deadline. But current processes mean that if you fail to lodge a defence, a creditor can apply for a default judgment,’ said Gerard Brody, CEO of Consumer Action.
‘It’s highly unlikely that all claims are entirely accurate, or that there is no valid defence in every undefended case. The Court needs to more fully examine evidence substantiating undefended complaints, such as account statements, correspondence and default statements. Given a judgment can mean anything from having your wages garnished, to bankruptcy and losing the family home, we think closer scrutiny of claims is required.’
The report, Like juggling 27 chainsaws, authored by Dr Eve Bodsworth of the Brotherhood of St Laurence, includes the real life experiences of 16 Victorians who received a default judgment because they failed to lodge a defence. Their stories show how confusion, stress and anxiety can result in a case going undefended.
‘The threat of legal action is stressful for anyone, let alone someone who is juggling multiple debts, doesn’t understand the complexities of our legal system, or doesn’t have access to legal assistance. Many of the court complaints are issued by debt collectors, and consumers can be confused about who is actually suing them. The report finds court documents need to be made clearer and be simplified.
‘The report also highlights gaps in legal support services—in particular, tradespeople and small business owners are often ineligible for free legal services,’ said Mr Brody.
Mr Brody also used the findings of the report to call on Australian businesses and other creditors to increase assistance to financially stressed customers.
‘The vast majority of Victorians we speak to want to repay their debts, but the payment plan put forward by creditors or debt collectors can be too onerous. From this point onwards court action is far more likely. We need businesses across Australia to offer struggling customers affordable payment plans, and to consider waiving debts where there is no real prospect of recovery.
‘Affordable payment plans mean debtors can meet their obligations, businesses can be paid, and our courts don’t get blocked up with thousands of cases which could have been resolved in a more appropriate manner,’ said Mr Brody.
Australians being threatened with legal action over unpaid debts can call MoneyHelp, a free telephone financial counselling service, on 1800 007 007.
A summary of the report is available here.