Interest on judgment debts
Statutory or contractual interest runs on some County Court judgment debts meaning the amount of the judgment can increase.
Interest before judgment
The claimant in a money claim can ask the court for interest to be added to the debt.
The County Court can award interest before judgment at a rate it thinks fit (usually eight percent per annum).[1] Interest can be awarded from the date the debt fell due until the date of:[2]
payment, in the case of a debt paid before judgment
judgment, where an order is made
The claimant must state that they seek an award of discretionary interest in the claim form and particulars of claim. It cannot be claimed in addition to any other interest that runs on the debt at the same time.
How to challenge pre-judgment interest
The defendant can challenge discretionary interest by completing the defence form and returning it to the court within the time limit.
The defendant can file a partial defence to reduce the amount of interest if there has been a long delay in the claimant starting proceedings.
Read more about how to defend a County Court money claim.
Statutory interest after judgment
Statutory interest runs on all relevant judgment debts at a rate of eight percent per annum.[3] The claimant does not have to include a claim for statutory interest in the claim form.[4]
The court cannot vary the rate of statutory interest. It can determine the date from which interest will start to run.[5] It could decide to award statutory interest from a date prior to the date of the judgment.[6]
Statutory interest does not run on any amount that already attracts interest, for example, because contractual interest is charged.
Relevant judgments
A relevant judgment is a judgment or order of the County Court for the payment of a sum of not less than £5,000. It includes:
default judgments
judgments on admission
summary judgments
sums registered with the County Court for enforcement, such as benefit overpayments
Excluded judgments
Statutory interest cannot be applied to a judgment when it is:
payable in instalments and they are up to date[7]
for a Consumer Credit Act regulated agreement[8]
a suspended possession order for rent or mortgage arrears[9]
subject to an administration order or attachment of earnings order[10]
Terms agreed in a Tomlin Order do not attract statutory interest because it is not a money judgment.[11]
What happens when the judgment is enforced
Statutory interest stops when the judgment debt is enforced by:
warrant or writ of control
attachment of earnings
third party debt order
Statutory interest can accrue as though enforcement had not started if it does not result in the recovery of money.
Statutory interest on charging orders
A charging order does not prevent the accrual of statutory interest. Interest continues to run if the judgment debt attracts interest, whether the charging order specifies that interest runs or not.
The charging order cannot attract statutory interest if it does not already run on the judgment debt. The standard wording of a charging order refers to statutory interest. That wording does not give the claimant a new right to add interest to the debt.
Contractual interest after judgment
Most consumer debts are regulated by the Consumer Credit Act 1974 (the CCA). Statutory interest cannot run on judgments for CCA debts.
The CCA sets out strict rules for claiming contractual interest after judgment has been entered for a regulated debt. The agreement sets out what interest can be charged on the amount borrowed, and following the borrower's default.
How the creditor claims contractual interest
There must be a clause in the agreement permitting the creditor to claim interest on the judgment debt. Then, the right to claim contractual interest must be expressly included in the:[12]
particulars of claim
judgment, stating whether it is fixed or variable
The judgment can contain a provision allowing a variable rate of interest to be calculated at a later date.[13]
Statutory notices under the CCA
Claimants can only claim interest on judgments for CCA debts made after 1 October 2008 by:[14]
issuing the debtor with a notice in the prescribed form
advising the debtor of their right to apply for a time order
giving the debtor notices about the interest charges at six-monthly intervals
The claimant cannot charge post-judgment contractual interest for any period before the service of the first required notice or during a period when they have failed to serve a notice.
The creditor must also give the debtor annual statements showing the interest that has fallen due.[15]
How the defendant can stop interest running
The defendant could prevent interest being added to their debt by making an application to court.
Apply for an order to pay by instalments
The defendant can apply for an instalment order, either in response to a claim or after judgment has been entered.
An instalment order prevents statutory interest from running on a judgment debt.
Read more about the defendant's application to vary a money judgment.
Apply for a time order
The defendant could apply for a time order to deal with contractual interest that runs on a Consumer Credit Act regulated debt. In practice, contractual interest on this type of debt is very rare.
Effect of the debt respite scheme
Standard breathing space and mental health crisis moratoriums under the debt respite scheme stop interest running on a qualifying debt.[16]
Complain to the Financial Ombudsman
The Financial Ombudsman Service (FOS) deals with complaints about Consumer Credit Act debts.
FOS considers what is fair and reasonable. It can consider breaches of FCA guidance, such as a creditor claiming interest where it has no contractual right to do so.
People who complain to FOS must first follow the creditor's complaints procedure.
Last updated: 28 October 2022