The Government is proposing to raise the monetary limit under which individuals can avoid going to court to formally settle a dispute.

Consumers can currently make a claim of £5,000 or less under the less arduous small claims court system, though the Ministry of Justice wants this threshold increased to £15,000 (see the Small Claims Court guide).

It wants both sides to undertake mediation before proceeding to a formal hearing. In addition, small claims hearings may no longer be conducted in person, under the plans.

The small claims court is not a court in the traditional sense, despite its name. Instead, judges make the process as informal as possible, while the losing side does not usually have to pay the winner's legal fees.

So while there is a fee of £25 to £300 there are unlikely to be additional legal costs.

The proposals are part of the wider review to create a simpler and quicker county court system, which is now subject to consultation.

If the Government gets its way, changes to the small claims court system will be in place in April 2012.

Small claims limit rise

The Government wants the limit to rise because it has not changed since 2000 so those that were close to the cap then will have breached it due to inflation.

It says claims that are dealt with above the threshold are done so at a disproportionately high cost, and could be handled more effectively using the small claims process.

The limit was originally set at £75 in 1973 but this has increased over time. In 1991 it was set at £1,000, in 1996 at £3,000 and in 2000 at £5,000.

The Ministry suggests three possible upper levels of £10,000, £15,000 or £25,000, but states £15,000 is "most appropriate".

Small claims mediation

The Government is also proposing a mediation stage involving both parties before a formal hearing.

It says over each of the past two years, more than 10,000 small claims mediation appointments have been conducted with 73% settled this way.

Mediation could be done by phone, as well as in person.

There would be a fee for using the service, but in the majority of cases this would be less than the cost of a small claims court hearing.

Hearings in writing?

At present, small claims hearings are conducted face-to-face at a court.

However, the Government says these could be dealt with in other ways such as in writing or via a video conference.

Further reading/Key links

Your rights: Small Claims Court, Consumer Rights