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Thinking of taking a debtor to Court? Be aware of the new protocol or risk losing your case!

The Courts are trying to reduce the number of claims that end up in front of a Judge. 

The process is costly and although the user pays a fee, it by no means covers the total cost hence the decision to make both parties do far more to settle their differences without resorting to legal proceedings.

The Pre-action Protocol (PAP) for debt claims came into force on 1st October 2017 and applies to any business (limited company, partnership, sole trader or public body), when claiming payment from an individual (which also covers sole traders). 

It does not apply to business to business debts unless the debtor is a sole trader and does not apply if it is covered by another pre-action protocol such as construction or mortgage arrears. 

If you ignore the Protocol you will risk losing your claim if it ends up in Court. The Protocol requires the creditor to issue a letter of claim which should include an up to date statement of account and details of any interest or other charges together with copies of invoices. 

You must also include an information sheet and reply form (for the debtor to complete), which should contain the following:

  1. The total amount of the debt
  2. Details of any interest or other charges
  3. Details of the written contract or precise dates etc. of any oral agreement
  4. If the debt has been assigned – details of the original debt and creditor
  5. If the debtor is currently making regular payments but you have decided they are insufficient – an explanation as to why you feel it merits taking legal action
  6. Details of how the debt can be paid and the name of the person the debtor should speak to to discuss payment options.
  7. The address to which the reply form should be sent.

If you do not receive a response from the debtor within 30 days you can then issue legal proceedings, however if the debtor informs you that they are seeking debt advice you must allow them a further 30 days in which to do so. 

If the debtor requests time to pay, the protocol requires you to reach an agreement to be paid in instalments based on the debtors income and expenditure and worse still – if the debtor fails to respond to the Letter of Claim you must demonstrate that you have done your best to contact the debtor to discuss the situation and request the return of the reply form!

If the debtor disputes the debt you must allow time (maximum 30 days), for the debtor to provide you with documentation in support of their claim. 

If settlement still cannot be reached both parties are obliged to take alternative steps to settle the matter without going to Court and this includes the use of alternative dispute resolution (ADR).  If despite all of this you still cannot reach agreement, you must give the debtor a minimum of a further 14 days’ notice before commencing legal proceedings.

As you will have gathered the process for recovery of any sums of money due to you is considerably more time consuming and difficult. 

So what lessons are there to learn?

  • Deal promptly with your debtors – chase immediately your normal terms of credit have been exceeded
  • Set up templates to try to systemise the collection process
  • Know your debtor – do they have the ability to pay? – consider credit checking

If you would like to learn more about the PAP and how it will affect you please contact Megan Graham on 0151 348 8400 or email