The New Pre-Action Protocol for Debt Claims - increasing the burden on Creditors and a step back in time?

Forbes Collect News

08 June, 2017

The New Debt Protocol comes into force on 1 October 2017 and you need to prepare for the debt recovery consequences now! Not only does the new protocol increase the burden on creditors it also could leave you without payment for even longer.

Who does the protocol apply to?

It applies to any business that is attempting to recover money from an individual (including sole traders)

It does not apply to business to business debts (unless you deal with a sole trader)

What are the biggest changes?

  • The Debtor will have 30 days to respond to a letter before claim
  • There is a heavy burden on creditors to provide documentation to accompany a much more detailed letter before claim:
    • Full details of the basis of the agreement need to be included; if an oral agreement, who made it? What was agreed? When and where was it agreed? If it was a written agreement, what date? Who were the parties? You also need to explain that a copy of the agreement is available from the creditor upon request.
    • An up to date statement of account needs to be enclosed
    • An Information Sheet
    • A Reply Form
    • A Financial Statement form
  • The debtor may request further time for up to 30 additional days to seek advice, time to pay or request further documentation
  • If you receive a response to the initial letter but do not reach an agreement you must give the debtor a further 14 days' notice of court proceedings

What is the aim of the protocol?

The overall aim of the protocol is to reduce the need to take further action by issuing legal proceedings. There is a focus on front loading the disclosure obligations at the pre-litigation stage to encourage the parties to communicate and negotiate at the early stages.

This aim is in fact in line with our approach at Forbes Collect - to maximise your chances of recovery at the initial pre-litigation stage.

However, what about those debtors that refuse to engage with the process, do not respond and simply bury their heads in the sand? Our experience suggests that there are many debtors that do not engage with the process unless there is a CCJ registered against them that has a direct impact upon their credit rating. This appears to be especially the case with individuals. This has been reflected in the Civil Justice Statistics which were released in March 2017. The risk is that the new protocol is punishing creditors by making them wait even longer to recover your monies and allowing debtors yet more time to pay.

Further, the protocol already seems to be outdated in parts. One example is that the additional documentation must be sent by post and cannot be sent by email unless express consent is given. This really is a heavy burden as all 12 or so pages will have to be sent out by post. This may also have a contrary effect to the aim of the protocol as the sheer amount of disclosure may make debtors even less likely to engage with the process.

Similarly, the Debtor is encouraged to complete the Reply Form and Standard Financial Statement by hand which is most definitely a step back in time. It could also be argued that many debtors do not complete an Income/Expenditure form when it is sent out by the court or as part of negotiations so it doesn't make us hopeful that these will be completed accurately and truthfully at such an early stage.

Our tips for debt recovery in the face of these changes:

  • Put a more stringent credit control process in place now. Reduce the length of time you keep debts within your internal processes and pass the debts over for legal collection sooner
  • The quicker we can kick start the 30 day clock the better
  • As the debt recovery process is now so different for individuals (including sole traders) as compared to businesses it is more important than ever to clearly know who you are contracting with at the outset and have full details on file
  • If the debt is above £5000 consider insolvency action rather than pursuing a county court claim. It is now more of a threat, less cumbersome and quicker to send a statutory demand to the individual for payment

Failure to comply with this new pre-action protocol for Debt Claims may have detrimental cost consequences, further any claim you have made might be stayed to allow time for this additional disclosure.

For more information about the changes see the pre-action protocol here or alternatively contact our Forbes Collect team on 0800 689 4176 or forbescollect@forbessolicitors.co.uk for any advice or assistance.

Back

Forbes Collect

NEWS AND ARTICLES

The New Pre-Action Protocol for Debt Claims - increasing the burden on Creditors and a step back in time?

The New Debt Protocol comes into force on 1 October 2017 and you need to prepare for the debt recovery…

Read the article

On behalf of everyone here at EvolveU we just wanted to say a massive thanks for all of your help and assistance with the Traffic Engineering and Management Services Limited

EvolveU

More clients

We are delighted with the Professional manner in which Forbes Solicitors deal with all our legal requirements and would not hesitate to recommend this Company.

Trident Fire & Security Group Ltd

More clients

We asked Forbes Solicitors to help when a client would not pay his bill. I sent an email to Katy, received a reply straight away, we were advised of the action that would be taken

Abby Welding Ltd

More clients

I contacted Alison at Forbes Solicitors regarding an outstanding debt of 44,554.27 which we were having problems getting paid for I would just like to say what a very quick and professional service

Natalie Fairclough
Thermal Hire Ltd

More clients

The Woodscape Group have been relying on Forbes Solicitors for over thirty years and the work carried out by Alison Nelson and the team over the last few years has only strengthened

Richard Nelson
Managing Director
Woodscape Ltd

More clients

DPFOC relies on Forbes for all legal advice. We find the service to be professional, well-informed and affordable.

Eddie O' Driscoll
DPFOC

More clients

I was owed money for plumbing services provided and despite several conversations with the debtor to request payment, he was dishonestly claiming that he had paid despite their being no evidence

Martyn Whalley
Back on Tap Plumbing

More clients

Alison and her team have worked with us on a number of occasions now - so much so that we see them as an extension of our business!

Lucy Hyde
Managing Director
Higher Access Limited

More clients

Forbes have helped me immensely with bad debt recovery over the past few years.

Olwen Hope
Credit Control
Able 2 Ltd

More clients

I have used Alison Nelson for a number of years for debt collection. I would strongly recommend her for similar work.

Mr Fahmi
Consultant Plastic Surgeon

More clients

I recently passed a referral to you for a contact requiring a debt collection service. The contact had an outstanding debt of around 2,000 that had been owed approximately one year.

Morgan Rothwell
Director
D&M Creative Limited

More clients

We have used Alison's services on a number of occasions and have always received the desired results!

Stephen Gibson
Operations Director
Ecompli

More clients

Make an enquiry