Introduction
At some point just about every business will be faced with a
customer who refuses to pay and ignores all your reminders. In fact, figures
out recently show that the number of businesses facing bad debts is actually at a 10 year high.
In terms
of pursuing recovery, there are essentially two main options available to
businesses: solicitors or debt recovery agents. But with debt recovery agents
generally regarded as cheaper, why should you consider instructing a solicitor
instead? In this article we look at 5 reasons for using solicitors over debt
recovery agents when pursuing outstanding debts.
1. Value for money
The first
point to consider is what you actually get for your money when instructing a
debt recovery agent. It is not uncommon amongst some debt recovery agents to
offer a letter before action service for as little as £2.95 plus VAT. The
problem however is that this letter is very often not compliant with the pre
action protocol, as set out in the Civil Procedure Rules, and means it rarely
leads to payment. The result is that at some point a further letter will then
need to be sent to the debtor before court proceedings can be issued, this time
in line with the protocol. This invariably creates a delay in the collection
process and a further cost to you.
2. Initiating court proceedings
Debt
recovery agents cannot initiate county court proceedings. They can only request
that the debt be paid. Many debtors are now aware of this and so, inevitably,
many such requests for payment from debt recovery agents often go ignored. By
comparison, solicitors can issue proceedings and so demands for payment from a
solicitor coupled with a threat of court action generally has a more persuasive
effect.
3. Case assessment
The
letter before action service offered by many debt recovery agents doesn’t
include any assessment as to the strengths of the case. Instead they simply
send the letter and will then report back if the customer refuses to pay or
disputes the debt. Solicitors by comparison can evaluate the legal position as
part of its service, drawing on both legal precedent and their experience from
similar cases previously. By knowing the strengths of your case from the
outset, and the chances of succeeding, you’re then in the advantageous position
of being able to know how aggressively to pursue this; whether it’s
commercially viable or whether you’re better placed to look at some sort of
settlement or indeed write off the debt entirely.
4. Alternative dispute resolution
Depending
on the circumstances and particularly the legitimacy of any reason why the
customer is disputing the debt, it may be that the case is better placed to be
resolved via alternative dispute resolution (ADR). Indeed this is now actively
encouraged by the courts, with the risk of cost sanctions for those parties who
are found to unreasonably refuse. Whilst very rarely a service available from a
debt recovery agent, solicitors specialising in litigation generally have a
particular expertise in organising, conducting and obtaining the best possible
results from ADR.
5. A more rounded service
As well
as assisting in the collection of a particular debt, a solicitor can also help
protect your business against future customers failing to pay. This can include
advising and assisting in the implementation of internal credit control
procedures within your business, as well as ensuring your terms and conditions
with customers are both robust and compliant with relevant legislation.
Conclusion
So, in
summary, if you have a customer who hasn’t paid and you’re now looking at
pursuing this, do consider instructing a firm of solicitors rather than a debt
recovery agent. You might find you’ve got a better chance of recovering the
debt that way.
If you’re owed money and want to know more about our
services or need any assistance, please give Wesley a call on 01202 888 300 or email him.