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New Pre-Action Protocol for Debt Claims

A new pre-action protocol for debt claims will come into force from 1st October 2017.

This will apply to all businesses pursuing debts against individuals, including those in business as sole traders. Other business-to-business debts are not covered.

The aim will be to ensure the early exchange of information between creditor and debtor and, where possible, assist the parties to resolve matters directly rather than resort to Court.

Under the terms of this new protocol, the creditor will be required to send the debtor a detailed Letter of Claim, outlining its case and enclosing any supporting documentation. This is very much standard practice we follow already and so for many, the new protocol shouldn’t be a problem. The difference though, and where things start to become complicated is the debtor will then have 30 days in which to respond, sending a standard Reply Form and Financial Means Statement that must be provided to them with the Letter of Claim. Also, if the debtor then indicates on his form that he is obtaining debt advice, the creditor must wait a further 30 days before commencing court proceedings.

These time periods proposed are much longer than current standard practice. Also, the requirement to provide the debtor with template forms to respond will, for many, be an unusual aspect. It’ll therefore be interesting to see what impact this has on businesses pursuing claims in the future and how they go about this. Businesses certainly won’t be able to simply ignore this new protocol, as courts will impose cost penalties on those failing to comply. 

Therefore, for those of you with businesses which regularly pursue debts against individuals, now might be the time to revisit your credit control procedures and look at how you go about pursuing these. 

There are specific templates you must follow and we have found the added weight of a letter on a Solicitor’s headed notepaper, whilst not essential, is extremely effective in the majority of cases.

If you’d like to discuss this further or look at what you need to doing forward, feel free to get in touch with my colleague Wesley Gifford.

Article Date: 02/06/2017

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