​The new Pre-Action Protocol for Debt Collection

​The new Pre-Action Protocol for Debt Collection

The Ministry of Justice have issued a new Pre-Action Protocol for Debt Claims which came into force on the 1st October 2017. It has introduced changes to the current procedure for businesses (creditors - including sole traders and public bodies) making a claim for payment from an individual (debtor - including sole traders).

However, the protocol does not apply to business-to-business debts unless, as above, the debtor is a sole trader; where the debt is to be recovered under the construction and engineering or mortgage arrears protocols; or to claims issued by Her Majesty's Revenue and Customs that are governed by practice direction 7D.

The Protocol sets out the conduct the Court would normally expect from the parties prior to them commencing proceedings in Court. Its purpose is to encourage early engagement, communication and disclosure between the parties to help clarify their positions in relation to the debt. All in the aim of resolving the matter without issuing court proceedings.

The biggest change to note is, that alongside the letter of claim, 3 forms need to be attached:

  • A reply form – this form should allow the debtor to set out their position in relation to the debt, such as, whether they believe they are liable for the debt, and if so, how they intend to pay it.
  • An information sheet – this should provide the debtor with a list of institutions which they can go to for independent legal advice and also should provide guidance in completing the other forms.
  • A financial statement - this form should allow the debtor to disclose their monthly finances and whether they have any further creditors, which they are already making payments to. This disclosure allows the creditor to get a gauge as to what the position is of the debtor and allows for them both to come to a realistic payment plan for the debt.

They have also put forward a longer period of time for the debtor to reply to the letter of claim i.e. in 30 days as opposed to the previous 14. This is a move in favour of the debtor, which I can only presume is to allow them more time to seek advice and to settle the matter whilst avoiding litigation.

If they have not responded within the 30 days, then an application can be made to Court without further notice. If, on the other hand, the parties cannot agree about the existence, enforceability, amount or any other aspect of the debt, the protocol sets out that appropriate steps to resolve the dispute need to be taken prior to proceedings being issued, such as ADR.

It is important that this conduct is adhered to, as the Court will deem your behaviour as unreasonable if it is not followed. Therefore it is imperative that you get the right advice in how to follow this procedure, and what information should be being provided.

To find out more or discuss your individual requirements in further detail, our dedicated debt recovery solicitors will be delighted to help. Contact us today on 01603 693500 or email us using 'Make an enquiry' form. Appointments available at our Norwich, North Walsham and Sheringham offices.