New Pre-Action Protocol For Debt Claims

As of 1 October 2017, when seeking to recover monies owed to them by individuals (including sole traders and public bodies) businesses must comply with the new Civil Procedure Rules’ Pre-Action Protocol for Debt Claims (the “Protocol”). Previously there was no specific Pre-action Protocol that applied to debt claims, and although you did have to adhere to the general Practice Direction on Pre-Action Conduct and Protocols this new Protocol brings in some quite major changes.

The purpose of the Protocol is to promote early communication between the parties, including early exchange of information about the debt to assist with identifying the issues in dispute. It also aims to enable the parties to resolve the dispute without recourse to court proceedings, which is in line with the courts’ general approach to litigation and encouraging parties to settle outside of court.

Now when sending a pre-action Letter of Claim, you must give the debtor 30 days from the date of the letter in which to respond and enclose a ‘Reply Form’ and ‘Financial Statement’ (which are annexed to the Protocol) which the debtor is asked to complete and return to you.

If the debtor does not respond to your Letter of Claim at all you can start court proceedings, but if they respond, the Protocol says that you must wait at least another 30 days before issuing proceedings. The idea is that this will enable you and the debtor to have more time in which to discuss the debt and try to reach an agreement about repayment. If you fail to reach agreement, you must give the debtor 14 days’ notice of your intention to start court proceedings.

All of this is important because if you end up in court, the judge will expect you to have complied with the Protocol and may penalise you if you have failed to do so.

A copy of the new Protocol can be sourced here: https://www.justice.gov.uk/courts/procedure-rules/civil/pdf/protocols/pre-action-protocol-for-debt-claims.pdf

At Loxley we regularly undertake debt collection work for clients, so please do contact us if you have any queries. 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.