Home > Uncategorized > New pre action protocol for debt recovery

New pre action protocol for debt recovery

Firstly I would like to thank Donna Goddard from Pitmans Solicitors in Reading for the updated information, the detail of which is replicated below.

This is quite an important development for businesses that experience difficult debts with consumers or sole traders and many will see this as overly weighted towards the debtor.

Personally I dont have a problem with the extended warning period. Seven days was really too short for individuals who could simply not have communication for such a period, but 30 days?

Also the onus would appear to be on the creditor to give reasons for rejecting a payment plan. Payment plans are a desirable solution but there are simply times when they are inappropriate and quite frankly it should not surely be down to the creditor to explain why.

It’s their money

A new Pre-Action Protocol for Debt claims will come into force on 1st October 2017.
The Protocol applies to all debt claims where a business is claiming payment of a debt from an individual irrespective of the value of the debt. The definition of “business” includes a sole trader and public bodies in business and “individual” appears to include a sole trader.
The new Protocol aim is to:
encourage early engagement and communication between the parties;
achieve settlement of claims without recourse of the Courts including setting repayment plans and alternative methods of resolving disputes;
encourage parties to act in a reasonable and proportionate manner;
Therefore, early disclosure is going to be essential under the pre-action protocol. An enhanced Letter of Claim which must detail the basis of the claim, including the details of any written or oral contract, and any charges and interest which have been added to the debt is required. Further, a Statement of Account, Information Sheet, Reply Form and Financial Statement are all to be enclosed with a Letter of Claim. Debtors will have 30 days to respond to a Letter of Claim and can request additional information and documentation during this period which must be supplied.
If a debtor indicates a need for time to pay, the creditor and debtor should try and reach an agreement to permit the debt to be paid by instalments, based on the debtor’s income and expenditure. If the creditor does not agree to a proposal for repayment, they will need to give reasons for this refusal in writing.
The new Protocol places the onus firmly on a claimant to make sure that the debtor is provided with a lot more information at the time of legal demand than is customary at present. However, the provision of this information at an early stage is likely to promote settlement of claims, identify and narrow issues and areas of dispute and ultimately reduce the need to reference matters to the Court for determination.
Failure to observe the new Protocol will expose the claimant to an adverse costs order being made by a Court or interest penalties.



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