12 months on: The Pre-Action Protocol for Debt Recovery
08 November 2018
A new Pre-Action Protocol came in to force on 1st October 2017, and has now been guiding businesses on how to deal with debtors for a little over 12 months.
Has it worked? What impact has it had on the advice we give to business clients?
Despite being in existence since the early part of 2017, and formally in force for over a year, we still find a lot of businesses are totally unaware even of the existence of the Protocol, never mind aware or compliant with the guidance! It has been the role of our expert Debt Recovery Team over the last 12 months or so to advise all business clients carefully, and to assist as they adapt their processes to ensure compliance.
We welcomed the new rules, and particularly the purpose behind them. The rules are designed to encourage early communication and settlement, promote the consideration of payment plans as a sensible option, and work to avoid costly court action where possible. Clearly anything that assist the debtor to come to an early conclusion can also be of benefit to the business – our main aim is to keep costs down whilst achieving a positive result for our client.
The rules apply to any debts owed to a business by an individual. This covers the majority of our clients; assisting limited companies, partnerships, sole traders and public bodies to pursue unpaid invoices. The debtor must be an individual or sole trader; these rules do not apply to business-to-business debts – although we can certainly assist clients to recover those disputed debts too!
One obvious change is the new time scales. The initial Letter of Claim – the scary red solicitor’s letter demanding payment or else – now provides the debtor with a 30 day period to engage. The rules also outline what needs to be included within that letter, and what documentation needs to be supplied at each stage. Any failure to comply with the Protocol can result in delays, costs sanctions or a restriction to the interest that can be recovered.
Iain Blundell, Solicitor leading our Debt Recovery Team, comments: “Over the last 12 months we have sent well over a thousand Protocol-compliant Letters of Claim. We have been pleased with the rate of debtors engaging with the letters, and we have settled a lot of debts without the need for court action. The Protocol does make it easier for a debtor to engage, and our no-nonsense plain English approach encourages them to make contact, cooperate and pay the debt. Overall, I think the Protocol has been a useful step forward.”
Our Debt Recovery Team are happy to assist whatever size your business and however the debt has arisen. Please call our experts on 01254 297130.