You may be aware of consultations on the Debt Pre-Action Protocol that have been on-going since 2015. This consultation has now been finalised and will come into force on 1st October 2017. This Protocol describes the conduct the court will normally expect from involved parties prior to the start of proceedings and includes a template Information Sheet and Reply Form to be provided to debtors in all cases. It means that you (or your legal representatives or collection agents) must make changes to the pre-action work conducted against individuals and sole traders prior to legal action. The protocol aims to:
- encourage early engagement and communication between parties, including early exchange of sufficient information about the matter to help clarify whether there are any issues in dispute,
- enable the parties to resolve the matter without the need to start court proceedings, including agreeing a reasonable repayment plan or considering using an Alternative Dispute Resolution (ADR) procedure,
- encourage the parties to act in a reasonable and proportionate manager in all dealings with one another (for example, avoiding running up costs which do not bear a reasonable relationship to the sums in issue),
- support the efficient management of proceedings that cannot be avoided.
Full details of the new Pre-Action Protocol for Debt Claims can be found here which has been provided to us by our partner Silverback Law. Silverback Law are a commercial law firm, providing the full range of legal services required by businesses throughout the UK, specialising in pre-legal collections, debt recovery and commercial litigation & dispute resolution. To discuss this Protocol in more detail please contact us and we will put you in touch with a representative of Silverback Law.
The most pertinent points of the new Debt Pre-Action Protocol are:
- The Protocol applies to any business (including sole traders and public bodies) claiming payment of a debt from an individual (including a sole-trader).
- The Protocol does not apply to business-to-business debts (limited entities, PLCs, partnerships, unincorporated associations, mutual societies, LLPs) unless the debtor is a sole trader.
- The Protocol does not apply to personal guarantees (not company guarantees).
- The creditor (you) must provide substantial information in a letter before claim (LBA) and attach several documents to the LBA including full details of any additional charges or interest calculations and how these have been incurred.
- The LBA must give the Debtor 30 days to respond.
- The Debtor must respond in full (and in all cases complete the documents attached to the LBA).
- If the Debtor requests further documents then a further 30 days must be given to the Creditor.
- Parties must attempt mediation or Alternative Dispute Resolution (ADR) before taking court proceedings.
- Failure to comply with the Protocol could mean financial penalties to either party and possibly to the Creditors and or the Debtors legal representatives – including costs against you in a small claim.
- Documents to be attached are: Reply Form (made up of 4 sections) which the Debtor must complete; Financial Statement (Statement of Means) which the Debtor must complete; Stamped addressed envelope (for replies).
If you have any questions regarding the new Pre-Action Debt Protocol please do not hesitate to contact us.