A new pre-action protocol for debt claims comes into force on 1 October 2017

The protocol outlines the procedures and conduct that the court expects the creditor to have undertaken prior to starting any official court proceedings.

The protocol does not apply where the debt is covered by another Pre-Action Protocol such as construction and engineering or mortgage arrears nor does it apply in respect of claims issued by the HMRC.

The protocol aims to encourage early engagement and communication between the parties and to enable the parties to resolve the matter without the need to start court proceedings.

Creditors need to send a clearly dated letter of claim to the debtor to include:

• The total amount of the debt

• Whether interest or other charges are continuing

• Who made the agreement, how it was made (oral or written). If oral, what was said, and where and when the agreement was agreed.If written, the date of the agreement, the parties to it and stating that a copy of the agreement can be obtained from the creditor

• Details of how the debt can be paid

• How to proceed if the debtor wishes to discuss payment

Creditors must provide:                                                                                  

• A statement of account for the debt, including the amount of interest and any other charges imposed since the debt was incurred;

• A copy of the Information Sheet and Reply Form

• The address to which the completed reply form should be sent

• A financial statement form

The debtor has 30 days of the date of the letter to reply.  If they do not respond within the 30 days then the creditor may start court proceedings.

However if the debtor replies indicating they are seeking debt advice the creditor must allow the debtor a reasonable period of time for that advice to be obtained.  The creditor must not start proceedings less than 30 days from receipt of the completed Reply Form.

If the debtor indicates that they need time to pay, the parties should try to reach an agreement for payment.  If a payment arrangement is made but the debtor subsequently defaults, the creditor must start the entire pre-action protocol again.

There is some scope in the new Protocol for debtors to push the creditor’s claim right to the time limits or to use any procedural error by the creditor to create further delay.

The above is not exhaustive and if you do require any advice in respect of a debt collection matter then please contact us.