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The Debt Protocol

The Pre-Action Protocol for Debt Claims (“the Protocol”) comes into force on 1 October 2017. It applies to any business (including sole traders and public bodies) claiming payment of a debt from an individual (including a sole trader). The Protocol describes the conduct the Court will normally expect of parties prior to the commencement of Court proceedings.

Pre-Action Protocols were established by the Civil Procedure Rules (CPR) as a means of encouraging early engagement and communication between the parties to a dispute, to enable parties to resolve their dispute without the need to commence proceedings, and to encourage parties to act in a reasonable and proportionate manner. A party to a dispute not complying with the relevant Pre-Action Protocol faces possible sanctions from the Court, including cost penalties, or even termination of their Claim or Defence altogether. Put simply, parties fail to adhere to Pre-Action Protocols at their risk!

The Protocol requires the creditor to send a Letter of Claim to the debtor before commencing proceedings. The Letter of Claim should contain certain key information relating to the debt, e.g. whether interest or other charges apply to the debt and details of how the debt can be paid. The Protocol also requires the creditor to send the debtor an up-to-date Statement of Account for the debt with its Letter of Claim, along with two key documents (the Information Sheet and the Reply Form). The debtor should respond to the creditor using the Reply Form within 30 days. If the debtor does not reply to the Letter of Claim within 30 days the creditor may start proceedings.

Unfortunately for creditors, the Protocol adds another layer of cost/bureaucracy when chasing debts.

For advice on the Protocol and debt collection in general, contact Chris Sykes via email.
5th June 2017