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HomeDebt RecoveryPre-Action Protocol for Debt Claims

A new Pre-Action Protocol came into force on the 1st October 2017.  It applies to any business claiming payment of a debt from an individual or a sole trader.  It does not apply to business-to-business debts.

The aim is to try and settle these matters before they get to Court and, given the amount of time that will now be given to debtors, this will really only delay claims and increase the frustration of creditors who are not being paid.

The Protocol requires that before a creditor can start proceedings they have to send:-

  1. A Letter of Claim.
  2. An up to date statement of account.
  3. The prescribed information sheet and reply form.

Creditors would then have to allow a minimum 30 day period for reply to the Letter of Claim.   If the reply form is returned and requests further information, a creditor must wait at least another 30 days after giving that information before he can revert to the Courts.

The damage this will do is incredible.  Many creditors will go bankrupt (into liquidation) before they can even issue proceedings.

This is the debt equivalent of the protection given to tenants from their landlords.

We are yet to see what effect non-compliance of the protocol will have.  It could mean that the creditor loses entitlement to recover some of the interest on the debt or costs.  There may even be Costs Orders against creditors.