Pre-Action Protocol For Debt Recovery.
It is worth being aware that a new Civil Procedure Protocol comes in to effect on 1st October for debt recovery. Therefore, if you are a business seeking payment of a debt from an individual, including a sole trader there is a protocol you should be adhering to before you issue County Court proceedings. This includes proceedings within the small claims track. A formal letter of claim must be sent, containing specific information and providing the debtor with prescribed forms to complete and return within 30 days.
The protocol does not apply to business to business transactions and dealings.
The protocol could have a significant affect on companies and businesses owed money as the process to recover debts will be more cumbersome and time consuming. Debtors can delay payment by up to 90 days.
There will be penalties for businesses failing to adhere to the protocol by suing individuals before the protocol, including the letter of claim have been complied with. The consequences include:-
a) Further delay in collection of debts if the court determines that formal legal proceedings are stayed (paused) whilst failures to comply with the Protocol are dealt with.
b) The possibility of costs sanctions in that the creditor may not be able to recover their legal costs, or worst still will have to pay the debtor’s legal costs.
c) Inability to recover interest from a debtor or recovery at a reduced rate.
Some organisations may need to revise their debt recovery procedures to take into the new protocol.
We can provide advice on the procedures that you are required under the protocol to have in place. We can write on your behalf the formal Letter of Claim that is a requirement of the Protocol.
