If you’re business or a public body claiming a debt from a consumer including a sole trader, then we’d advise that you should use the new Pre-Action Debt Protocol before issuing your claim in court.
I’ve broken down the new process in a serious of blogs: Part 1: Debt recovery for businesses - a change in the law and Part 2: Business to consumer debt recovery – what should go in the new letter before claim?
So, you’ve posted your letter before claim, what happens next?
If you don’t get a response
The debtor has 30 days to respond. If the debtor does not respond then the creditor can issue proceedings so long as it gives 14 days’ notice to the debtor of its intention to do so.
If you do get a response
The debtor should use the Reply Form (on page 10 of the link) and that means that the parties will have at least 30 days to discuss the debt to see if the matter can be resolved without the need of going to court. The debtor should also indicate if he or she is seeking legal advice and must be allowed a reasonable period of time to do so, for this purpose the 30 day period can be extended.
The debtor can also request copies of relevant documents to assist in establishing the position as early as possible. If the document(s) is unavailable then the relevant party must explain why. Where the debtor has requested more information in their Reply Form, you should not start proceedings until 30 days after providing the documents.
I'll suggest that you consider using an appropriate form of Alternative Dispute Resolution, if you cannot come to an agreement about repayment of the debt. An example is appointing a mediator or arbitrator to facilitate discussion between the parties to reach a resolution.
If a creditor refuses an offer of repayment, it must explain why, and must still give 14 days’ notice of its intention to issue proceedings.
Even though this Protocol is not mandatory, the court will expect you to follow this procedure. If you don’t, the court will take account of your non-compliance when giving directions (instructions broadly speaking) and you could face orders as to costs and interest rates on sums due.
Businesses that deal mainly with consumers or sole traders will have to review and potentially amend their debt recovery processes, to comply with this Protocol. Debtors may also make the most of this Protocol by delaying payments. It’ll be interesting to see how this Protocol impacts on businesses in the long run.
The new principles are summarised in the Pre-Action Protocol for Debt Claims.
Law for the online generation starts here.
Debt Claim letters are also going to be required to be more in depth such as additional details on the type of contract (oral and/or written) the offer of payment by instalments and the rate of interest that is being added, if any. To add to this the letter must also be sent by posted mail.