New Pre-Action Protocol for Debt Claims
Laker Legal Solicitors - 26th May 2017
As of October 2017, there will be a new Pre Action Protocol relating to Debt Recovery matters.
This Protocol will seek to engage both parties in early discussions in the hopes of bringing a swift conclusion to matters without the need for going to Court.
At present, prior to issuing Court proceedings, a Letter of Claim must be sent to the debtor setting out details of the initial agreement or contract made between the parties, including any documentation to evidence this where possible, together with information on how the debt has arisen and the amount due.
Under the new Protocol, the Letter of Claim is still sent to the debtor, however, from October 2017, a standard form must be accompanying it. This form must be completed by the debtor within 30 days and will contain information regarding whether they believe a debt is owed, and if so, their proposals to make payment of the same.
If 30 days lapses and there has been no response from the debtor, Court proceedings can then be issued, the exception to this being where the debtor acknowledges the Letter of Claim and form but states that they require legal advice on the same. In this scenario, the debtor must be given ‘reasonable’ time to obtain the same. There does not appear to be any definition of what constitutes ‘reasonable’ at this time.
It is worth noting that if the debtor does respond to the letter of Claim, but parties are unable to reach an agreement, then the debtor must still be given 14 days notice of intention to issue proceedings against them under this Protocol.
If a deal can be reached between the parties but the debtor then further defaults a new letter of claim must be sent to them.
The new Protocol relies on Alternative Dispute Resolution, such as mediation or referral to the relevant Ombudsman, and whilst this may resolve some debt matters, it will also prove more timely for those creditors to recover monies owed where the debtor does not engage in this process.
If the Protocol is not followed and Court proceedings are issues then the Court may sanction the party who has failed to comply. This may include the removal of rights to retrieve costs for the successful party or the reduction of interest due to them.
If you have any queries relating to a debt matter or would like to instruct one of our solicitors to act on your behalf, please do not hesitate to contact us.