It’s been more than a year now since the UK government introduce new rules concerning how businesses in Britain must go about recovering debt from individuals. This new ‘Pre-Action Protocol’ came into force in October 2017, yet very few organisations are familiar with the rules, regulations, guidelines and obligations covered by it.
Before the new protocol came into place, a business could take an individual to court for monies owed and each case would be taken on its merits thereafter. Now? There are things in place to cover off before the court date and non-compliance can lead to possible sanctions and stays of proceedings from the court. So it’s important to play by the new rules and follow the protocols.
Worth noting: The rules do not apply to business-to-business debts, only where an individual person (sole traders count) owes a business money (again, the business can be a sole trader).
What are these pre-action protocols?
In essence, there’s very little required of both parties. The creditor simply needs to write the debtor a letter. And the debtor needs to reply to it. There are certain points which the letters must address, though. For the initial letter (creditor to debtor) these include:
- A full breakdown of the debt, including the amount, any interest accrued and any additional charges which may have been levied
- The nature of the agreement and its details (oral, written, what was agreed, terms, etc.)
- All relevant dates of actions
- Any and all details of payments made or payment plans agreed/not followed
- Full details of how the debt can be paid, including bank details, names, amounts, addresses, etc
Also enclosed with the letter should be:
- A fully up-to-date statement of account
- Copies of the Ministry of Justice's 'information sheet' and 'reply form'
- A copy of the MOJ's 'financial statement form'
The individual owing the debt should then reply to the letter, disclosing:
- Whether or not they are seeking debt advice
- Full stated reasons for if they require more than 30 days before court proceedings can begin
- A full explanation of why the debtor disputes the debt or amount (if applicable)
The debtor should also include the following:
- A completed reply form
- A completed financial statement form
What’s the point of debt recovery protocols like these?
The new requirements aren’t just box-ticking exercises or pointless red tape. They serve a few purposes, including:
- Encouraging communication between the parties and potentially solving the issue without expensive court action
- Stimulating communication and easing tensions, making the court’s decision and enforcement of the decision that much easier
- Preparing all information in advance of the court date
- Potentially avoiding running up disproportionate costs
Does this topic affect you? If so, you may be concerned that the new protocols will affect your ability to recover debt. You needn’t. They may seem clumsy and nothing more than obstacles, but these the ‘new’ rules can be followed and a positive resolution be found.
Even if the pre-action protocols don’t affect you directly now, it may be worth altering your debt recovery plans and processes to take them into account.
If you’re confused or concerned about how this may affect you, we can assist. Contact us here at McAlister, we can help with all your debt recovery needs.