The Pre-Action Protocol For Debt Claims – 6 months on
Back on October 1st, 2017, the Ministry of Justice released a new Pre-Action Protocol for Debt Claims, and despite it now being just over six months since these changes came into effect many companies still aren’t quite sure how to implement them.
Who does the protocol apply to?
Essentially, if you’re a business and you’re claiming for payment of a debt by an individual, then the protocol applies to you.
All manner of individual debtors are covered, including borrowers, tenants and so on.
There are a few exceptions to the rule, however, such as the individual being classified as a sole trader at the time of the debt. If you’re dealing with a fellow business or partnership, then the protocol doesn’t apply.
Why was it introduced in the first place?
At the time of the protocol being announced the Government said that the aim of the move was to try and reduce the number of claims that go to court. Early engagement and communication is key to its success, and the favoured outcome would be an agreed payment plan or use of an alternative dispute procedure.
It was also hoped that the introduction of this protocol would see a reduction in the costs that many times are run up during legal procedures which aren’t considered reasonable in relation to the debt owed.
What changes or preparations should I have put in place?
The changes to the law have changed the procedure that is used in the Letter Before Claim, with more information required by the debtor before this stage is reached.
Are the current credit policies you have sufficient? You should be asking yourself if it’s cost-efficient to pursue legal action in situations where the debtor falls under the protocol, and if you maybe have to change the requirements that such customers have to meet before you issue them with credit.
You should also have adjusted your records accordingly, separating the sole traders and individuals from the companies and partnerships on your books.
If you’re still unsure about anything you should get in touch with a debt recovery agency such as First Capitol. We will be able to steer you in the right direction and provide you with a solution to getting back any debt owed quickly and without problems.