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.
Common excuses for stalling payment
For any small business, cash flow management is essential. If one of your main clients stalls payment, it can put you in a precarious financial position. You too may fall behind on payments, which causes you to incur overdraft fees. Or, you may not be able to take advantage of an opportunity that presents itself. With that in mind, let’s take a look at some of the common excuses clients use when trying to delay payment.
This is the main excuse given by clients when attempting to stall payment. They may have said that the cheque has gotten lost in the post, their accounts system is down, or that your invoice never arrived. While it is a good idea to give clients the benefit of the doubt to begin with, if these excuses keep coming, give your client an alternative option so they no longer have the excuse. For example, if cheques keep getting lost in the post, inform the client that they can pay via bank transfer, BACS, or even PayPal.
They are waiting to be paid
While it may be true that supply chain issues are causing payment delays, you are entitled to be paid on time and in full regardless of your client’s cash flow. If you suspect that this is likely to be a recurring issue, it is a good idea to secure at least a portion of the payment up front.
The client may claim that something is wrong in an attempt to stall payment. For example, they may state that something is wrong with the service provided, or that there is an error on the invoice. Act quickly and communicate well with your clients to avoid this. If the problem persists, professional debt recovery is advised.
If any of the excuses above sound familiar, it is a good idea to get in touch with a debt collection agency as soon as possible. At First Capitol Collections, we specialise in debt recovery services, including doorstep collections. We know the most effective methods for collecting the payments you have been waiting for. Simply get in touch for more information.
How to settle disputes about money owed
If someone owes you money, it can be stressful, time-consuming and, should it come to it, possibly very pricey. Luckily, there are a few different approaches that you can take to get back the money you’re owed.
Contact the person who owes the money
This is usually the most common and informal way to retrieve the money. Whether it be over letter, text, phone call, email or in person, it’s important to try this route first to avoid relations going sour – as this could further jeopardise repayment. Remember to include all of the necessary information, such as the amount owed, why it’s owed, and other factors. If you’re worried that they’re going to avoid you on social media, try and arrange a face-to-face meeting in public, as this will help to avoid escalation and arguments if money is a sensitive subject.
Try a mediation service
If the previous method has failed, consider hiring a mediator to aid your attempts to retrieve owed money. The point of a mediator is that they work with both sides to resolve the matter, without the priciness and hassle of bringing it to court. Of course, a mediator is only useful if the other side is willing to enter discussions, negotiations and reach a compromising conclusion. Most courts expect you to have tried the previous informal methods of resolution and mediation before you take a case to court, so remember to document every attempt of closure well.
Hire a solicitor
A solicitor who specialises in debt recovery is the first legal step that you should take if other methods yield no results. The solicitor will write a letter threatening legal action if the debt isn’t repaid, and this will usually get the debtor to pay up. Solicitors will either work on a fixed fee basis or charge an hourly rate.
Hire a debt recovery agency
Another possible solution before taking the matter to court is to hire a debt recovery agency. These are companies that offer debt recovery services for a fixed fee. Some may instead take payment by claiming an amount of the money that they recover for you. It’s worth noting that you’ll need to research an agency before employing them, as not every debt collection agency uses legally trained staff.
Go to court
This is the last resort for settling a dispute over money owed to you. It can take months for the process to complete and may prove costly. However, it is one of the most surefire ways to settle a monetary dispute. For more information regarding the ins-and-outs of taking your case to court, including if it’s worth it, check out this government services website.
Contact First Capitol Collections
If you’re looking for an external collections agency to aid you in resolving a feud surrounding money, look no further than First Capitol Collections. We’re a reliable, knowledgeable and friendly company sitting among the market leaders in doorstep debt recovery, credit control and other legal matters.
Why you should try and avoid court for unpaid debts
The vast majority of small businesses are owed money. Some are owed much more than others but it’s a common problem that many suffer with. It’s tempting to jump straight into court action but it doesn’t always have to come to that.
Why avoid court?
Cost – When you decide to take a matter to court you can never be sure of exactly what it’s going to cost. There are solicitors and court fees that can come to thousands. There are other costs that can make chasing your bad debt a huge pain.
Time – As well as cost, there can also be a considerable time burden with court cases. This will take you away from your business where you could be doing something much more productive. If there are any appeals then this could take even longer.
How to collect payment
Communication – When you make any type of agreement, you want to take as much contact information as possible. This includes address, e-mail, and phone numbers. Once you’ve exhausted these communication methods, it’s time to increase the pressure.
Interest – Once you have given them adequate time to pay the debt, you can add late fees and interest onto the debt. This will often give the debtor the motivation that they need to pay up.
Legal threats – It’s important to know your options and let the debtor know that any further delay of payment will mean that debt collectors and/or court action is taken. This threat needs to be genuine and one you’ll follow through with.
The most effective method
The most reliable and effective method for recovering your debts is to call debt recovery services who will be able to reclaim the money that you are owed. This can be as effective as court action but without the negatives that come with it.
The cost of using a collection agency is usually vastly inferior to going through the courts. Also, as you are using another company’s services, you won’t have to spend your own time chasing the debt. This will allow you to focus on your business.
Taking legal action
No matter how hard you try, sometimes taking legal action is the only option left for you. Thankfully debt collection companies can help serve and carry out court orders. If you have any debtor issues, contact us today to see how we can help you.
How to collect an unpaid debt and settle disputes
We are living in a day and age in which many people find themselves in tough financial situations. With more than 6 million Britons believing they will never be debt-free (https://www.theguardian.com/money/2017/oct/30/average-uk-debt-at-8000-per-person-not-including-the-mortgage), more businesses are turning to collection agencies to receive what they are owed.
Why turn to debt collection agencies?
As a business, being owed money is never a great situation to be in, but in order to maintain a good public image, many businesses are now seeking assistance from outsourced credit agencies to collect said debts. By having an external debt collection agency handle any disputes which may arise, this allows your staff to dedicate themselves to their roles, and will not cause any issues with staffing.
Whilst being owed money is not ideal, the collection of the outstanding debt can often be a stressful process, for all parties involved. Many of those who have found themselves in debt have not done so willingly, and many of them can feel as though their debt is controlling their life. External debt collection agencies are specialists in handling any situation which may come their way, but they are also highly skilled in negotiation.
Ensuring debt is paid off in full
Collecting a debt in full is never going to be a likely possibility, so by offering flexibility and agreeing to a payment plan, this can ensure that the person can afford their repayments. Demanding a large sum of money can often lead to negative altercations, and many people simply do not have the funds to pay off their debts in full. Debt collection officers are able to talk with the debtors to work out a solution for both them and for the business party involved.
Quite often, when someone finds themselves in debt, they can bury their head in the sand, worrying about the money owed, as they do not believe that debt collection agencies have their best interests at heart.
Many people have a negative view on outsourced debt collection agencies, thinking that they will not leave them alone until the debt is recovered, and that they can be rude and aggressive.
This is not the case, and in many cases, a resolution can be reached calmly. By being compassionate and understanding, allowing debtors to set up payment agreements which are affordable for them, many debts are often paid back in full.