New debt collection rules for consumer debts from October

A new act to be introduced by the Ministry of Justice this October plans to make collecting debt from individuals harder for businesses, with higher compliance costs as well as a longer response period for debtors.

Double the time 

The Action Protocol for Debt Claims is planned for 1 October 2017 and aims to enable parties to resolve debts without having to begin court proceedings.

Under existing legislation, there's a window of 21 days to respond to a letter of claim for a debt. However, new rules will extend this response period to 31 days, plus an additional 14-day grace period. Debtors will, therefore, have twice the amount of time to pay a debt before the relevant creditor can take them to court.

Creditors are also expected to have to provide ‘more detailed information’ to debtors. This includes:

  • whether the claim for debt has arisen from a written or oral contract
  • whether instalments have been offered and details of how the debt can be paid
  • whether interest is being charged and the amount incurred so far.

The letter containing this information must be sent by mail.

Common concerns 

In introducing new rules for creditors and debtors, the Action Protocol for Debt Claims will help to cut the need for court proceedings and maintain a balance in administrative and compliance proceedings.

For example, if a debtor shows in their Reply Form that they need time to pay, the creditor and debtor should first try between themselves to come to an agreement on paying the debt by instalments, taking into account the payee's income and expenses.  

The rules will allow both creditor and debtor to agree on reasonable repayment plans and offer individuals the opportunity to use Alternative Dispute Resolution (ADR) procedures instead of going directly to court.

To learn more about the debt advisory services offered by Dukes Bailiffs or to discuss your own options, contact us here.