How will the upcoming Pre-Action Protocol for Debt Claims affect you?

The Ministry of Justice has updated the processes businesses need to follow when collecting debt from an individual. The final form of this policy, called the 'Pre-Action Protocol for Debt Claims', is being introduced to aid the payment of debts without resorting to taking any issues to court. The Protocol, as it's known in short, lands on 1st October 2017 and will apply to all types of businesses, including sole traders. Here’s what you need to know.

What does the Protocol do? 

In an effort to encourage both parties to reasonably manage unpaid debts and avoid additional costs, the Protocol will help debtors and creditors to find solutions that work for both sides. This could involve, for example, agreeing on reasonable repayment plans or using an Alternative Dispute Resolution (ADR).

It lays out a clear sequence of steps that should be followed by both parties. To begin proceedings, the creditor should send a Letter of Claim to the debtor. This must contain the amount owed, details about interest charges, the terms of the debt (oral or written agreement), where the debt was assigned and whether regular repayment instalments have been offered by the debtor. In response, the debtor has to enclose any relevant documents, such as proof of any payments that a creditor might not have acknowledged, and complete a Reply Form.

How will the Protocol affect debtors and SMEs? 

By initiating clear, recorded communication from the beginning, the Protocol becomes an efficient and easy-to-understand method of resolving problems, allowing a full exchange of information.

Equally, the requirement for replies within 30 days helps to facilitate a faster resolution. This means the Protocol can simplify the repayment process for all involved and keep collection costs as low as possible.

If you are concerned about debts owed or would like to learn more about the options available to you, contact us here to speak to a Dukes Bailiffs advisor.