1 October 2017 – Introduction of the Pre-Action Protocol for Debt Claims (“the Protocol”)
Who does this apply to?
A business claiming payment of a debt from an individual or sole trader.
Why has the Protocol been introduced?
The aim of the Protocol is to:
- encourage early communication between the parties;
- identify and to help clarify any issues in dispute;
- encourage the use of repayment plans and alternative dispute resolution procedures;
- discourage the running up of costs which are not reasonable to the sums claimed; and
- support the efficient management of any proceedings that cannot be avoided.
What information should be provided by the creditor to the debtor?
The Protocol lists the information which needs to be provided in a demand letter. It includes information regarding how the debt arose, any interest payable and how the debt can be repaid. An information sheet and reply form and a financial statement must also be attached.
The demand letter should be sent by post, unless the debtor has made an explicit request that an alternative method be used. If the creditor has additional contact details for the debtor, such as an email address, the creditor may also send the Protocol letter by that method.
The debtor should reply to the Protocol letter by completing the reply form within 30 days.
If the debtor wishes to take legal advice, a reasonable period of time must be allowed to enable the debtor to do so. That period is not defined, but we suggest any creditor should allow 28 days to be consistent with other court protocols.
If the parties cannot agree about a resolution, the first port of call is not the court, but an appropriate form of alternative dispute resolution.
If this fails, the creditor should give the debtor at least a further 14 days’ notice of the intention to start court proceedings, unless there are exceptional circumstances which require urgent action to be taken.
If the parties do reach an agreement for repayment of the debt, and the debtor subsequently defaults, the creditor must send an updated protocol letter before issuing court proceedings.
If the debtor does not reply to the protocol letter within 30 days, the creditor may start court proceedings.
Failure to comply with the protocol
The court will expect parties to comply. Failure to comply will be taken account of by the court and it will decide whether to impose sanctions. These sanctions may include making an order for costs against the offending party.