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Dispute Resolution & Real estate disputes

New Pre-Action Protocol for Debt Claims

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The new Pre-Action Protocol for Debt Claims came into force on 1 October 2017 and applies to debts owed to businesses by individuals (which includes sole traders). Prior to this coming into force, creditors were of course already subject to the general Pre-Action Protocol and there are some similarities between that and the new Protocol. However, the latter is undoubtedly more onerous for creditors and it is now expected to take much longer for creditors to recover their debts.

The new Protocol requires creditors to send the debtor a letter before action prior to commencing court proceedings. No change there then. However, whereas generally a debtor was expected to respond within around 14 days in a straightforward claim, now creditors are required to give debtors not less than 30 days from the date of the letter before action to respond. They are also required to enclose various prescribed documents, such as an Information sheet and Reply form. If the creditor receives the Reply form from the debtor, it must not issue proceedings for a further 30 days from receipt of the form.

The parties are required to share documents and information and try to reach an agreement as to payment. Where the debtor responds to the letter before action and the Protocol has been followed but an agreement as to payment cannot be reached, the creditor must give the debtor 14 days’ notice of its intention to issue court proceedings.

In summary, the Protocol could certainly see creditors waiting for over 60 days before they can even begin court proceedings to recover a debt. As ever, a failure to follow the Protocol will not be looked at kindly by a court when creditors eventually issue their claims and could see them being penalised on costs. Creditors are therefore advised to comply with the Protocol however onerous it may be.

http://www.lpc-law.co.uk/news/latest-news/2017/april/pre-action-protocol-for-debt-claims/

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Lauren McQue

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lauren.mcque@collyerbristow.com



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