News & Events
Find out more about what Bright Solicitors are up to and keep up-to-date on what is currently happening in the industry.

Debt Collection Protocol, Are You Ready?


On 1 October 2017 a change is due in the way that businesses deal with an individual, including a sole trader, who pays them late.

The Ministry of Justice have put in place a formal protocol for collecting overdue funds from an individual. The protocol is expected to be followed by all parties prior to issuing a claim form with the idea that the issuing of a claim is a last resort. We expect the court to be heavily critical of those parties that do not follow the protocol and rush out and issue a claim form without following the procedure. We would also expect the court to look to creditors to follow the spirit of the protocol for the collection of commercial debts though the protocol does not extend to them it would be wise to certainly consider the protocol when taking steps on any business to business debt.

The protocol is being introduced with the aim of:-

1. encouraging early engagement between the parties including exchanging information to clarify the dispute
2. settling claims without recourse to the court, including setting repayment plans and alternative methods of resolving the dispute
3. encouraging parties to act in a reasonable and proportionate manner; and
4. supporting efficient management of proceedings that cannot be avoided.

The draft protocol is certainly making the process more lengthy and heavy on paper usage and the letter of claim and documents to be sent are in the region of 10 -13 pages, certainly duplex printing is highly recommended. The procedure is not straightforward and will increase expense, waste and cause delay in the ability to collect a debt in a timely manner.

Pre-action Process – Letter of claim

The letter of claim must clearly set out:-

a) The amount of the debt;
b) Detail interest and any other charges;
c) How the debt arises i.e. out of a verbal or written agreement and if written a copy of the agreement
d) How the debt can paid

The letter needs to be clearly addressed, dated and sent by post.

Along with the detailed letter of claim it is for the creditor to also send:-
i) an up to date statement of account which should include interests and other charges
ii) information sheet
iii) reply form
iv) financial statement form

The debtor will have 30 days to respond to the letter of claim and should use the Reply form provided by the creditor. Should the debtor intimate they are seeking advice then a reasonable amount of time must be given to allow the debtor to seek this advice. In any event at the end of the 30 day period the debtor should either admit or deny the claim, seek time to pay or request further information in relation to the debt. Should the debtor seek time to pay that time should be given and the debtor should provide the information on affordability in the financial statement.

Should the debtor fail to respond at all at the end of the 30 day period you would then be free to issue a County Court Claim Form. However, it should be noted that the creditor must take pro-active steps to attempt to engage the debtor. We are all aware of debtors refusing to enter into discussions and failing to follow up on promises. It is likely that even though the debtor is refusing to speak to a creditor the court will take a very dim view should a creditor not attempt to enter into those discussions.

It is also yet to be seen how a debtor will react to the large letter falling on their doorstep and how overwhelmed they will be with the amount of information required.

Now is the time to raise awareness of the new protocol and all creditors must be ready for the change on 1 October 2017

We are more than happy to assist you with any concerns over the Pre-action protocol and provide any assistance you may need.

Philippa McDonald

Senior Paralegal
Bright (South West) LLP