New Pre-Action Protocol for Debt Collection

Linda Marshall

Linda Marshall, comments on the new Pre-Action Protocol for debt collection, coming into force on 1st October 2017.

The new Protocol applies to any business claiming payment of a debt from an individual (which includes a sole trader).  It will therefore cover collection of debts from all customers who are not either limited companies or partnerships.

The new Protocol is very much in favour of the debtor, in that they will have 30 days (rather than 14) following receipt of the pre-action letter, to either pay in full, make payment proposals, or complete and return a Reply Form and Financial Statement.  In the Reply Form, if they indicate that they are seeking debt advice, Court proceedings cannot be commenced until 30 days after receipt of the Reply Form, and if they indicate that they cannot get debt advice within 30 days, further time must be allowed. Also, if they offer payment by instalments, and these are accepted but not honoured, a new 30 day letter must be sent before Court proceedings can be commenced.

Going forward, it is going to be vitally important for businesses, when instructing solicitors to chase a debt, that the status of the debtor is clear.  This is because, in every case possible, it will be desirable to avoid having to use the new Protocol.