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New Protocol for Debt Recovery Claims

From 1 October 2017 the new Pre-Action Protocol for Debt Recovery Claims (“the Protocol”) came into force for a business wishing to seek the recovery of a debt from an individual. The Protocol is likely to have a significant impact on businesses looking to pursue outstanding debts and seeks to provide debtors with more protection, encouraging early communication between the parties. 

The Protocol does not apply in business to business transactions. However a sole trader can be classed as both a business and an individual for the purposes of the Protocol, and therefore it will apply.

Creditors must now provide as much information as possible at the start of the claim to comply with the Protocol in a formal document known as a Letter of Claim.  The requirements include (but are not limited to) details of the debt, any assignment of the debt, how the debt can be repaid and a full breakdown of any additional claims such as interest and administration charges.  In addition, a pro forma information sheet and reply form must be provided with the Letter of Claim.

The Debtor has 30 days to respond to the Letter of Claim.  If a Debtor fails to respond the Creditor may commence Court proceedings.  If the Debtor requests additional time to receive debt advice the Creditor must afford the Debtor that opportunity. 

In the spirit of disclosing all information at an early stage, if the debtor makes a request for a document the Creditor must comply with the terms of that request within 30 days from receipt of the request. 

Either way the Creditor is not permitted to start Court proceedings within 30 days from receipt of the Debtor’s reply and/or the request for additional documentation, whichever is later. 

Even where the parties cannot agree and the debt remains disputed, they are still encouraged to take steps to resolve the dispute by alternative means.

The purpose of the pro forma documents is to enable the Debtor to set out their position, circumstances and financial situation.  However, businesses should take note because if a repayment plan is agreed and the Debtor subsequently defaults then the Creditor is expected to send an updated Letter of Claim and comply again with the timeframes set out above.

Where the parties are engaged in discussions but a settlement cannot be reached the Creditor must provide the Debtor with at least 14 days’ notice prior to the commencement of Court proceedings.

In view of the above businesses should treat the Protocol with caution and ensure that all of the conditions are met.  Failure to do so imposes risks in terms of the recovery of costs and/or delays in the proceedings. The requirements may be considered onerous, costly and time consuming but it reiterates the importance of effective credit control and businesses should review current processes in light of the Protocol.

For advice on this, or any other litigation matter, contact Claire Bentick on 01905 723 561 or email


Added: 05 Oct 2017 12:38

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