The Analysis News & Opinions


‘Cheques can still have a role to play’


Opinion


Thoughts on the rules for legal collections


I write in response to the recent article entitled ‘Top 10 Debt Recovery Myths’ (CCRMagazine.com, 8 May 2017). The article states: “It is unreasonable and


disproportionate to attempt to contact the debtor several times a day by telephone or social media to remind them that they owe you money.” Really? A telephone call is made to the


customer at, say, 10:00. There is no reply and no opportunity to leave a message on an answerphone. I think it is entirely reasonable to call


Clients paying by cheque can still have a positive result for credit managers, despite the time taken to clear, according to a leading industry professional. Speaking at a round-table debate run by


CCRMagazine, in association with Else Solicitors, Atul Vadher, international credit manager at French Connection, said: “I may be in a minority, but I am quite sad to see cheques go. There is a resistance against them, but you have acceptance of debt, because they have issued a payment. “You have the Fraud Act as they have


issued a cheque that did not clear. With limited companies, you have liquidity questions. I have a budget and a forecast and so I know what is coming in. And against other companies, I know that there is a problem if that cheque comes back unpaid. Switching to international debt, in France and Italy it is illegal. So why would you move away from that security?” However, Nigel Fields, international credit


director of Twentieth Century Fox, said: “You can have the same problem in that, if someone has issued a cheque and it has bounced, then you might be able to sue, but you still do not have payment. There can be a two week gap with a cheque coming back, and I do not like that gap.” Mr Vadher added: “For me, it is the next


step. Take a scenario: you have a promise of a payment and the cheque goes in, then after a period comes back unpaid. I can consider taking my stock out or putting some pressure


June 2017


on, whilst other companies might still be waiting for the promise.” Meanwhile, Brian Lewis, credit manager


at Hanson UK, said: “We take cheques from all different sizes of organisations from the one-man band through to the bigger firms, who can change their payment options to suit them. They can go back to BACS payments or to cheque payments in whatever way they want to facilitate their cashflow. In terms of returned cheque, by the time that we have billed and the cheque has bounced, our goods have gone. “We might have a retention-of-title clause


in our terms, but it useless as the product has been buried! It is incorporated into a building and we cannot take it back. So, with a direct debit, for example, we might be notified of a failure and then a couple of days later we are paid. With a cheque, we may get notification today and then there is a time lag. “I am a great believer if you are there the


first on due date, and shouting the loudest, you have the best chance of being paid. With an overdue debt that is unpaid, I still believe that the third-party psychology of using a solicitor’s letter gets you more response than your own letter – the earlier you can do that, and the cleaner you can keep your debt, the better chance you have of being paid. “It is also cashflow management. They


know that it is going to be seven days before they get hit with the cheque clearance: they can have five or six days of cash utilisation while you process it.”


www.CCRMagazine.co.uk


again at 19:00. If a customer was unaware that they


had not made their monthly installment, they may well appreciate every effort being made to inform them. Also, it is worth mentioning that there is


no legislation, or guidance, that specifically prohibits more than one attempt to call a customer in a single day. The article also states: “A creditor who is


owed money under simple contract and has failed to take formal legal action within six years from the cause of action, will be statutorily barred from issuing an action on that debt. “A debt which is statute barred still exists,


and can be paid by the debtor.” It is worth mentioning that laws are


slightly different in Scotland, where, in somewhat simplified terms, debt is extinguished after a five-year period. It no longer exists and cannot be paid by the debtor. Finally, it is worth clarifying the comment


that “if there has been no acknowledgement of the debt, a creditor can still apply to the court to extend the limitation, though the court would require very good reasons to do this” only applies if you already have judgment.


Bob Kingdon Director of compliance, 1st Credit


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