In Focus Commercial Credit
A new lifeline for debtors?
Will the Pre-Action Protocol for Debt Claims prove to be a stumbling block for creditors?
Danny Fitzgerald Credit manager, HFD
Danny.fitzgerald @
mercado.co.uk
For those of us that issue out own county court claims, there are some major changes; for those that use solicitors or agencies the only difference will be the time scale. With the new Pre-Action Protocol for Debt
Claims coming into force on 1 October 2017, creditors will now have a very long wait for their overdue accounts. This will apply not only to consumer debt, but business-to- business where the debtor is an individual, sole trader, or partner. If, like us, you issue your own court claims,
you need to read, understand, and comply with this protocol to avoid claims being thrown out or having to pay costs. The protocol does not apply to business-
to-business debts unless the debtor is a sole trader or partnership (where the defendant is named personally in the claim).
The current process We currently offer up to 50 days’ credit and consider legal action only when a debtor is 30 days or more overdue, unless an arrangement has been made to settle the debt. If no satisfactory agreement is made, we
issue a seven-day letter before action and issue a claim after the letter has expired, allowing three working days for post. Usually the seven-day letter claiming late-
payment compensation and contractual interest, in addition to the debt, is sufficient to prompt the debtor into action, as they are fully aware we will be issuing proceedings and adding further costs by way of court fees to the debt. At this point they either pay in full or, if they are unable to, at least come to a satisfactory repayment arrangement. This then usually allows them to continue to trade with us even if only on a cash basis.
14
If, like us, you issue your own court claims, you need to read, understand, and comply with this protocol to avoid claims being thrown out or having to pay costs
days to service, after which the defendant has another 14 days to respond. If they then file an acknowledgement of
service, that is another 28 days gone. Add the time it takes to obtain judgement and you are looking at six months before enforcement action can commence. During this lengthy period, trade has ceased and trust been lost. Add this to administration, volume of
paperwork to be sent, excessive court fees, and increasing court delays. This really is just another burden on businesses resulting in restricting cashflow.
If they have queries or disputes this is
taken into account, resolved or compromised. During the 30-day overdue period, we
issue two chase-up letters at 10-day intervals requesting payment or notification of any dispute. In addition, we chase by telephone, e-mail, and visits by area representatives. There is time to seek financial advice, raise a dispute, or enter into discussion about a payment plan. The majority of claims we issue are
undefended and result in a judgment leading to payment, confirming the fact that the claims are ‘clean’ to start with.
Under the protocol Now, under the protocol, we have to give a minimum of 30 days and potentially up to 90 days on debts owed by individuals, sole traders, or partnerships. On top of that, once we issue via the County Court Money Claims Centre it takes typically another 30
www.CCRMagazine.co.uk
The aims The protocol’s aims are to: l Encourage early engagement and communication between the parties, including early exchange of sufficient information about the matter to help clarify whether there are any issues in the dispute. l Enable the parties to resolve the matter without the need to start court proceedings, including agreeing a reasonable repayment plan or considering using an alternative dispute resolution procedure. l Encourage parties to act in a reasonable and proportionate manner in all dealings with one another, for example, avoiding running up costs which do not bear a reasonable relationship to the sum issued. l Support the efficient management of proceedings that cannot be avoided. The letter before proceedings should now
contain the following information: l The amount of the debt. l Details of any interest or other charges. l Date and details of any written agreement. l If instalments are currently being offered.
November 2017
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