Pre Action Protocol for Debt claims 1st October 2017
Latest Industry news update from Credit Management Group UK
At Credit Management Group UK we are keen to keep you up to date with any changes in the industry that we think might affect you and the way in which your credit function works.
There has been a recent announcement from the Ministry of Justice that a new Pre Action Protocol for Debt claims will come in to place from 1st October 2017
Who does this affect?
- Any business (including sole traders and public bodies) claiming payment of a debt from an individual (including a sole trader).
- It does not apply to business-to-business debts unless the debtor is a sole trader or unlimited partnership.
What does this mean to me?
You will need to ensure that you amend your process when starting work with individuals, Sole Traders and partnerships to protect your ability to collect payment should this become an issue.
The process will now become much more complex:
An enhanced letter of clam is required including much more detail:
- Basis of the claim
- Dates and examples of a written contract, or contractual words spoken, when and where in an oral agreement
Additional information needed before submission:
- You will need to provide an up to date statement of account
- An information sheet (including signposting
- A reply form (example link here)
- A financial Statement form
Once you have submitted all of this to the court the “Sole trader will have 30 days to reply to your letter of claim.
You need to ensure you follow the process as there may be considerable Pre-Action penalties that will be out of proportion to the claim.
Our Opinion
Whilst these additional measures are understandable for consumers. with “Sole Traders” and unlimited Partnerships who could be a tradesman, a sole practicing solicitor or a high earning consultant, we do feel 30 days’ notice up to a maximum of 90 days might encourage delays.
Together with a mandatory appendix encouraging the debtor to seek debt advice, the response form encouraging payment to be made in instalments and an income and expenditure sheet will all be detrimental to getting paid.
Taking all of this in to consideration, businesses may want to reconsidering offering credit terms to “sole Traders” and unlimited partnerships , Although this does not come into effect until October 1st, 2017 invoices that are being raised now may still be affected.
If you are still looking for more clarification or some advice why not book onto one of our upcoming courses that are being held in October 2017.
Or contact us to discuss how we may be able to help you improve your collection strategies to comply with the new legislation.
