The Ministry of Justice has issued new regulations governing the process for recovering debts. The Pre-action Protocol (PAP) will come into force on 1st October 2017, and it’s vital for anyone involved in debt recovery to be familiar with it by then.
What is the Pre-action Protocol?
The stated aims of the PAP include to “encourage early engagement and communication between the parties… enable the parties to resolve the matter without the need to start court proceedings…[and] act in a reasonable and proportionate manner in all dealings with one another…”
The PAP applies to any business, whether a limited company, partnership, sole trader, public body etc., that’s claiming repayment of a debt from an individual, including a sole trader. It doesn’t apply to claims against businesses that aren’t sole traders, or to debts that are already covered by separate protocols, such as Mortgage Arrears or Construction and Engineering.
Letter of Claim
The most important thing to get right is the Letter of Claim that must be sent to the debtor at the start of the process. To be valid, the letter must include:
- How much is owed, including interest and charges.
- An up-to-date statement of account, including details of all interest and charges since the debt began.
- In the case of a debt originating from a verbal agreement, details of the parties, when and where the agreement was made and what was agreed.
- In the case of a debt originating from a written agreement, the date and parties, along with a statement that a copy can be made available on request.
- If the debt has been assigned, full details must be given.
- A full explanation why any offer of payment by regular instalments is unacceptable and a claim is being considered.
- Full information about how the debtor can pay the debt or discuss payment options.
- The address to which the debtor should send the completed Reply Form.
Changes to Deadlines
One of the biggest changes is in the amount of time the debtor will now have to respond. Where it was previously 10 days, they’ll now have 21 days, and if no payment is forthcoming a second letter must be sent, with the debtor given 14 days this time. If they haven’t paid after this time, the creditor then has the option of starting court proceedings.
Hopefully this will work smoothly, once everyone is used to the new regulations. If you’re not sure how the PAP will affect you, feel free to get in touch with me to discuss the matter.