Do you know what the Pre-Action Protocol for Debt Claims is?

Social media can be a wonderful platform. You ask a question and get loads of advice – as well as a few trying to sell you their stuff to solve your problem. The problem is that the advice you get isn’t always from someone as informed as they might be. It may not then, be the best course of action for you.

It may also be misinformation, as I’ve seen on LinkedIn recently. It’s clear from the advice given, that lots of business owners are unaware of the Pre-Action Protocol for Debt Claims which came into force on 1st October 2017.

This strikes me as odd I must say. I’ve seen quite a bit about it in the media. It might be that the dissemination of this news has so far spread only to those in the legal and credit management professions. Or it’s only they that have noticed it?

What is the Pre-Action Protocol for Debt Claims?

Simply put it’s a set of rules your business must follow before you can pursue a debt through the courts. Whether with an individual or sole trader. The intention of the Pre-Action Protocol is to encourage early resolution of payment disputes and keep them out of the courts.

Debts with partnerships and limited companies are not affected by the Protocol. The Protocol doesn’t apply where the debt is covered by another Pre-Action Protocol such as those for Mortgage Arrears or Construction and Engineering.

What do you have to do now?

Once you’ve decided that you’re ready to take legal action to recover your money you need to send your overdue customer a Letter of Claim (LoC). This is similar, but much more detailed than the Letter Before Action which you will be familiar with sending.

It should contain the following:

  • The amount of the debt and whether interest or other charges are continuing.
  • Where you made the agreement relating to the debt orally, full details of what, where, when and with whom you made it.
  • Where you made the agreement relating to the debt in writing, confirmation of the date and parties and that you can supply a copy upon request.
  • Full details of any debt assignment
  • If your customer is offering regular instalments or is paying them then you’ll need to offer an explanation about why this offer is unacceptable and why you’re still considering a court claim.
  • Details of how to pay. E.G. a method and address for payment and details of how to proceed if your customer wishes to discuss payment options.
  • The address to which to send the completed Reply Form – see below.
  • An up-to-date account statement – including details of any interest and administrative or other charges added. The most recent statement of account for the debt along with confirmation in the LoC of the amount of interest incurred and any administrative or other charges imposed since the issuing of the statement of account. This must be enough to bring the statement up to date. Or, in the absence of a provision of a statement of debt, a statement in the LoC of the amount of interest accrued and charges imposed from the incurring of the debt.
  • If no statements have been provided for the debt, a statement in the LoC of the amount of interest incurred and any charges imposed since the debt was incurred.
  • A copy of the Information Sheet and the Reply Form (provided at Annex 1 of the Debt Pre-Action Protocol) and a Financial Statement form. Annex 2 of the Debt Pre-Action Protocol provides the Standard Financial Statement as an example, so it’s possible to use other forms.

The Letter of Claim must be clearly dated and sent by post to your customer. You can also send a copy by email. You can only send it by email alone if your customer has made an explicit request to receive correspondence in that format.


The biggest difference though is the timescales. A Letter Before Action could give as little as seven-days notice of intention but the Letter of Claim has to give your customer a minimum of thirty-days to respond.

The Pre-Action Protocol suggests that you allow time beyond the 30-day period to accept responses sent at the very end of the period.

The Reply Form

Your customer should send the completed Reply Form (and Financial Statement, if relevant) back to you within the thirty days.

There are various options for your customer to respond. They range from agreeing the whole sum claimed and paid in full, to disputing the entire sum. There is provision for them to propose paying in instalments.

Your customer can also show that they are seeking advice. In that instance you must allow a reasonable period of time for them to get that advice. The advice sought could be legal advice seeking to challenge the claim, or debt advice. If your customer indicates they are seeking advice but have been unable to get it within thirty days, then you should allow reasonable extra time for this.

In these circumstances, you must not begin proceedings within thirty days from the latter of:

  • The receipt of the completed reply form.
  • The date you provide any requested documentation to your customer.

If your customer admits the debt but needs time to pay, you should seek to reach an agreement for settlement of the debt, based on your customer’s income and expenditure. You must provide reasons for refusing any proposal to repay the debt.

If you reach an agreement with your customer about repayment of the debt then you should not start court proceedings as long as your customer is complying with the agreement. If your customer fails to make the repayments as agreed and you want to start proceedings at a later date you’ll need to issue a new Letter of Claim and start the whole process again. Though if it’s within six months of the original letter you may not need to resend all the documentation if nothing has changed.

The Pre-Action Protocol places an obligation on you and your customer to try to resolve the matter outside of the courts and, in particular, you should consider alternative dispute resolution (ADR). This may take the form of using a mediation service. You can get details of registered mediation providers from the Civil Mediation Provider Directory. You should give careful consideration to the potential costs of mediation in relation to the amount of the debt.

Where your customer has responded to the LoC but there is still no agreement, then you should give at least fourteen days’ notice before issuing any court proceeding.

What will happen if you don’t comply with the Pre-Action Protocol?

The court will expect the parties to have complied with the Protocol if the matter proceeds to litigation.

The Pre-Action Protocol is all about increasing engagement between a business and its debtors. So the court will take into account the level of engagement when giving directions for the management of your case.

The best case scenario is that you incur extra costs and lose valuable time while the court orders you to make good on the parts of the Protocol you didn’t follow.
The worst case scenario is that the court dismisses your claim and orders you to pay costs for the court’s time.

It’s better by far to invest the time upfront rather than suffer costly delays in court.

How could the Protocol affect you?

The most obvious effect is time. You can no longer decide how long to wait before taking court action. It’s stipulated in the Protocol. In addition, there will be a time cost in preparing the Letter of Claim, which is a far lengthier document than the Letter Before Action.

It will take you longer to get your money.

The additional cost in paper for sending a Letter of Claim may not seem like much, but will soon add up if you use this process often.

There is also the real possibility that the volume of the documentation sent to your customer may overwhelm them. Potentially in excess of ten pages, it could faze people enough into burying their head in the sand rather than responding.

Finally, there is a risk that overdue customers will use these extended timescales to delay further. This means you may have to wait more than thirty days from the date of the Letter of Claim before the issuing of proceedings.

Prevention is better than cure

Of course, this should all be a last resort. It’s far better to have robust processes and controls in your business from the time the order is received, through to getting paid. Processes that help protect you from late or non-payment. See our article here for some basic steps you should be taking.

You can read our article to see how a credit management consultant can add value to your business.

If you would like help in identifying ways to improve the way you manage the risk to your cash when you give your customers time to pay please get in touch with us for a FREE, no obligation consultation.

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