When will the Protocol apply?
The Protocol applies to ‘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.
The Protocol’s aims are:
• to encourage early engagement between the parties;
• to enable the parties to resolve the matter without the need to start court proceedings;
• to encourage parties to act in a reasonable and proportionate way; and
• to support efficient case management.
Letter of Claim replaces Letter-Before-Action
Full details of inclusions are at paragraph 3.1 of the Protocol, among them are:
• details of the debt, including the amount, any interest or charges and how the debt has arisen;
• if repayment by instalments are being offered/paid by the debtor, explain why the payments are not acceptable and why you are considering proceedings;
• details of how the debt can be paid; and
• the return address for the completed Reply Form.
The Letter of Claim should also include either documents or information that explains the outstanding balance and give details of all interest and administrative charges made. Where the debt arises from a written agreement, the Letter of Claim should also say the debtor can ask for a copy of that agreement. If the agreement cannot be provided, a creditor will need to give as much information as possible to evidence the debt is due and owing and the terms and conditions that apply.
When sending out the Letter of Claim, creditors must include:
1. an Information Sheet and Reply Form – attached to the Protocol is the suggested format, with debtors expected to use the Reply Form to respond to the Letter of Claim; and
2. a Financial Statement – (and many creditors already do this).
Provision of documents
The Protocol encourages early disclosure of documents before issuing proceedings.
If a debtor asks for a document, the creditor should, within 30 days of such a request, either provide the document, or explain why it is unavailable.
Under the Protocol, a creditor should not issue proceedings until 30 days after the date:
• at the top of the Letter of Claim. This is to allow a debtor time to complete and return the Reply Form, and to encourage negotiations;
• of receipt of the Reply Form from the debtor. This includes the return of a partially completed Reply Form; or
• on which the creditor provides documents requested by the debtor (or an explanation why these are not available).
A creditor must also allow a reasonable period for a debtor to seek legal advice.
If following discussions, there is no agreement, the creditor may give the debtor at least 14 days’ notice of their intention to start proceedings, unless there are exceptional circumstances (like the expiry of a limitation period) which means the creditor cannot wait. If the debtor responds with a dispute, the Protocol sets out what the parties need to do with the creditor expected to consider alternative dispute resolution.
We handle 90% of all applicable UK debts without the need for legal action so only 10% of these debts reach the legal process where the Protocol will apply. In most pre-legal cases, we will have undergone a financial assessment and answered any queries raised by the subject. Therefore, we will continue to recommend legal action as a last resort, and will comply with the Protocol. Where additional information or documents are required, we will request these from you, as we do today.
The only real risk to you is time: delay being the enemy of recovery.
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