Recovering Debts From Consumers is About to Get Harder

Posted on September 15, 2017

New debt recovery rules that come into force in October will make debt recovery more challenging for businesses. If you've been putting off collection, there's less than 2 weeks to start the process to take advantage of the current rules.

New Debt Recovery Rules

A new "Pre-Action Protocol for Debt Claims" (the Protocol) will take effect on 1 October 2017. The Protocol places increased focus on settling debts and avoiding court proceedings. To do this, it allows more time for the exchange of information before a business can issue court proceedings.

You can read in more detail how the Protocol will work in our blog of 12 May 32017: "New debt recovery rules from October: businesses need to review their approach to collecting debts",

The Key Points for Businesses to Bear in Mind

The Protocol applies to businesses that are owed money by individuals. It is expected to slow down the process of debt recovery because:

the parties have to exchange information about the debt before issuing court proceedings;
the parties have to agree on a payment plan or an alternative way to resolve the dispute (rather than going to court); and
the business creditor has to wait a minimum of 30 days if advised by the debtor that they are seeking advice about the debt.

Time for a Clear Out? Act Now – and Utilise the Current Rules

If there are debts owing to your business which remain obstinately outstanding, now is a good time to review them. Businesses who act quickly and start the debt recovery process before 1 October, will still be able to use the current rules. Recovering the debt could be as easy as sending a letter before action.

Non-Compliance With the Protocol Could Affect How Much You Recover

After 1 October, compliance with the Protocol will be essential. Failure to comply, could mean you lose the entitlement to recover some of the interest on the debt or your costs - even if the debt is found to be due. You might even have to pay some of the debtor's costs.

Contact

For more information about the new Protocol and its effect on how your business handles debts, contact Christopher Burke on 0161 684 6941 or make an enquiry.

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.