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Pre-action Protocol for Debt Claims

The Pre-Action Protocol for Debt Claims

The Pre-Action Protocol for Debt Claims

Relates to letters before claim sent by you/your legal supplier to your customers on or after 1 October 2017 if they are individuals or sole traders.

Complements regulatory, industry and government guidance (including the FCA’s Handbook).

Aims to encourage early communication, resolution without court proceedings and acting in a reasonable and proportionate manner

Contents of the LBC

  • the amount of the debt
  • whether interest or other charges are continuing
  • agreement details: date, parties to, that a copy can be requested
  • assigned debts: details of the original debt and creditor, when it was assigned and to whom
  • instalments being offered or paid: explanation of why the offer is not acceptable and why proceedings are being considered
  • paying: how & payment options
  • address to send the Reply Form

Enclosures (one of the following)

  • up-to-date statement of account including interest and charges; or
  • most recent statement (the LBC must state the interest and charges since the statement was issued to bring it up to date); or
  • where no statements have been provided, the LBC must state the amount of interest and charges imposed since the debt was incurred
  • Information Sheet
  • Reply Form
  • Financial Statement form

No response within 30 days? You can issue

Debtor’s reply

  • use the Reply Form to respond

Debtor seeking advice?

  • allow a reasonable period. No proceedings less than 30 days from receipt of Reply Form or provision of any requested documents whichever is later
  • needs more than 30 days for advice? Allow reasonable extra time
  • needs time to pay? Try to reach agreement for income/expenditure based instalments having regard to the provisions of the Standard Financial Statement/equivalent. If proposals are not agreed give the reasons in writing

A partially completed Reply Form is an attempt to engage.  You should attempt to contact the debtor to discuss the Reply Form and understand their position.

Document requests:

Within 30 days of receipt of the request provide the document or explain why it is unavailable.

Where the debtor has responded to the LBC but agreement has not been reached, the creditor should give the debtor at least 14 days’ notice of their intention to start court proceedings.

The PAP will obviously raise eyebrows, particularly in the commercial world where the claims relate to debts incurred by sole traders where most creditors are used to sending a 7 day LBA and issuing immediately. There is nothing of course to stop creditors still doing so, but if a matter proceeds to litigation, the court will expect the parties to have complied with the PAP. The court will take into account non-compliance when giving directions for the management of proceedings. The court may impose sanctions for non-compliance including costs sanctions.

The court is not likely to be concerned with minor/technical infringements, especially when the matter is urgent.  Question whether this includes return of goods claims.

We are more than happy to discuss individual creditor concerns and strategy ahead of the PAP coming into force.
We are also offering free training delivered to you in house, please telephone Ann Lloyd on 01202 786262 to discuss.


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