Pre-Action Protocol for Debt is coming into force 1 October 2017

How does the Protocol (Debt PAP) affect me?

The Protocol applies to ANY business (including sole practitioners and public bodies) claiming payment of a debt from an INDIVIDUAL (including sole practitioners).

It does NOT apply to B2B (business to business) debts (unless the debtor is a sole trader).

It does NOT apply where the debt is covered by another pre-action protocol (such as mortgage arrears).

For credit controllers, the Protocol needs to be complied with as this is seen by the Courts as “good practice”.

Why the change?

In short, the Pre-Action Protocol has been put in place and approved by the Master of the Rolls, to ensure that all debt claims are dealt with fairly with the aim to reduce the number of claims going to Court.  Compliance is key within the legal field and debt is no different.  The aim of PAP is to encourage mediation, negotiation and of course, communication between parties to avoid possible litigious disputes of a debt.  Alternative Dispute Resolution (ADR) has many benefits, including not paying any court fees, together with avoiding attendance at court.

Are you a CREDITOR?

If you are owed money and need to comply with PAP, you should send a Letter of Claim (often called a Letter Before Action) to the Debtor before any proceedings are started. Click here to see what a Letter of Claim should contain.

The Letter of Claim must be sent via post UNLESS an explicit request for an alternative contact method has been agreed with the Debtor.

Are you a DEBTOR?

If you owe money (or are believed to owe money) you should use the Reply Form (which should be attached to the Letter of Claim).  Click here to view a copy of the form.

The Debtor should respond with the Reply Form within 30 days.  If the Debtor indicates they are receiving or seeking legal or debt advice in the Reply Form, then the Creditor must allow a reasonable period before bringing action.

Payment Plans

Ultimately, a good conclusion for a debt is either for it to be paid in full or at least offer the Debtor a chance to pay in instalments. This is effective communication and the quicker an agreement is resolved the better it is for each party.  The Creditor should consider the Debtor’s ingoing and outgoings when trying to organise payment plans.  If a Creditor refuses to accept the Debtor’s repayment offer, the Creditor must set out the reasons for refusal in writing.

Disclosure of Documentation

Pre-Action Protocol insists on early disclosure of relevant information/documents.  These disclosures can often resolve a matter early on in a dispute and each party should exchange information and disclose documents in enable Creditor and Debtor to understand each other’s position (this also includes amount, interest, charges, time for payment).

Alternative Dispute Resolution (ADR)?

The above communication and disclosure is in itself a compliant way of staying in line with the Pre-Action Protocol.  It shows an attempt at ADR engaging in a discussion.  However, if disclosure of documentation isn’t enough to resolve the matter,  ADR can be a cost-effective way in reaching an agreement.  Often, when there is a large debt, mediation or arbitration might be appropriate (Click here for more information on ADR).

Allsquare’s Advice

Ultimately, Debt PAP  under the Civil Procedure Rules are being enforced in October 2017 as a way to keep legal costs to a minimum and also to keep debt disputes away from the courts.  The Protocol is being put in place to resolve individual claims and to faciliate early and settlement for both the Creditor and the Debtor.

If you would like further advice on anything to do with debt or legal advice, please do not hesitate to contact us for a free, confidential chat.


Disclaimer – the above is for information only and does not constitute legal advice.