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New - The Pre-Action Protocol (PAP) for Debt Claims

Tuesday, 3rd October 2017

On 1st October 2017, a new Pre-Action Protocol (PAP) tailored specifically tailored for debt claims came into force. Previously businesses and creditors were compelled to follow their regulator and trade body guidelines. 

Who does this apply to?

The Protocol applies in England, Wales and Northern Ireland to any business (including sole traders and public bodies) claiming payment of a debt from an individual (including a sole trader). This Protocol does not apply to business-to-business debts unless the debtor is a sole trader.

What are the main aims of the Pre-Action Protocol for Debt Claims?

The main aims are to encourage early engagement and communication between the parties, including early exchange of sufficient information to ascertain if there are any disputes. The Protocol will enable parties to resolve the matter without the need to start court proceedings and encourage the parties to act in a reasonable and proportionate manner in all dealings with one another, with a view to keeping costs low.
The Protocol describes the conduct the court will normally expect of those parties prior to the start of proceedings. It includes a template Information Sheet and Reply Form to be provided to debtors in all cases.

Are there any exceptions when the Protocol will not apply?

The Protocol does not apply: where the debt is covered by another Pre-Action Protocol such as Construction and Engineering or Mortgage Arrears; or to claims issued by Her Majesty’s Revenue and Customs that are governed by Practice Direction 7D (Claims For The Recovery Of Taxes And Duties).

How long do I have to fill in the Reply Form?

You only have 30 days from the date at the top of the received letter from the business to send back the Reply Form. If the business does not get your Reply Form within 30 days, it could take you to court in relation to the debt. When replying to the form make sure you allow sufficient time for posting and consider using recorded delivery as you can add the bar code on the receipt from the Post Office into their Track & Trace service to prove postage date and receipt date.

Do I need to get debt advice before replying to this form?

It is always advisable to seek debt advice to ascertain and confirm your debt options. We have a list of the not for profit debt advice agencies here Free / Debt Advice Help

We also have a list of six options available to you when debt problems arise, all these options, except for No.3 where you pay creditors in full, will affect your credit rating. This is accompanied with our very own easy to read debt solutions table. This chart illustrates a summary of possible debt solutions, you can compare the options available to you. We detail which options freezes interest and those that can stop the creditors chasing you for the debts!

Debt Solutions Explained & Debt Solutions Comparison Table

What happens when I return the Reply Form in time?

If you return the Reply Form within 30 days, you and the business will have at least a further 30 days to discuss the debt, or for you to seek debt advice, before the business takes you to court. During that time you should discuss with the business how you can resolve the matter, ideally without going to court. If you request more information in the Reply Form, the business must wait at least 30 days after it gives you that information before taking you to court.

What if I don’t post the Reply Form back within the 30 days?

If you do not reply to the Letter of Claim within 30 days of the date at the top of the letter, the creditor may start court proceedings, subject to any remaining obligations the creditor may have to you (for example, under the Financial Conduct Authority’s Handbook). See FCA Debt Collection Guidelines

The creditor is expected to take into account the possibility that a reply was posted towards the end of the 30 - day period so one hopes they will not be that quick to start proceedings.

Is this new PAP good for creditors?

In a word, no. Creditors will have supply more documentation to debtors, ensure they engage with debtors and exchange information/docs within strict a time periods. It is also possible for a debtor to string out matters and achieve up to 90 days before the creditor begins to start court proceedings.

Where can I see an example of the Reply Form?

Scroll down to page 10 of 17 on the following link to the Government website

Debt Wizard Comment

Under this new Pre-Action Protocol, creditors will now have to supply far more information as standard to non payers, work within restricted time limits when communicating with a borrower/debtor and be more proactive. The Protocol also offers the opportunity for some borrowers not to pay for up to a period of 90 days, after which creditors/businesses would be eligible to start instigating court proceedings. Under this new Protocol the process of debt recovery has definitely swung towards the consumer/borrower, and in my view, not before time.







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