The What, Why and How Of Pre-Action Protocols

Debt collection isn’t always a quick process. In fact, sometimes it can feel as though it all moves at a snails pace – especially if you’re the one trying to collect money. Thankfully, there are policies and procedures in place to support you in pursuing overdue payments all the way up to court if need be. They’re called pre-action protocols, and while they can be incredibly useful, there are some who think they are more unnecessary barriers to collecting funds owed fast.

What Is A Pre-Action Protocol?

The term pre-action protocol (or PAP for short) is the name for the process a person needs to take if they want to bring a claim to court. They aren’t specific to any one industry or issue, but give you easy to follow, simple instructions to follow to ensure things run smoothly. The concept was introduced as a way to make sure that everyone involved in the claim knows what’s going on, what the dispute is about and what each ‘side’ says happened leading up to the dispute.

These protocols aren’t law exactly, and don’t enjoy the same status as civil laws do. But they have been carefully put together by teams of experts for certain types of common claim, to make the process easier. At the time of writing, there are pre-action protocols in place for 13 different types of claim, and debt collection is one of them.

What Does A Debt Collection Pre-Action Protocol Do?

The debt collection PAP was created in 2017 to make the process of bringing debt collection claims to court easier for individuals and sole traders, and to ensure cases were properly prepared before they arrived in court. The aims of the protocol are:

• To encourage early engagement and communication between the parties, including early exchange of sufficient information about the matter to help clarify whether there are any issues in dispute.

• To enable the parties to resolve the matter without the need to start court proceedings, including agreeing a reasonable repayment plan or considering using an Alternative Dispute Resolution (ADR) procedure; 3

• To encourage the parties to act in a reasonable and proportionate manner in all dealings with one another (for example, avoiding running up costs which do not bear a reasonable relationship to the sums in issue);

• To support the efficient management of proceedings that cannot be avoided.

In other words, it encourages parties to communicate openly and early, in the hopes that a resolution can be found without needing to go to court at all – an outcome that’s better for everyone. The key thing to remember is that the debt collection PAP only applies to individuals or sole traders, so bigger businesses will need to bring their claims to court through the official channels.

How Does It Work?

Just like all other pre-action protocols, there are distinct steps to follow when bringing a debt claim to court. We won’t go into all of the nitty gritty details here, but the short version is:

1. The creditor sends a detailed Letter of Claim (including reply form, financial means statement and pro forma) to the debtor. This should be done by post, with electronic copies only being sent if you have the specific consent of the debtor.

2. The debtor has 30 days from receipt of the documents to complete and return them. If they do not meet this deadline, the creditor can move on to formal court proceedings based on any remaining obligations of the debtor.

3. If the debtor does respond and indicate that they are seeking debt advice, the creditor can’t start court proceedings for at least 30 days. This is to give the debtor enough time to put things in order and settle the debt.

Interestingly there is no reason the creditor can’t start court proceedings earlier if they wanted, but the court will expect both parties to have completed the PAP process. If not, the court will take into account non-compliance on both sides when giving directions for the management of the debt, and may even delay the court proceedings until the full 30 days has been awarded. The court is also liable to impose sanctions for non-compliance, including, but not limited to, fines – so it’s always worth following the pre-action protocol steps in full.

Ultimately, it’s up to you as the individual or sole trader to decide whether using the pre-action protocols is the right move for you. your cash flow will likely have a lot to do with this decision, as pre-action protocols can add at least 60 days to the clock before you can take further action on the debt. If you would like more information on the debt collection pre-action protocol, or you need support in settling credit disputes for your business, please just get in touch with us today.