Partner Article

Are you ready for October 1st?

It is now less than a week until new legislation on pre-action protocol for debt claims is introduced.

As the Pre-Action Protocol for Debt Claims (‘the Protocol’) comes in to force on October 1, a Midlands expert in debt recovery offers a timely reminder of the implications to both creditors and sole traders.

Rob Burke, head of debt recovery at Higgs & Sons, warns: “There is certainly a view that the Protocol imposes harsh or unfair pre-legal requirements on creditors seeking to recover debts from sole-traders.”

Simply put, the Protocol imposes requirements on creditors seeking to recover debts from individuals (including sole traders) to provide information, documentation and to allow at least 30-days before issuing court claims.

This means that a typical Letter Before Action, currently one or two pages long, will need to increase to around 12 pages in length. So instead of giving the debtor the usual seven days to pay before issuing a court claim, the debtor will have at least 30 days before proceedings should be commenced.

Rob Burke added: “Whilst the aims of the Protocol are commendable, the burdensome nature of the requirements upon trade debt creditors will mean increased pre-issue costs and delay in respect of recovering straightforward unpaid invoices.

“The Protocol appears to attempt to address court claims being defended due to an absence of documentation to support the claim which is rarely the case in business to business debt claims. Typically debts being pursued through the court relate to simple goods and services that were supplied with claims only being issued after credit control payment reminders and requests (which usually involves sending copy invoices) have been ignored.

“If a debtor had sole-trader status at the time the debt was incurred then despite the business-to-business nature of trading between the parties they are classed as an individual, not a business, so the Protocol applies. The Protocol does not apply to purely business to business debts unless the debt is pursuant to a guarantee given by an individual.”

The dedicated Debt Recovery team at Higgs & Sons specialises in collecting unpaid invoices on behalf of businesses of all sizes. They are able to help businesses prepare for October 1 by ensuring the correct procedures and documentation are in place.

A full outline on the Protocol and what it means can be found on the Higgs website.

This was posted in Bdaily's Members' News section by Sam Taylor .