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Pre Action Protocol For Consumer Debt Claims
In October 2017 new rules for the procedure leading up to the start of legal action against consumers came into force.
The Pre Action Protocol (PAP) applies to all businesses (including sole traders and public bodies) claiming payment of a debt from an individual or a sole trader. It describes the route that a Creditor must take before the Creditor issues a claim into Court.
Consumer Debt Claim – What is required?
The Creditor must send by post a letter of claim to the Debtor which must include:-
- The amount of the debt
- Whether interest or other charges are continuing
- Brief details of the nature of the debt extending to dates and parties to a written contract if there is one, or the contractual words spoken and by whom in an oral agreement and also details of any assignment of the debt.
- An up to date statement of account from the Creditor
- An information sheet for the debtor (we have this already)
- A Reply Form for the debtors response (we have this already)
- A Financial Statement form for the debtor to complete (we have this already)
- If the debtor is already paying by instalments, the reason why this is no longer acceptable.
- Details of how the debt can be paid and what the debtor needs to do to discuss repayment options (we do this already) and a return address for the reply form.
What happens next?
The debtor has 30 days from the date of the letter to respond to the letter of claim then there are a number of options:-
- If no response is received then legal action can be started.
- The debtor responds with a completed reply form.
The reply forms allows the debtor the opportunity to explain their position and to state whether they admit the full debt is owing, or only part of the debt is owing (with their proposals for repayment) or that they dispute the whole debt with their reasons for this.
The Debtor has the opportunity at this stage to request specific documents from the Creditor. This may include (but is not limited to)
- A copy of the written contract to the debt
- A full statement of account, including details of all interest and charges with an explanation as to how they have been calculated and any payments made.
- A copy of the Notice of Assignment of the debt (if applicable)
Importantly for Creditors, once a request for documentation has been received, we have 30 days in which to provide this or provide an explanation as to why the documentation or information is not available.
Once we have provided the debtor with the additional documents we must give the debtor a further 30 days to respond to us.
The debtor may also state that they are seeking debt advice from a professional organisation. If they state this then we must allow them a reasonable period of time (minimum 30 days) to obtain this.
Consumer Debt Claim – If the Debtor still hasn’t paid?
If the parties cannot agree about the existence, payment, or any other aspect of the debt then both parties must take steps to resolve the matter prior to starting a Court action. This could take the form of discussions and negotiations between the parties or for large debts a more formal mediation through a professional mediator.
Consumer Debt Claim – If the matter still cannot be resolved?
If the debtor does not respond or the matter clearly needs to go to court to resolve the claim then we must write to the debtor telling them that we are doing this and waiting a further 14 days before we can start a legal action.
Items for our clients to consider:-
- There is a requirement for all paperwork relating to the debt to be provided quickly following a request from the debtor. Clients should look to ensure that the case papers, and in particular, the items set out above are readily available once we are instructed or there is a valid reason why they cannot be produced.
- For clients who wish to start a legal action as a matter of urgency the PAP will delay how quickly we can present the claim into court for you. In these circumstances we can start our amicable collection efforts with a letter of claim in order to lessen the impact on the client.
- From our experience of dealing with PAPS since 2017, having good paperwork (invoices, statements, contracts etc) is essential at the commencement of our instructions so as not to delay matters further along the line
Items for the Debtor to consider:-
- If you choose to ignore the PAP when it arrives then after 30 days from the date of the letter the creditor can look to commence legal action against you.
- Following the issuing of a claim, if you still do not respond after the requisite time the creditor is at liberty to enter a County Court Judgment against you which will seriously impact your credit rating.
- We have dealt with PAP’s for a number of years now and have found that those debtors who engage in the process and open a dialogue with us at the earliest opportunity tend to have a mutually acceptable conclusion to their case that does not damage their credit rating and does not incur court fees and further interest against them
- Sadly it seems, too many debtors avoid engaging with us when they receive a PAP and once court action is commenced we can, if necessary, draw the courts attention to this fact if required in cases where the debtor enters a defence that wasn’t disclosed earlier in the PAP which can weaken the debtors position especially on costs awarded.
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