On 1st October 2017, a Pre-Action Protocol (PAP) for debt recovery claims will come into force.
The PAP applies to any business, including sole traders and public bodies, claiming payment of a debt from an individual, including a sole trader.
The PAP does not apply to business to business debts, unless the debtor is a sole trader.
What is the aim of the PAP?
The aim of the PAP is to:
- Promote early and open communications between parties.
- Encourage parties to resolve disputes at an early stage without the need for Court proceedings.
- Encourage parties to act reasonably and at proportionate cost.
What do you need to know?
- An individual will have 30 days to reply to the Letter of Claim.
- A more substantive Letter of Claim is required detailing the parties to the contract, contractual terms together with specific enclosures as detailed within the PAP.
- Failure to comply with the PAP may result in a Claim being ‘stayed’ to allow time for compliance of the PAP. Alternatively, the Court may impose sanctions including adverse Costs Orders.
The impact of these changes could have a dramatic impact on a business’s cash flow. You may need to re-consider your credit control policies to prevent any unnecessary delay. This may include the ‘tightening’ up of your procedures and enforcement of stricter time limits.
We would recommend an early referral to solicitors so that the clock can start to run sooner rather than later as this will inevitably assist cash flow if the debt is paid promptly following receipt of a Letter of Claim from solicitors.Find out more about our Dispute Resolution team