Debt Recovery under the new Pre-Action Protocol for debt claims

With wage increases not keeping up with inflation is it any surprise that more and more creditors are having to chase debtors for payment of their overdue debts? It seems that many of our small business clients are unaware of the new protocol and the effect that it has on the collection of their outstanding debts.

Prior to 1 October 2017, there was no specific Pre-Action Protocol for debt claims, although parties were expected to comply with the existing Practice Direction for Pre-Action Conduct (the Practice Direction). However since, 1 October 2017, the new Pre-Action Protocol for debt claims (“The Protocol”) came into effect.

The Protocol applies to any business, including sole traders and public bodies, claiming payment of a debt from an individual (including a sole trader)’. It does not however apply to business to business debts, so will not apply where a business is seeking to recover a debt from a company or LLP. However, it will apply where a business seeks to recover a debt due under a guarantee from an individual.

On a side note, where a business is seeking to recover debts from a company or LLP it should be borne in mind that the Late Payment of Commercial Debts (Interest) Act 1998 (“the Act”) applies in such situations.  The Act serves two purposes. Firstly, to compensate creditors for the late payment of debts. Secondly, to deter late payment. It is also important to remember that it only applies to the commercial supply of goods and services where there is no provision for interest in the company’s “Terms of Business”.

In short, for invoices that are not paid on time, the Act enables a creditor to claim interest, compensation and (for orders placed after 16 March 2013) its reasonable costs of collecting the debt where these exceed the compensation. Interest can be claimed at 8% over the Bank of England base rate (current rate 8.5%) together with compensation at the rate of £40 – £100 per invoice.

However when a business is seeking to recover debt from an individual (including a sole trader) the Act does not apply and it is bound to follow the Pre-Action Protocol or face possible sanctions from the Court for failure to do so.

While the Protocol is designed to speed up the debt recovery process and assist in resolving matters as well as to reduce the number of claims coming before the court it could actually as a result of the timescales built into the Protocol result in claims taking longer to reach resolution especially where a debtor is only playing for time and does not has a genuine dispute.

The Pre-Action Protocol’s aims are to:

  • encourage early engagement between the parties,
  • enable the parties to resolve the matter without the need to start court proceedings,
  • encourage parties to act in a reasonable and proportionate manner,
  • support efficient case management, in the event that proceedings are issued.

Letter of Claim

Full details of what should be included within the letter of claim is set out paragraph 3.1 of the Protocol and includes:

  • details of the debt, to include the amount, any interest or charges and how the debt has arisen;
  • if repayment by instalments are being offered/paid by the debtor, an explanation of why the payments are  not acceptable and why proceedings are being considered;
  • details of how the debt can be paid; and
  • the address to which the completed reply form should be sent.

The Letter of Claim should also include either documents or information which explain the outstanding balance and provide details of all interest and administrative charges which have been charged.

Where the debt arises from a written agreement, the Letter of Claim should also say the debtor can ask for a copy of that agreement. If the agreement cannot be provided, a creditor will need to provide as much information as possible to evidence the debt is due and owing and the terms and conditions that apply. The creditor must give the debtor 30 days to respond to the Letter of Claim.

The requirement of the 30 day is the most controversial feature of the new Protocol as it affords the debtor a significant amount of time to deal with the Letter of Claim, meaning that the creditor has to possibly wait even longer before receiving payment of the outstanding monies or being in a position to issue proceedings. This is one of the reasons why it is important for creditors not to delay matters when seeking to instruct solicitors to recovery monies due to them from debtor particularly when these persons are individuals.

New forms

When sending out the Letter of Claim, creditors will be expected to include:

  1. an information sheet and a reply form, a suggested format is attached to the Protocol. and
  2. a financial statement.

The Letter of Claim will request that the debtor uses the “reply form” to respond.

Provision of documents

The Protocol encourages early disclosure of documents before issuing proceedings.

If a debtor asks for a document, the creditor should, within 30 days of such a request, either provide the document, or explain why it is unavailable.

It is as such important that all relevant documents are provided to the debtor from the outset and attached to the Letter of Claim to avoid any further and unnecessary delays to recovery of outstanding monies.


Under the Protocol, a creditor should not issue proceedings until 30 days after the date:

  • at the top of the Letter of Claim. This is to allow a debtor time to complete and return the Reply Form, and to encourage negotiations. ;
  • of receipt of the Reply Form from the debtor. This includes the return of a partially completed Reply Form; or
  • on which the creditor provides documents requested by the debtor (or an explanation as to why they are not available).

A creditor must also allow a reasonable period of time for a debtor to seek legal advice.

If, following discussions, no agreement is reached, the creditor may give the debtor at least 14 days’ notice of their intention to start proceedings, unless there are exceptional circumstances e.g. a limitation period which means the creditor cannot wait.


Failure to comply may well have cost consequences if proceedings are later issued with the Court refusing to award costs and/or interest to the creditor.

Where a creditor needs to secure the debt urgently and does not have the time to follow the timescales set out in the Protocol it will nonetheless need to bear in mind the impact of the Protocol and weigh up the risks of not complying with it.

rhw Solicitors in Guildford (logo) For more information about the debt recovery and the pre-action protocol for debt claims, please contact solicitors Stephen Bottomley or Daniel Crate. Call rhw Solicitors in Guildford on 01483 302000, complete the contact form or email

For further reading see our article on claiming late payment interest.