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Pre action protocol debt recovery
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Understanding Pre-action

Debt recovery terminology can often seem complex, but it's simpler than it appears. 

In the first part of this three-part series, we’ll explain some of these terms, ensuring you have a clear understanding of the pre-action protocol in debt recovery. By the end, you'll feel confident in knowing the necessary steps and when to take them. 

What is pre-action protocol? 

Pre-action are the steps that a creditor must take before initiating court proceedings to recover an unpaid debt. There are different protocols for different types of debt, but the goal of all pre-action is to encourage early resolution of disputes, ensure fairness and minimise the need to take the dispute to court. 


How does pre-action protocol for debt claims work? 

The pre-action protocol for debt claims applies where the party that owes the money is an individual or sole trader. This process aims to: 

  1. Encourage early settlement: Resolve disputes early on, without the need for court proceedings. 
  2. Exchange information: Ensure both creditor and debtor share relevant information and documentation. 
  3. Clarify Issues: Narrow down the issues in dispute, making any potential court case more efficient. 
  4. Promote ADR: Encourage the use of Alternative Dispute Resolution (ADR) methods, such as mediation or negotiation. 

How do I carry out pre-action protocols? 

 Letter of claim: 

The creditor must send a formal "Letter of Claim" to the debtor. This letter should include details of the debt and any accrued interest, a summary of how the debt has arisen, copies of relevant documents such as contracts or invoices.  

 Response time: 

The debtor is given a minimum of 30 days to respond to the Letter of Claim. In their response, the debtor can: 

  • Admit the debt and propose a repayment plan. 
  • Dispute the debt and provide reasons for the dispute. 
  • Request further information or documentation from the creditor. 
  • Indicate if they are seeking debt advice and need more time. 

 Debtor's response: 

If the debtor responds within the 30-day period: 

  • The creditor should consider any proposals, disputes or requests for information made by the debtor.
  • If the debt is admitted, the creditor and debtor should try to agree on a repayment plan. 
  • If the debt is disputed, the creditor should respond to the debtor’s points and provide any additional information requested. 

 Negotiation and ADR: 

Both parties are encouraged to communicate and negotiate to resolve the dispute without court action. Alternative Dispute Resolution (ADR) methods, such as mediation or negotiation should be considered to reach an agreement. 

No response or dispute: 

If the debtor does not respond within 30 days or the parties cannot reach an agreement, the creditor may proceed with legal action. The letter itself warns the debtor of the claimant’s right to instigate legal proceedings without further notice. 

Importance of compliance 

Compliance with the pre-action protocol is crucial for several reasons: 

  • Court consideration: When determining costs and other procedural matters, courts take into account whether the pre-action protocol has been followed. 
  • Potential penalties: Non-compliance can result in penalties, such as costs sanctions or delays in the legal process. 
    Example: If the court learns that the creditor’s solicitors did not send out mandatory warning letters to the debtor about paying the debt, the court may decide to pause proceedings until the letters have been sent to the debtor and the debt remains unpaid.  
  • Promoting fairness: Ensures that both parties have a fair opportunity to resolve the dispute amicably and that court resources are used efficiently. 

By following the pre-action protocol, the dispute can be resolved without need for court intervention, saving time and legal costs, and maintaining a working relationship. 


What if I don’t have a contract? 

Contracts can be made in various ways and don’t always require a formal document.  

Example: If a builder performs work on someone’s property without obtaining a signed contract, it is still considered a binding agreement. This is because the property owner permitted the builder to enter and complete the work. 


What are the different types of pre-action? 

We offer 3 types of pre-action which can be discussed with your account manager: 

  • Bespoke 
  • Enhanced 
  • Solicitor 


Can I recover the costs? 

If your contract allows or it’s business to business, there will be some costs that we are able to recover, this will be reviewed on a case-by-case basis. 


Pre-action protocol - County Court Judgments (CCJs) 

If the pre-action process does not result in a resolution and the creditor proceeds with legal action, they may apply for a CCJ against the debtor.  


To read part two and three of our three-part series, see "Understanding Pre-action"and "Understanding Enforcement" blogs in related articles below. 

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