Pre-Action Protocol and Breathing Space Regulations – The impact on debt collection

In recent years, new regulations have affected the way creditors chase debts from individuals and sole traders. In this article, we explore how the Pre-Action Protocol for Debt Claims and the Breathing Space Regulations have impacted debt collection.

The Pre Action Protocol, introduced on 1st October 2017, applies to any company that is claiming payment of a debt from an individual or sole trader. If debt is owed to you by a company (that is not a sole trader), the protocol will not apply.

The protocol intends to encourage early engagement between both parties in order to resolve/settle the debt before having to issue court proceedings. Resolution may involve setting up a payment plan or engaging in ADR (Alternative Dispute Resolution). The idea is to ensure that costs are kept to a minimum and attempts to keep a positive relationship between both parties.

A great deal more information is required within the protocol when compared to the Letter Before Action so it will be important that this information is easily accessible to save cost and time. Information may include who made the agreement, when the agreement was made and in the case of a verbal agreement, what was said. A useful tip is to segment your ledger so that you are able to isolate sole traders and individuals and apply the protocol accordingly.

The Pre Action Protocol requires you to give your customer at least 30 days to reply to or pay the debt before court action can be issued. If your customer requests information or copy documents then a further 30 days must be given from the date the documents were provided before issuing court proceedings. If these documents cannot be provided then reason for why must be given within 30 days.

To assist creditors, Guildways has created a FREE guide and template to ensure  compliance with the protocol. Download here. Alternatively, watch our video  for visual explanation of the protocol.

In addition to this, on the 4th May 2021, Breathing Space Regulations came into force which has also had an impact on the way creditors collect debt from an individual or sole trader.

An individual or sole trader that is not VAT registered may ask a debt adviser to initiate a breathing space period, if they are struggling with debt. Whereby creditors will not be able to engage in any debt collection activities for at least 60 days.

More information about Breathing Space Regulations may be found here. We also have an easy to follow flow chart here.

Guildways can assist with sending and adhering to the Pre Action Protocol, on your behalf. We will work on a risk free, no collection no fee basis in accordance with our terms.

Get in touch with us today at [email protected] or on 0333 3409 000 and we would be more than happy to help.

28 Jun 2022