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New rules: New 'pre-action protocol' will make recovering debts from individuals more cumbersome

Businesses collecting debts from individuals (including sole traders) in England and Wales face new rules from October 2017 which will make debt recovery more cumbersome.

Legal Alert

This update was published in Legal Alert - June 2017

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

The steps businesses should normally follow before taking a debtor to court are set out in a 'pre-action protocol'. The aims of the protocol include encouraging you and your debtor to communicate with each other, clarify the issues between you, and see if you can negotiate a settlement or use some form of alternative dispute resolution to avoid going to court. If you do not follow the protocol, the court may penalise you on costs.

A new pre-action protocol is planned for 1 October 2017 for debt claims brought by businesses against individuals, including sole traders, which will make the steps to follow more complex.

The protocol will require a business to include an information sheet and reply form when it writes to a debtor who is an individual, and the letter should contain specified information about, for example:

  • The amount of the debt
  • Any continuing interest or other charges to be added to it
  • If the agreement giving rise to the debt was made orally, the parties to it, when and where it was made and what was agreed (stating, where possible, the actual words used)
  • If the agreement was in writing, the date it was made and parties to it, and that a copy can be supplied on request
  • If the debtor has offered to settle, or is already paying by instalments, an explanation of why this is not acceptable
  • How the debt can be paid, and what the debtor should do if they want to discuss how they can pay
  • The address the reply form should be sent to

The business should also include various documents in the letter, such as an up-to-date statement of account (including interest and administrative charges).

Time limits will then apply, depending on whether the debtor returns the reply form, whether they say they are taking advice, whether they request copies of documents, and so on. If they say they need time to pay, or they dispute the debt, the pre-action protocol sets out further steps each side should take.

Operative date

  • 1 October 2017


  • Businesses should:
    • Update their systems and procedures to ensure they can comply with the new pre-action protocol, and train relevant staff
    • Consider whether they need to tighten their credit control criteria when taking on new individual customers
    • Consider what they can do to spot and discourage debtors from using the new rules and time limits to delay payment
    • Consider the potential effect on their cashflow, and the financial and commercial consequences

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.