The new Pre-Action Protocol for Debt Claims (PAP) came into force on 1 October, with the stated aim of encouraging early engagement between creditors and debtors and avoiding court procedures. The implication is that it makes debt collection quicker, more understanding, less bureaucratic and cheaper. However, I'm not convinced.
I believe PAP is very debtor-centric, so creditors will need to be fully educated on the new rules to ensure they remain in a strong position. With that in mind, I’m going to share a brief overview and consider the implications for both parties.
PAP only applies to debt owed by an individual or sole trader, not business-to-business debts. These are still governed by the Practice Direction for Pre-Action Conduct and Protocols (PDPAC).
The new plans mean you’ll have to follow strict steps before taking debtors to court. This starts with a 'letter of claim' containing eight specific pieces of information, a statement of account or separate list of interest and administration charges. You'll also need the standard Information Sheet/Reply Form and Financial Statement form issued as part of PAP.
Creditors must then wait at least 30 days and “take appropriate steps to resolve the dispute without starting court proceedings”. Only then can any court action be considered.
These safeguards undoubtedly provide at-risk individuals with ample opportunity to seek advice and assistance. However, where a debtor is aware of the trigger points to delay and stall engagement, the process becomes lengthy and cumbersome.
For example, if you don’t get a response to your letter of claim after 30 days, you may take court action. However, if an answer is received, you’ll have to wait another 30 days. By simply delaying their reply, a debtor can add a month to the timescale. This can be extended even more with document requests or disputes.
The matter can be further complicated by PAP’s insistence that a partially completed reply form must be taken “as an attempt to engage with the matter”. This clause, which permits laziness or disruption by a debtor, places the onus on the creditor to engage, despite them already being expected to comply with rigorous conditions.
To avoid bureaucratic chaos, I believe it’s vital that creditors integrate the proceedings into their existing debt-collection structures. That means adapting templates for invoices and reminders to include the relevant PAP information, having mediation methods in place in advance and keeping strict, clear records.
Maintaining an open line of communication with customers, clients and stakeholders has also never been more important. Identifying problem debt in advance will help avoid the added burdens that PAP could bring; staying in touch with your debtors is the most effective way to do so.
Many thanks for viewing my post; I hope you found it useful. If you have any private questions on this topic, you can connect with me on LinkedIn and send me a message, or else you'll find my contact details on my LinkedIn profile.