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The success of the pre-action protocol for debt claims?

View profile for Ben Foley
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Are you a property manager looking to recover a debt from a tenant and/or guarantor (where the tenant/guarantor is an individual)?

This blog reviews the pre-action protocol for debt claims and how successful it has been since its introduction.

Background and context:

On 1 October 2017 a new pre-action protocol for debt claims was introduced, which applies to any business claiming payment of a debt from an individual, including an individual in business as a sole trader (‘the Protocol’).

The Protocol requires an enhanced letter of claim to be sent by the Creditor to the Debtor which has to detail the basis of the claim, including details of any written or oral contract (if the claim is based on a written contract this must be made available to the Debtor on request), and any charges and interest which have been added to the debt. It also provides that a Statement of Account, Information Sheet, Reply Form and Financial Statement are to be enclosed.

A Debtor now has a minimum of 30 days to respond to a letter of claim. However, this may be extended:

  • If a Debtor indicates that debt advice is being sought, the Creditor must allow the Debtor a reasonable period for the advice to be obtained
  • If a Debtor requests a document or additional information from the Creditor, this must be provided within 30 days of receipt of the request and if it is not available the Creditor must explain why it is not available. A Creditor must not start court proceedings less than 30 days after providing the document or information to the Debtor
  • If a Debtor indicates that he requires time to pay, the parties should try to agree repayment terms, based on the debtor’s income and expenditure. If a Creditor does not accept a proposal put forward by a Debtor, this should be communicated to the Debtor in writing

The Protocol encourages the use of alternative dispute resolution, but it does recognise that the cost of mediation should be considered in relation to the amount of the debt, which is helpful.

If a matter proceeds to litigation, the Court will expect the parties to have complied in substance with the Protocol.

Has it worked?

The new requirements, imposed by the Protocol, were introduced with the main aim of encouraging communication between parties in an attempt to resolve disputes without the need to go to Court. In my opinion, sadly this has not been achieved at the expense of Creditor Companies who must now incur the cost of dealing with the additional disclosure requirements and wait at least 30 days after sending a letter of claim (more often than not without a response) before taking any further action.

The provisional civil justice statistics published by the Ministry of Justice (MOJ) for October to December 2018 (‘the Statistics’) support the argument that the Protocol has not had the desired impact. The MOJ has reported a sharp increase in claims issued in the County Court for the period October to December 2018.  Indeed, during this period, County Court claims increased by 29% to 533,000 and of these, 436,000 were specified money claims (up 42% on the same period in 2017). The MOJ has recognised that specified money claims had been following an upward trend until October to December 2017 where volumes fell following the implementation of the Protocol. However, the MOJ has also recognised that the volume of specified money claims is now returning to the levels seen prior to the implementation of the Protocol.

The Statistics in relation to default judgments also raises the question whether communication between the parties is a realistic goal. According to the Statistics there were 315,500 judgments made in October to December 2018, of which 280,000 were default judgments. This means that in 89% of these cases, judgment was entered as a result of a failure to respond to the claim. This is an alarming percentage and I fail to see how the Protocol is going to change the behaviour of a Debtor in the vast majority of cases, now or in the future.

Next Steps

If you would like further information, please email for a copy of the Litigation process infographic.