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The Protocolapplies to any business (including sole traders and public bodies) claiming payment of a debt from an individual (including a sole trader). The Protocol does not apply to business-to-business debts unless the debtor is a sole trader.
The aim of the Protocol is to:
• Promote early communication between the parties, including early exchange of information about the debt to assist with identifying the issues in dispute.
• Enable the parties to resolve the dispute without court proceedings, including by agreeing a repayment plan or considering using a form of alternative dispute resolution.
• Encourage the parties to act reasonably and in a proportionate manner, and to support the efficient management of proceedings that cannot be avoided.
The Protocol is intended to complement any existing regulatory regime to which the creditor is subject to. If there are any inconsistencies with a specific regulatory obligation, that obligation will take precedence.
Where the debt is covered by another Pre-Action Protocol (for example, construction and engineering), the Protocol will not apply.
The aims of the Protocol are to encourage early communication between the parties and avoid court proceedings, by agreeing a repayment plan or considering using a form of alternative dispute resolution (ADR).
Parties are also encouraged to act reasonably and proportionately to the size of the debt, and to support each other in the efficient management of proceedings that cannot be avoided.
The creditor is required to send a letter of claim to the debtor, which should contain the following information:
• Amount of the debt.
• Whether interest or other charges are continuing.
• The date of the letter, towards the top of the first page.
• If the debt arises from an oral agreement, who made the agreement, what was agreed, and when and where it was agreed.
• If the debt arises from a written agreement, the date of that agreement, the parties and the fact that a written copy can be requested from the creditor.
• Statement of account for the debt, including the amount of interest and any other charges imposed since the debt was incurred.
• Where the debt has been assigned, details of the original debt and creditor, when it was assigned and to whom.
• If the debt is currently being paid on behalf of or by the debtor, an explanation of why these payments are not acceptable and why proceedings are being considered.
• Details of how the debt can be paid, and what the debtor can do if it wishes to discuss payment options.
• Enclose the Information Sheet and Reply Form at Annex 1 of the Protocol.
• Enclose a Financial Statement for the Debtor to complete, an example of which can be found at Annex 2 of the Protocol.
The creditor should post the letter either on the day it is dated or, if that is not reasonably possible, the following day. The Protocol states that the letter should be sent by post, unless the debtor has made an explicit request that it should not be sent by post and has provided alternative contact details.
If the debtor does not reply to the letter of claim within 30 days of the date at the top of the letter, the creditor may start court proceedings (provided that it has given 14 days’ notice to the debtor of its intention to do so)
The debtor should use the Reply Form to respond. The debtor can request copies of any documents from the creditor, and enclose documents they think are relevant. The creditor should not start court proceedings less than 30 days from receipt of the completed Reply Form, or 30 days from the creditor providing any documents requested by the debtor, whichever is later.
If the debtor indicates that they are seeking legal advice, the creditor must allow the debtor a reasonable period of time to do so.
The parties should exchange and disclose documents as early as possible, to help them understand each other’s position. The creditor must provide documents or information (or otherwise explain why the documents or information requested are not available) within 30 days of any request.
If the parties cannot come to an agreement about the repayment of the debt, they should consider using an appropriate form of ADR. The type of ADR used is left to the parties to agree.
If the parties reach an agreement for repayment of the debt, which the debtor subsequently breaches, the creditor must send an updated letter of claim and comply with the Protocol afresh before issuing court proceedings.
The court will expect the parties to have complied with the Protocol if the matter proceeds to litigation, and will consider any non-compliance when giving directions for case management.
If the debtor responds to the letter of claim but an agreement is not reached, the creditor should give the debtor at least 14 days’ notice of their intention to start court proceedings (unless urgent action is required, for instance, the limitation period is about to expire).
Wall James Chappell is a modern specialist firm of solicitors which can trace its origins in Stourbridge back to 1830. Wall James Chappell specialise in providing high quality advice to both individual and corporate clients.
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