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Dealing with debtors

View profile for Giles Dobson
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Being in debt and being owed a debt can place significant stress on a person’s personal relationships, professional life and even their health.  However, the situation can be worsened if relevant protocols are not followed by the person owed a debt and if the debtor feels they are treated unfairly by the people they owe money to.

Under English law a person owed a debt, a creditor, has a right to contact the debtor in order to recover unpaid debts.  The permitted methods of contact include email, letters, phone calls or even visiting the debtor’s home.  However, the law also requires that they act within certain protocols and codes of conduct when pursuing that debt.  If they deviate from what is considered to be reasonable, this can cause difficulty down the line.  Not only can the debtor launch an official complaint to the Financial Conduct Authority, most likely in relation to a debt recovery agency.  If the new pre-action protocol for debt claims which came into force on 1 October 2017 is not followed, a Court can impose sanctions if the claim is later pursued before them, including the creditor paying the debtor’s costs.

The protocol applies to any business including sole traders claiming payment for a debt from an individual or a sole trader.  This does not therefore include business to business transactions other than between sole traders.

The main aim of the protocol is to put the onus on the parties to resolve debt disputes without resorting to Court proceedings and encouraging the use of mediation or other forms of alternative dispute resolution while also exchanging information early on in the process to assist both parties to understand each other’s case.

Initially, a detailed letter of claim must be sent by the creditor to the debtor allowing 30 days to respond.  If the debtor responds to the claim in this window requesting any copy documentation, this must be provided within 30 days of the request.  If any time to pay is requested, the party should attempt to agree payment via alternative dispute resolution.

Where the debtor informs the creditor they are seeking advice, a reasonable period should be provided and then the matter considered upon receipt of a substantive response.

Proceedings are not allowed to be issued until 30 days after a detailed reply is received or once the creditor has provided 14 days’ notice of their intention to issue proceedings; whichever is the later.

Alternative dispute resolution by numerous methods including mediation, roundtable meetings or solicitor correspondence are expected to be considered for at least 30 days in all cases where a response is received from the debtor.

Previously, a creditor needed only to comply with a general practice direction on pre-action conduct under which there was no requirement to attempt any form of alternative dispute resolution prior to issuing a claim.

It remains to be seen as to whether this will ultimately assist the process of debt recovery or further delay debts rightfully being paid and cause cashflow problems for those legitimately owed money.  No cases have reached the Court as to what sanctions will apply should the protocol be missed but it is likely to form the basis of either a stay of debt recovery proceedings until alternative dispute resolution has been pursued or for the creditor to pay the debtor’s costs whatever the outcome.

If you are owed money or have received a protocol letter, it is always a good idea to seek the service of a solicitor who will be able to identify the issue, consider alternative dispute resolution or deal with issues arising out of non-compliance with the protocol.

If you would like to get in touch about any issues raised in this article please email our new enquiry team at or call 01474 546013.