The new protocol came into force on 1 October 2017 and applies to any business claiming payment of a debt from an individual.  It does not apply to business to business debts unless the debtor is a sole trader. 

The Purpose of the Protocol

As with other pre-action protocols, the PAPDC encourages the parties to engage with each other at an early stage to communicate and exchange sufficient information about the matter to help clarify the issues in dispute and promote the chances of settling the matter prior to the need to commence formal court proceedings.

Except in cases where proceedings need to be issued urgently, parties should comply with the PAPDC as a failure to do so is likely to result in costs sanctions payable by the party at fault even where that party is ultimately successful in its action. 

The Creditors’ Obligations

Before commencing formal court proceedings, the creditor should send the debtor a letter of claim by post which sets out the following:

·     The amount of the debt;
·     The interest or other charges claimed;
·     How the debt arises (e.g. via an oral or written agreement, what was agreed, when, how and with whom)
·     Where the debt arises from a written agreement a copy must be provided or details of that agreement together with confirmation that a copy can be provided by the creditor on request;
·     If the debt has been assigned, details concerning the assignment;
·     An explanation as to why any offer by the debtor to pay via way of instalments is not acceptable;
·     Details of how the debt can be paid (e.g. a method and address for payment and what the debtor can do if they want to discuss payment options);
·     Address to which the completed Information Sheet and Reply Form should be sent;
·     Up to date statement of account including details of interest and other charges as referenced above
·     A financial statement form (see Annex 2 of the PAPDC by way of example).

Whilst seemingly quite archaic, the requirement to send the letter of claim by post is clear and email may only be used if the debtor has explicitly requested that the letter of claim be served in this way.

The Debtors’ Obligations

The debtor should use the Reply Form at Annex 1 of the PAPDC to respond within 30 days and can request copies of any documents from the creditor which it considers to be relevant.  Such documents must then be provided, or a reasonable explanation given as to why the creditor considers them to irrelevant, within 30 days.  
 
 
When can Court proceedings be issued?

If the debtor indicates it is taking legal advice a reasonable period of time must be provided for that advice to be obtained and the debtor should not start court proceedings less than 30 days from receipt of the completed Reply Form or, if later, 30 days from the provision of any documents by the creditor to the debtor that have been requested.
If the debtor does not reply to the letter of claim within 30 days of the date of the letter, the creditor must provide a further 14 days’ notice to the debtor of its intention to start court proceedings before it is entitled to do so.

Comment

Whilst it is hoped that the PAPDC will facilitate the early and amicable resolution of debt claims it will undoubtedly increase both the time and costs for a creditor prior to the issuing of proceedings.  Whereas previously, in seemingly straightforward cases, a debtor could reasonably have demanded a full response and/or payment within 14 days, the PAPDC significantly extends that period regardless of the value of the debt or the complexity of the issues. 
It seems clear that the PAPDC has been written with the protection of the debtor in mind and makes no allowance or provision for circumstances where a creditor has already previously provided a debtor with details of the debt and time to consider the matter.  Ultimately if a debtor fails to engage in the process it could be argued that the PAPDC has simply imposed an extra administrative burden and a 30 day waiting period before formal action can be taken.
Those who regularly provide credit to individuals or sole traders should ensure that they can readily provide evidence of the debt, and the terms of repayment, if needed and advance compliant correspondence with the debtor promptly. Such action will enable recovery to take place as quickly as possible in a way that minimises exposure to the creditors’ business.