New pre-action protocol for debt claims

Thu 30th Nov 2017

A new pre-action protocol for debt claims came into force on 1 October 2017.

What does it cover?

The Debt PAP applies only to debts owed by sole traders and individuals where none of the other pre-action protocols applies, for example those covering construction and engineering disputes or professional negligence claims. Creditors in regulated sectors also need to bear in mind their own particular regulatory obligations (e.g. a principle, rule or guidance contained in the Financial Conduct Authority’s Handbook) as these take precedence over the protocol if there is any inconsistency between its terms and a specific regulatory obligation. For a quick guide, see our downloadable flowchart here.

The protocol does not apply to sums due from public or limited companies, partnerships, limited liability partnerships or public bodies. The procedures for these ‘business to business’ debts remains the same (see here), but you must be aware that although you may view any sole traders you deal with as a business, you must apply the new regime when you’re chasing them for money.

The protocol’s aims

The protocol aims to encourage early engagement and communication, as well as reasonable and proportionate dealings between creditors and debtors. It is designed to identify whether there are actually any issues over a debt, promote resolution without the need for court proceedings and help the efficient management of cases where proceedings cannot be avoided.

What’s new?

Click here to read the full new protocol. In short, it:

  • Extends the time for debtors to reply to letters of claim to 30 days
  • Specifies the particular content for letters of claim
  • Stipulates that the Information Sheet (in Annex 1) must be sent with letters of claim
  • Requires debtors to respond on the standard Reply Form (also in Annex 1) and provide financial information (using a form such as the example in Annex 2) to support any requests for time to pay or other proposals they may make
  • Provides for a ‘stock take’ before proceedings are issued to try and avoid them, or narrow the issues that they will address
  • Gives debtors who respond to letters of claim but with whom terms cannot be agreed the right to at least 14 days’ notice of proceedings are issued

The protocol may well feel overly perceptive and something of a ‘sledge hammer to crack a nut’. However, bear in mind however that whilst it may seem like one for smaller cases, paragraph 2.1(c) makes it clear that a “reasonable and proportionate” approach is required which does not run up costs which bear no relationship to the amount being claimed.

Regardless of the size of the case, it is important to remember that the court will take into account compliance with the protocol’s terms when it considers costs, and ignoring it may well lead to adverse costs consequences, even on the small claims track.


Requests for documents and pre-action disclosure require some care. Early disclosure and the timely provision of information can certainly help resolve disputes and get debts paid, but the process needs to be managed carefully to avoid debtors abusing the process.

Creditors are given 30 days to deal with requests for documents and information, but in my view, the sooner information is sent the better to stop any dispute dragging on and bring it to a head more quickly, so you can take a view on how you want to proceed if it cannot be resolved.

Paragraph 5 says that documents and information “must” be provided if they are asked for but this should be read in light of paragraph 2.1(c)’s provisions on costs and proportionality which can be referred to to help control unreasonable requests.

Alternative Dispute Resolution

ADR can be as straight forward as a without prejudice telephone call or meeting. It doesn’t have to mean a formal mediation, but care is required in this area because judges can, and do, penalise unreasonable refusals to consider ADR in costs.

Recording settlement terms

Any terms which can be agreed with debtors should be recorded clearly and unambiguously in writing. This can either be done by way of a simple exchange of emails or letters which spells out what each side has to do/is giving up under the terms of the agreement.

From a tactical point of view, a formal settlement agreement is often a sensible investment in a case of any value or complexity, particularly where payments are being made over time or guarantees are involved.

Having a dedicated settlement agreement can also make enforcing the terms of a settlement very much easier. If a debtor defaults on its terms you will be enforcing the terms of the settlement, rather than the previous underlying dispute which usually gives a debtor very little, if any, scope to defend an enforcement claim.

Next steps

  • Download our PAP flowchart here
  • Consider factoring in the new 30 day response period into your credit control procedures and think about triggering the protocol earlier than you might currently do to take account of the extra time debtors are going to have to respond and the resulting potential for this.
  • Train your credit controllers/finance team on the new requirements
  • Produce standard letters that comply with the protocol
  • Ensure your account opening/sales procedures identify sole traders and individual customers so you follow the right route for them if they don’t pay

Click here to find out about our Debt Recovery Scheme which provides quick, fixed price options for letters of claim and litigation that you can easily bolt on to your own procedures.


If you would like more information or advice relating to this article or a Commercial Litigation & Dispute Resolution law matter, please do not hesitate to contact Simon Walsh on 01727 798085.

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Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them alone. You are recommended to obtain specific advice in respect of individual cases.