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Automation Reduces Risk of The Pre-Action Protocol for Debt Claims Non-compliance article image

Automation Reduces Risk of The Pre-Action Protocol for Debt Claims Non-compliance

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The latest revision to the Pre-action Protocol for Debt Claims (PAP) will come into force on 1st October 2017. The PAP applies to any business (including sole traders and public bodies) claiming payment of a debt from an individual and describes the conduct that the Court will expect from those parties prior to issuing a Claim Form.  It aims to enable the parties to resolve the matter without the need to start court proceedings and encourage the parties to act in a reasonable and proportionate manner in all dealings with one another. This revision requires the attention of law firms servicing the debt recovery sector.

To ensure that the PAP is complied with, (given that the Protocol is heavily procedure-based), automation of processes is crucial. Take the Letter Before Claims (LBC) that solicitors acting on behalf of creditors will be required to send to debtors before proceedings with specified requirements and enclosures. The LBC needs to include a fair amount of detail – everything from the amount of debt, whether interest or other charges are continuing; agreement details such as date, parties to, that a copy can be requested; assigned debts – details of the original debt and creditor, when it was assigned and to whom; instalments being offered or paid with explanation of why the offer is not acceptable and why proceedings are being considered; payment options; and address to send the Reply Form. Manually, this is an administratively heavy and time consuming exercise. However, by automating the processes surrounding these tasks in their case management systems, law firms can easily comply.

Similarly, with regards to enclosures, with the appropriate workflows in the case management system, it becomes easy to create a statement of accounts or calculate interest and charges. The LBC must state the interest and charges since the statement was issued to bring it up to date. Where no statements have been provided, the LBC generated by firms must state the amount of interest and charges imposed since the debt was incurred. Automating such calculations makes creation of the LBC as fail-safe as possible. Other enclosures such as Information Sheet, Reply Form and Financial Statement Form can all be generated from within the case management system.

Also, based on the timeline of the various processes, reminders and schedules can be built in to ensure that the Debt Claim is suitably closed. For example, an automated reminder that alerts a solicitor that the response from the debtor hasn't been received within the stipulated 30 days, the firm can automatically issue the debt claim after the giving of any additional notice. In fact, the case management system can pull through the court documents automatically, with the relevant data that exists within the solution. On the other hand, if the firm receives the Reply Form within 30 days, the automated processes initiate the next steps for Debt Claims – be it allowing extra time to the debtors to make payments or indeed reaching an agreement for income/expenditure-based instalments.

Leveraging automation offered by the case management systems is the most efficient, effective and error-proof way of complying with PAP for Debt Claims. It ensures customer satisfaction for the creditors being represented by the firm and indeed provides a reasonable approach from the perspective of debtors too – which is essentially the objective of this legislation. Most importantly, an automation-led approach eliminates risks as the system offers built-in checks and balances to ensure the firm is complying with the legislation. I say this with conviction and based on experience – all the necessary workflows for PAP for Debt Claims are already built in our Visualfiles case management system.

About the Author:

Ann Lloyd handles a wide range of contentious asset finance and consumer credit matters, including satisfactory quality and title disputes, wrongful interference claims and the enforceability of consumer credit agreements, both regulated and unregulated. Ann also deals with defended mortgage cases for commercial mortgage lenders and handles business and personal banking cases including the recovery of secured and unsecured facilities and shortfalls.

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