This month has been extraordinary, never before in my 6 years at Master Collections have I experienced so many debtors trying it on with spurious claims and/or misleading statements. I’ve always said cases can be won or lost by good or poor lawyers. My clients pay me to challenge spurious claims and misleading statements, I don’t stand for it and will shoot down any debtor that tries it on with my clients. But it doesn’t stop at debtors, debt collectors too can be guilty of misleading statements and foul play.
In this discussion I demonstrate how a debt collector misleads debtors and is guilty of sending non compliant letters of claim.
Protocol on Pre-Action Conduct
The Civil Procedure Rules govern the conduct and procedure of legal proceedings before and after proceedings have been issued in England and Wales. Indeed the Civil Procedure Rules set out a Protocol on Pre-Action Conduct.
There is a requirement where the creditor is a business and the debtor is an individual, for the former to provide the debtor with information about sources of advice, before proceedings can be issued.
Paragraph 7 of the Practice Direction deals with exchange of information before the start of proceedings and suggests that:
- the letter of claim is sent .
- the debtor should acknowledge the letter within 14 days and give a full response within a reasonable period of time, which for a straightforward undisputed debt is generally 14 days.
- Annex B to the Practice Directions sets out specific information that should be provided before starting proceedings in a debt claim by a claimant who is a business against a defendant who is an individual.
Annex B makes provision for the information a claimant business should provide to the individual debtor and this is that the claimant should:
(1) provide details of how the money can be paid (for example the method of payment and the address to which it can be sent);
(2) state that the defendant can contact the claimant to discuss possible repayment options, and provide the relevant contact details; and
(3) inform the defendant that free independent advice and assistance can be obtained from specialist organisations, details of which should be supplied in the letter.
Failure to comply with the protocol may lead to costs penalties or suspension of legal proceedings.
I have attached a letter above from a debt collector for a Utilities company to a private individual, for legal reasons I have omitted the details of the debt collector, private individual and utility company. The content of the letter offends the Protocol on Pre-Action Conduct on several counts:-
(i) the letter does not confirm a time limit at all for the debtor to respond in order to avoid the issue of legal proceedings.
(ii) the letter does not clearly set out how the outstanding balance of £2,637.41 has been incurred by the debtor.
(iii) although the letter has images of credit and debit card providers in the margin there are no details of how the money can be paid.
(iv) the letter does not confirm that the debtor is entitled to free independent advice and assistance.
(v) the letter does not confirm the contact details of specialist organisations where free independent advice and assistance can be obtained from.
In the second paragraph of the letter the debt collector states:
‘The original invoice balance of £2144.24 has incurred, due to non payment, a recovery administration charge of 0.23% (£493.17) for which you are also now liable’
The information is incorrect because 0.23% of £2144.24 is not £493.17 but £4.93. Even if it were correct the debt collector can only claim an administration charge or debt collection costs if they can prove the debtor agreed to the same.
In paragraph 4 the debt collector lists Bankruptcy as an enforcement action, technically bankruptcy is not an enforcement action because unlike the other actions it does not secure the debt or force an event to collect the same. Indeed a debtor may welcome bankruptcy because they are insolvent and can not settle debts as and when they fall due.
In the final paragraph the debt collector puts the debtor under the false impression that in order to arrange an affordable payment plan the debtor needs to contact the debt collector immediately. As above according to the Pre-Action Protocol the debtor has 14 days to respond.
Getting Away with it?
As a result of the letter offending the Protocol on Pre-Action Conduct the debtor is entitled to ignore it because if proceedings are issued the court has power to suspend proceedings to allow the protocol to be followed and/or award costs penalties against the creditor in favour of the debtor.
The problem is that in the words of Michael Caine ‘Not a lot of people know that’, and sometimes debtors who genuinely do not owe the debt or can not afford to pay the same immediately are wrongly encouraged to do so.
If you wish to discuss any of the above or would like my help with drafting compliant letters of claim do not hesitate to contact me on 01920 871547 or e-mail: firstname.lastname@example.org
Carlo Pegna LL.B (Hons), F.Inst.L.Ex, MICM