The purpose of the procedure is to attempt to resolve outstanding debts without the need to go to Court. Early engagement and communication between the parties is essential.
The new rules will apply to any creditor business seeking to recover payment of a debt from an individual or sole trader and it does not apply to business-to-business debts. The debtors should be provided with sufficient information by way of a letter to enable them to obtain advice on their position prior to issuing a claim and an up to date statement of account and a copy of the Information Sheet and Reply Form and A Financial Statement Form.
Businesses will need to ensure that their current pre-action processes and systems for debts owed by individuals and sole traders are reviewed and made compliant with the new procedure by 1 October 2017. Business will need to ensure better preservation and storage of relevant documents in their systems. Given the new 30 day period for response by a debtor, debt recovery is set to become a slower process. This will add further frustration to businesses. It is also, with the additional documentation that needs to be provided, likely to become more burdensome in terms of processes and consequently more expensive.