More about debt collection

Debt collection is the process of pursuing payments of overdue invoices/debts owed by individuals or businesses.

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What is debt collection?

The process of collecting debts is undertaken in three distinct steps:

  • Letter Before Action
  • Proceedings followed by Judgment
  • Enforcement

Letters Before Action: Before issuing any legal proceedings, a letter before action should be sent to a debtor.

Proceedings: If you send a letter before action to your debtor but do not receive a response (or satisfactory response) then the next step is to issue proceedings in the County Court. The debtor receives a Claim Form with attached details (a Particulars of Claim) requiring them to pay the debt, plus interest and costs within 14 days. The person or entity owed money is called a Claimant and the debtor is called the Defendant.

Court Issue: The Court will issue and serve the claim and tell us when they have done so. The Court will also tell us the date by which the Defendant must respond*.

Response: The debtor can do one of three things – respond admitting the debt or part of it; file an acknowledgment of service followed by a Defence; ignore the proceedings entirely. County Court Judgment (“CCJ”): This is a court order that entitles the Claimant to enforce the amount due against the Defendant. A CCJ can be obtained immediately after the date above* if there is no response. This is called a default judgment. The CCJ is the final decision by the Court which gives you the power to take enforcement action to collect the debt, although in exceptional circumstances the Defendant may apply to the Court to set aside the judgment and take part in the proceedings

Enforcement: Once a CCJ has been obtained, it is then possible to “enforce” that debt immediately.

What are our costs and how much do I have to pay to the Court?

Late Payment of Commercial Debts (Interest) Act 1998

The Act only applies to the commercial supply of goods and services where you don’t have any provision for interest in your terms of business. In other words, it only applies to debts between businesses (B2B).  The Late Payment of Commercial Debts (Interest) Act 1998 gives you the ability to claim back the costs involved with recovering your debts. Our Late Payment Demand letter requires the debtor to pay the debt owed within seven days and also enables you to recover the costs of using our services at various stages of the collection process.

But under the Act you can claim compensation and additional interest on each of your outstanding invoices. You are entitled to claim between £40 to £100 in compensation (depending on the amount due) and interest at 8% above the Bank of England’s base rate (by way of example if the Bank of England base rate is 4.25% then the total interest payable is calculated at 12.25%. This is all in addition to the original debt amount and legal costs.

The Late Payment of Commercial Debts (Interest) Act 1998 has two purposes for debt recovery.  It not only seeks to compensate creditors for the late payment of debts but is also intended to deter late payment.

Other types of interest which can be claimed

If you have terms and conditions, they should at the very least contain terms as to payment of interest for late payment (“contractual interest”). This can be at any rate which the parties agree or at the rate in your terms, typically up to 10% above the Bank of England base rate.

If neither of the above applies, we will claim interest pursuant to The County Courts Act 1984 which allows an interest claim at 8% per annum.

If you haven’t got terms and conditions or want to update them contact our commercial team.

Litigation and dispute resolution team

For more information, please contact our head of litigation, Joanne Davies on 01543 420000 or jdavies@keelys.co.uk.

Debt Collection Services

  • Thank Patrick for his proactive approach …successfully avoiding us getting involved in spiralling legal costs, by being alert to legal deadlines, which we very much appreciated.

  • Thank you once again for your persistence and patient support.

  • Thank you very much for all your help and support with this matter.

    In the nicest possible way, I hope we won't be in touch again for a while, but it's very nice to know you are there as and when needed.

  • Thank you for all the work that you have put in on my behalf and the excellent result that you have obtained for me. Very impressed with your  professionalism.

  • Many thanks for your skill, patience and professionalism in helping me to move forward from this and bring closure to a difficult situation.

  • I would like to express my heartfelt gratitude for your exceptional guidance throughout. Joanne, your call on Friday, following the proceedings, was truly invaluable. Both you and [Counsel] displayed remarkable professionalism and support. Your collective assurance throughout the entire journey gave us confidence in the strength of our case.

  • We both agree that it is an extraordinary letter that should have the highest praise for its research, content and factual eloquence.

  • Elly has been brilliant and made it very clear and simple for us!

  • (After 3 days in court) “Jo thank-you for this week, you were brilliant, we both felt like we had a best friend who had our backs, which meant a lot.

  • Thank you for your work and ongoing help, I’m very grateful to have you by my side.

  • Thank you for your assistance in this matter Jo, it’s been enjoyable working with you.

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