Letter Before Action
A Letter Before Action or, in formal terms, a Letter Before Claim is a letter warning your debtor that if they do not settle the debt within a specified time, usually 7-days, then you will issue legal proceedings against the debtor. An LBA serves two purposes. It is an effective debt recovery tool that often results in payment. It makes the debtor aware of Pre-Action Protocol, giving them a final opportunity to dispute the debt.
You can issue an LBA yourself using a Letter Before Action template. However, an LBA professionally written and issued by a third party would be considerably more effective and more likely to result in payment. Debt Recovery Solicitors charge a fee to issue a Letter Before Claim. However, there is an entirely cost-free alternative. Advocate’s free debt recovery service includes the issue of an expertly structured and compliant Letter Before Claim specific to the debt to be recovered. An LBA issued by Advocate includes a claim for debt recovery costs in accordance with a creditor’s entitlement under late payment legislation, which enables us to offer our clients a free service.
To increase the effectiveness of a Letter Before Action Advocate, contact the debtor by email and telephone during the 7-day notice period of the LBA. Our success rate is over 80%, and if we are unsuccessful in recovering payment of the debt, there is no charge to the creditor. In unpaid cases, we can, if you wish, issue legal proceedings on your behalf through our Debt Recovery Solicitors
Do you have to send a Letter Before Claim Before Taking a Debtor to Court?
A Letter Before must be issued before taking legal action to comply with Pre-Action Protocols. When a debt is disputed, the Court will expect both the Claimant and Defendant to have complied with the relevant Pre-Action Protocol before the proceedings were issued. When giving directions on the management of the proceedings, the Court will consider any non-compliance specifically in orders for costs. The Court is unlikely to be concerned with technical or minor infringements. However, if either party has not complied in substance with Pre-Action Protocols, there could be severe financial repercussions.
In layman’s terms, if you issue a compliant Letter Before Claim advising the debtor on the relevant Pre-Action Protocol, and they fail to pay or dispute the debt. You can go ahead and issue Court proceedings safe in the knowledge that the Court would look unfavourably on the debtor if they then raised a dispute once the claim had been issued.
What are Pre-Action Protocols?
They are designed to govern and guide the parties on what steps they must take before issuing a claim in Court. Non-compliance with Pre-Action Protocols could result in either the Claimant or Defendant being later issued with a costs order as a punishment by the Court.
The parties should act reasonably, attempt to resolve any differences and exchange relevant documents and information before Court proceedings are issued. Pre-Action Protocols aim to avoid lengthy and costly disputed Court proceedings by encouraging the parties to reach an agreement and resolve any disputes by other means.
What Should be Included in a Letter Before Claim Template?
- It is essential to check that you are using the debtor’s correct address. If that is a trading address, you should also send a copy of the letter to the address registered at Companies House. Do not give the debtor give the excuse that they did not receive the LBA.
- Send a copy of the letter by email. If the email address you have is for a person, check the business website and check if any other email addresses are available and email copies to each address. State on the letter: By Post and Email to example@debtor.com You only need to use one email address on the letter.
- Always use a reference number that is associated with the overdue account. This could be the customer account number, a purchase order number or an invoice number.
- Enclose a copy of the unpaid invoices or a current statement of account.
- Ensure the letter is correctly dated so that the deadline for payment is clear.
- The purpose of the letter should be clear at the outset. For example, RE: Overdue Invoices issued by Creditor Limited
- Specify the total amount you are requesting payment of, including VAT.
- The relevant Pre-Action Protocol must be prominently displayed so that the debtor is aware of what they are required to do if they dispute the debt. You can include a link https://www.justice.gov.uk/courts/procedure-rules/civil/rules/pd_pre-action_conduct
- Advise the debtor that the total amount they must pay could increase if late payment compensation and interest are applied. You can refer the debtor to The Late Payment of Commercial Debts Act. You could also supply a schedule with the Letter Before Action to show a breakdown of additional charges that could be claimed.
- Make clear the consequences of non-payment, the action you intend to take and the date you intend to take the action.
- Advise that if Court proceedings are issued against the debtor, and they still do not pay, a County Court Judgment would be registered against them. The CCJ would remain on the register for six years, and it would affect both the debtors’ credit rating and ability to obtain credit.
- Include details on the payment methods you will accept.