If you want to sue a customer for unpaid bills you’ll have to follow new guidelines before going to court, but not in every case. In what situations do the new rules apply and what extra steps must you take?

New protocol

When all the usual attempts have failed the last resort for collecting overdue debts from your customers is to take them to court. But since 1 October 2017 you’ll first be expected to follow the latest pre-action protocol for debt claims. This sets out the steps the court will expect you to take before your case can go ahead.

Tip. The new protocol doesn’t apply to business-to-business debts except where the person owing you money is a sole trader (see below).

What debts are covered?

The new protocol only applies where:

• the debt relates to your business, whether you trade through a company, partnership or are a sole trader
• the person owing the money is an individual, or if it’s a business it’s run by a sole trader; and
• no other debt protocol applies, e.g. if your business is regulated by the Financial Conduct Authority, its debt protocol takes precedence.

Letter before claim

The revised protocol still requires a letter before claim (LBC), but now gives your customer more time to respond - 30 days. Other changes to the LBC are that it must include:

• details of the contract, i.e. when and with whom it was made
• an offer to provide copies of written contracts on request; plus
• an up to date statement of account detailing the interest and charges applied; or
• the most recently available statement of account showing any added interest.

You should also enclose a reply form and information sheet in the format set out in the updated protocol (see The next step ).

Tip. If the customer doesn’t respond to the LBC within 30 days you can make your claim to the court.

Further steps if a reply is made

In most cases the customer will reply, and the protocol sets out what steps you should then take depending on how they have responded.

A disputed claim

If your customer disputes the debt wholly or partly, there are other steps you must take before going to court (see The next step ). If they owe the money but can’t pay immediately, you must consider payment terms.

Time to pay

If your customer asks for time to pay you don’t have to accept anything unreasonable, but bear in mind that courts are often generous to debtors, so it’s better to agree terms without the rigmarole of court action. You can insist they provide details of their income and outgoings so you can agree a fair deal; the protocol provides a form you can use for this. If you don’t accept the customer’s offer to pay over time, you must write to them and explain why before you can proceed to court.

The Next Step - Downloads: Pre-action Protocol Summary - Disputed Claim Step Summary

The guidelines only apply to customers who are individuals, i.e. not to business customers unless they are sole traders. You must now allow a longer period (30 days) for a customer to respond to your letter threatening court action, and provide them with an up-to-date statement of account showing interest, where applicable.