A creditor has to send a Letter Before Claim before they take you to court for a debt in England, Wales and Northern Ireland. This letter may be headed something like Letter Before Action or Notice of Pending Legal Action or even Letter of Claim.
This is good news for people with debts! You have the right to ask for more details and to take debt advice before it goes to court.
Before these new rules, many people just accepted they were going to get a CCJ. Often there may have been a good reason why they shouldn’t… getting more information will help you find out if you have a good defence to a CCJ.
What debts does this cover?
The new Debt Protocol must be used by any business who is taking an individual, including someone who is self-employed, to the County Court claiming payment of a debt.
It applies to all unsecured loans, credit cards and catalogues, overdrafts, utility and mobile bills, and parking tickets from privately run car parks. It also applies to less standard situations – if you are being sued by a builder, or by a landlord for example because they say you owe them money.
It does not apply to:
- “government debts” such as council tax arrears and parking tickets from the council;
- an individual who wants to sue a business or another person;
- anything which is covered by a different Protocol such as mortgage arrears.
What must be in the Letter Before Claim/Action
The new Letter Before Claim/Action has to be sent by the creditor before court action is started. You can check yours is in the right format against the official version here: Pre Action Protocol (PAP) for Debt Claims.
- a cover letter from the creditor. This doesn’t have set words but it has to include certain information, see below.
- a Statement of Account for the debt. This may be left out if the details are given in the cover letter.
- an Information Sheet.
- a Reply Form. See below for how to complete this.
- a Financial Statement.
What the cover letter has to say
- the amount owed
- if interest and charges are being added;
- details about the written agreement (its date and who the parties were) if there was one. It should also say that you can ask for a copy of the agreement – more about this below;
- if the debt has been assigned (that’s legal jargon for “sold”), the letter should give the date of the assignment and who it was assigned to;
- if you are making payments, or have offered payments, the letter should explain why a court claim is being considered.
If it doesn’t look right…
If something is missing or isn’t using the right words, contact National Debtline (see below) as soon as possible. Also do this if you are sent a Claim Form for a debt and they haven’t sent you the Letter Before Claim described here.
Section 1 of the Reply Form – Do you owe the money?
This sounds a simple question but it isn’t… although you may have borrowed some money what matters is whether the creditor can win a legal case.
There is a lot of legal protection for consumers. The creditor has to be able to prove his case and have taken action within the time the law says. So look at the possible defences below and don’t end up with a CCJ if it’s not necessary!
There are four boxes – only tick one:
- Box A – I agree I owe the debt. Only tick this if none of the possible defences below apply.
- Box B – I owe some of the debt, but not all of it. Tick this if none of the possible defences apply AND you are sure of the numbers and don’t need advice – otherwise go for Box C.
- Box C – I don’t know whether I owe the debt. This lets you ask for more information and gives extra time to take advice.
- Box D – I dispute the debt. Tick this if you are sure exactly why you dispute the debt, otherwise go for Box C.
“But I don’t want court costs to be added”
All you need to do at this stage is ask for extra information and then think whether to talk to an advisor. When you know the facts, you can choose to pay the debt (or offer a monthly amount) if you want. At this point court costs will not have been added. I’m not encouraging you to take a Claim to court unless you have a reasonable chance of winning!
“I’m scared of going to court”
Court is a long way off (unless you ignore this form). There is a section on the Reply Form for you to ask for more information. If you do this, the creditor may decide not go to court eg if they can’t find the written agreement for your old catalogue debt.
“I can’t risk a CCJ!”
This is not a reason to just pay the money now … if you ask for more information, the case may never come to court. If it does, you may win. Even if you lose in court, the CCJ will disappear completely from your credit record if you pay it within a month. Don’t be bullied into paying something that isn’t right because you are worried about your credit record.
Read all of these, you may have more than one defence. You don’t have to choose “the best one”, you can increase your chance of winning by using all the ones that apply to you.
You never owed this money
Don’t ignore this Letter Before Claim even if you know the debt isn’t yours … it is better to sort this out now and stop it ever getting to court. So tick Box D and say why you never owed this money. “I have never had a contract with Vodafone”, “I sold the car before the date of the parking ticket” etc, use a separate sheet if necessary. Also complete section 3 as you may want to take debt advice and ask the creditor to supply a copy of the written agreement in section 4.
The amount is wrong
If you are confident of your numbers, tick Box B (or D if you have repaid the whole debt, including interest and charges). Otherwise tick Box C for more information because you need a complete Statement of Account for the debt showing interest, charges and your payments and also the written agreement.
The debt may be statute barred
If you have made a payment in the last six years the debt isn’t statute barred and this is not a possible defence for you.
If you haven’t made a payment for more than six years the debt may be statute barred. If it is, you have an excellent defence because the creditor has delayed too long in starting court action.
But see Questions about statute barred debt for details. This defence has got harder from January 2019 when a court case decided that the date of a Default Notice was important for some debts including some credit card, catalogues and loans. complicated.
If you are sure a debt is statute barred – perhaps you have already taken debt advice – you could tick Box D and state this. But otherwise tick Box C for more information and ask for a full Statement of Account and the written agreement for the debt.
Important: if there is any chance at all that your debt is close to being statute barred, you must NOT tick Box A and be careful on the Reply Form to refer to “the alleged debt” not “the debt”. Otherwise you may be acknowledging the debt.
The creditor doesn’t have the written agreement
This one matters if you owe money under a credit agreement (loans, credit cards etc) because you have the right under the Consumer Credit Act 1974 to ask for a copy of the agreement, which has to contain certain information. If the creditor cannot produce the CCA agreement, they cannot take court action until they do.
This is more likely to work with older accounts but it is always worth asking for. The CCA agreement will also help with checking the amount is correct and that the debt is not unfair. So tick Box C and ask for it.
The debt was included in insolvency
If the debt was included in your bankruptcy, IVA or Debt Relief Order, tick box D and write in the type of insolvency, the date it started and the date it completed, if it has.
The original credit was unaffordable
If you couldn’t afford the credit you were given, consider making an affordability complaint to the original lender, not the current creditor. This is very common for payday loans.
Affordability complaints are described in How to ask for a payday loan refund. Go straight to a full complaint, don’t ask for a list of your loans first, and send the complaint to the Financial Ombudsman immediately if it is rejected. If the lender tells you to talk to the debt collector about this last debt, say you want the lender to consider all your loans or you will send the full case to the Ombudsman.
If you do this, complete Box D on the Reply Form and say that you have sent an affordability complaint to the original lender. The debt collector should not start court action until your complaint is sorted. Also complete section 3 – you may want debt advice – and section 4 to ask for the written agreement.
The debt is unfair for some other reason
I can’t list all the possibilities! Some examples: you were less than 18 when you took out the debt, the firm may have supplied you with poor quality goods or an inadequate service, you may have cancelled the agreement within the specified time, the firm owes you some other money etc.
If you are confident, go for Box D. Otherwise, talk to a debt adviser. If you can’t do this quickly, tick Box C to give you more time and to ask for any other information.
How to complete sections 2, 3 and 4 of the Reply Form
Section 2: “How will you pay?”
You only have to complete Section Two if you ticked Box A or Box B – agreeing you owe some money. If you ticked C or D, you aren’t admitting you owe the money and you shouldn’t complete this or provide a budget sheet.
Your options are to pay it all (Box E) or offer instalments (Box F). If you can repay the whole amount without a problem, this is usually best as it gets rid of any possibility of a CCJ. But don’t borrow more money or get behind with essential bills to do this.
Monthly payments need to be affordable:
- don’t panic and offer too much, because you have to be able to keep on paying it;
- if you are currently in a DMP, put down the amount that is being paid to the creditor. Ask your DMP firm for a budget sheet you can enclose with your Reply Form;
- to draw up a budget yourself, use National Debtline’s Your Budget tool. That suggests how much you should offer to this particular debt and lets you print a summary to send with the Reply Form.
- if you are unsure, talk to National Debtline.
You don’t have to complete the Financial Statement sent with the letter if you are enclosing another budget sheet or if you are ticking box C or D.
Section 3: Getting debt advice
You may be planning on getting advice but need to see the extra information you are asking for first. This won’t be a problem, because the creditor has to give you 30 more days after they have sent you the information you have asked for. Many people will want to write something like this in Box G:
I intend to get debt advice about this debt and my budget.
I can’t do this until I have received the information I am asking for.
Section 4: What information are you providing? What information do you need?
Box H asks what information you are providing.
- If you are admitting the debt and offering monthly payments (Box B) this should include a budget sheet, see above.
- If you are disputing the debt (Box D) there may be information that backs up what you are saying, but often there may not be.
- If you are asking for more information yourself (Box C) there is no need to provide any extra details yourself until you have received this and know the facts.
Box I asks what information you need. Helpfully it gives some examples:
A copy of the written contract for the debt; A full statement of account, including details of all interest and charges included on the outstanding balance of the debt, explaining how they have been calculated, and any payments already made toward the debt; a calculation of the interest claimed; the annual or daily rate of interest; a description of the nature and amount of any administrative charges included in the debt; a copy of the notice of assignment of the debt.
If you have a credit debt (any form of loan, overdraft, credit card, catalogue, hire purchase) I suggest you ask for all of the above. Also ask for a copy of the Default Notice. And if your debt has been sold from one debt collector to another, put notices of assignment in the plural as you want them all.
For “consumer” problems about goods or services it is less clear what to ask for. Sometimes there may be no written agreement. So ask for anything that you think will help your case.
The process of replying
If you do not send the Reply Form back in 30 days, the creditor can go to court and the next letter is likely to be a Claim Form.
30 days may sound like a long while but don’t leave it until the last minute to decide what to do, because you may want to talk to a debt advisor before completing the form. Also make sure your reply is posted well before the end of the 30 days to allow for weekends and any delay.
This is a standard form. If you lose it or want to start again, print out the pages from the Debt Protocol link above.
Take a copy of your reply before you send it, by scanning it or taking a photograph.
Send the letter by recorded delivery to the address given in the cover letter. Make sure you use this address, probably of a legal firm, not some other address for the creditor.
Places to get help
Who it’s best to talk to depends on your case and what you want to ask, but here are some general pointers.
National Debtline National Debtline can be contacted by phone 0808 808 4000 or webchat. This can be easier than trying to get a local appointment. They also have a good library of factsheets on court issues.
Citizens Advice, Law Centres Face-to-face advice is good if you have documents you would like checked or for a consumer issue.
Legal Beagles This is a forum but many people posting are very knowledgeable. It has the advantage you can use it in the evenings and at the weekend.
Solicitors You are unlikely to need a solicitor to help you complete this Reply Form if you are just asking for more information.