3. Traditional Debt Collection Models/Processes
In-house collection processes
Typically telephone and letter ‘soft collection’ techniques
• Benefits: Customer retention
• Disadvantages: Not effective in all cases
4. Traditional Debt Collection Models/Processes
External Debt Collection Agencies (DCA’s)
External ‘soft collections’; potentially including field visit
• Benefits: Removes the ‘customer service’ approach associated with
in-house collections, can help to prioritise debt
• Disadvantages: Unrecoverable costs; most DCA’s have very little
‘leverage’
5. Traditional Debt Collection Models/Processes
Litigation
Issuing legal proceedings against the customer
• Benefits: Will encourage most debtors to address the issue
• Disadvantages: Can be costly for the creditor if misapplied as a
process; many claimants will also neglect to enforce judgments
6. Which process is right for your business?
How much time/resource should be allocated to internal
collection endeavours?
If an external DCA is used, what is their remit/agreed service
levels?
What are the options for the business where internal and
external ‘soft’ collections are unsuccessful?
7. Considering suitability of litigation
Will depend upon:
• Type/provenance of debt – as regards likelihood of matters being
defended
• Amount (average level) of debt
• Profile of debtor – as regards enforceability
9. Brief overview of litigation process
Ministry of Justice Statistics (Q3 2012)
• Only 2.96% cases proceeded to trial
• Of 368,890 claims issued, 314,259 (85.2%) were undefended
If applied carefully, issuing proceedings against debtors can be a valuable
debt collection tool and need not result in protracted and costly litigation
10. Benefits of litigating
• Many judgments can be obtained without proceeding to court/managing
defences
• Helps to prioritise the debt and may encourage
negotiation/mediation where no such prospect existed
• Not all judgments require enforcement
11. HM Courts Service: Money Claim Online
• Allows county court claims to be issued for fixed sums up to £100,000
• Set up in 2001, part of the Northampton ‘bulk centre’
• MCOL enables a claimant to request a claim online, check the status
of the claim and, where appropriate, request entry of judgment
12.
13.
14.
15. Enforcement Options
• Third Party Debt orders
• High Court Enforcement / Enforcement against goods
• Attachments of earnings (individuals)
• Charging orders against property
• Basis for insolvency
16. High Court Enforcement
Process of enforcing judgments against assets of the Defendant
Any High Court or County Court judgment debt over £600.00 which is not
regulated by the Consumer Credit Act may be enforced in the High Court by
Writ of Fieri Facias (‘Fi Fa’)
Writ of Fi Fa orders/permits an HCEO to recover the judgment debt (plus
costs) or to seize and remove the defendant’s assets
17. High Court Enforcement
Costs and Timeframes
• Court Fee £60.00
• Average turnaround on writ is 14-16 days
• Cost of enforcement action (HCEO) costs are payable by the defendant in
accordance with the High Court Enforcement Officers Regulations (2004)
19. Application of High Court Enforcement
Is the Defendant likely to have assets?
Leverage is the key to successful enforcement
Defendant will need to have assets upon which to attach
•Commercial debtors: stock, vehicles, office equipment, IT equipment
•Individuals: Non-exempt household goods, vehicles
20. Application of High Court Enforcement
Powers of Entry
High Court Enforcement Officers may force entry to commercial premises
Private residential premises are protected and may only force entry where a
walking possession agreement has been made and broken
21. Application of High Court Enforcement
High Court Enforcement is most effective as against a commercial debtor
with trading premises and assets, stock etc.
For commercial debtors, the prospect of seizure, removal and sale of assets
will effectively leave them unable to trade – putting the creditor in a strong
bargaining position
Enforcement against individuals can still be effective but collections by
arrangement are more likely
Conclusions
22. Benefits of High Court Enforcement
• Where successful, the claimant can recover judgment amount, costs and
interest under the writ
• Defendant will be liable for HCEO fees
• Quick, low-cost method of enforcement
• Particularly effective against commercial debtors
23. Conclusions
• Judgment in default can take as little as 21 days and, using MCOL, the
claimant can benefit from reduced issue fees
• High Court Enforcement, when correctly applied, can offer an expedient,
cost-neutral method of enforcing judgments – where necessary!
• Almost all business can benefit from including litigation as part of a debt
collection process
• MCOL can provide a simple means of bringing the issuing of proceedings
‘in-house’; reducing the need to incur legal fees
• Claims are often undefended, making obtaining judgment a simple ‘form
filling’ exercise
25. Burlington Group Service Offering
Outsourced pre-litigation DCA, with field contingent
Litigation services
High Court Enforcement Officers
www.burlingtongroup.com
In house collection processes tend to include letter and telephone. Benefits – if it works, the business gets to retain it’s customer. Works where the customer experiences short term payment difficulties and is able to overcome these. Disadvantages: Will not work with all customer, especially serial offenders and those who are prioritising other debts.
In house collection processes tend to include letter and telephone. Benefits – if it works, the business gets to retain it’s customer. Works where the customer experiences short term payment difficulties and is able to overcome these. Disadvantages: Will not work with all customer, especially serial offenders and those who are prioritising other debts.
In house collection processes tend to include letter and telephone. Benefits – if it works, the business gets to retain it’s customer. Works where the customer experiences short term payment difficulties and is able to overcome these. Disadvantages: Will not work with all customer, especially serial offenders and those who are prioritising other debts.
2.96% Trial
14.81% Defended
Defences
Cost considerations
Merit of defence – if the defence is flawed may be able to open negotiations and settle
If settlement is not possible – may be able to apply for summary judgment – cost?
Allocation questionnaires
Hearing at Def local County Court – most issuers will use agents to attend - cost
