UK debt collection legal procedures

38.1 United Kingdom
38.1.1 Amicable Phase
38.1.1.1 General
Our collectors try to collect the debt without recourse to legal ac-tion
by telephone and letters. We always try to obtain payment
of the debt in full but will negotiate with you to agree a payment
plan or a settlement figure. In order to support this process in
the UK we must issue a Letter before Claim, which is the start of
the legal process. This is not used in all cases, only those where
the collector considers that the debtor has the ability to pay and
needs some strong evidence of our intentions. In England and
Wales we can issue a copy of the proceedings that will be sent
to the court in the event that the debtor fails to make payment.
Where there is a dispute, we aim to reach an amicable solution
between creditor and debtor. We do this by analysing all con-tractual
documents (e.g. signed contracts, orders, confirmations,
invoices and delivery notes as well as standard terms previously
agreed upon). All investigations are completed with the assis-tance
and agreement of our legal team.
38.1.1.2 Local Agent
There is currently no availability for a field service to visit debt-ors
in the UK.
38.1.1.3 Interest
Late Payment of Interest Act
This act sets out to assist businesses faced with late payment
problems. It does this by adding a number of rules to contracts
between businesses. It is important to realise that this legislation
only applies to a commercial debt. It does not apply when one
of the parties is not acting as a business, for example sales to a
private individual/consumer. The debt should be one that has
arisen in the course of business. Both parties should be busi-nesses,
commercial entities or public sector organisations. Inter-est
is claimed at the Bank of England rate currently at 0.5% plus
8%. The rate is listed as the UK clearing bank base lending rate
in the Financial Times and is also known as the repo-rate. The
rate that applies is the rate in-force at the end of the day that the
payment was due.
38 United Kingdom
GDP (2014 EST.)
billion 2,828 $
GDP GROWTH RATE, ESTIMATED 2014
11.5 %
INDUSTRIES
Among the world’s largest and most technologically
advanced producers of machine tools, electric power
equipment, automation equipment, railroad equipment,
shipbuilding, aircraft, motor vehicles and parts, electronics
and communications equipment, metals, chemicals, coal,
petroleum, paper and paper products, food processing,
textiles, clothing, other consumer goods
EXPORTS ANNUAL GROWTH RATE (2014 EST.)
2.2 %
IMPORTS ANNUAL GROWTH RATE (2014 EST.)
1.9 %
SUCCESS RATES (1/2011-12/2013 EST.)
58.79 %
SOURCE: INTERNATIONAL MONETARY FUND,
WORLD ECONOMIC OUTLOOK DATABASE, OCTOBER 2013
ALL DATA IN USD
ATRADIUS COLLECTIONS - INTERNATIONAL DEBT COLLECTION 202 HANDBOOK · MAY 2014
TABLE OF CONTENTS UNITED KINGDOM

38 UNITED KINGDOM
38.1.1.4 Debt Collection Costs
As well as interest, the supplier may also charge an amount to
compensate for the costs of collecting late payments. The amount
of compensation that can be claimed is determined by the amount
outstanding as follows:
Amount Owed Compensation
Up to GBP £999 ...........................GBP £40
GBP £1,000 to £9,999 .................GBP £70
GBP £10,000 and over ................GBP £100
Change made under the Late Payment of Commercial
Debts Regulations 2013 (Regulations) with effect from the
16th March 2013.
A supplier over and above the listed compensation costs may
also claim any “reasonable costs“ incurred in recovering the
debt as compensation.
38.1.1.5 Prescription
The Limitations Act 1980
This outlines the time limit within which a creditor can chase a
debtor for outstanding debts. This Act only applies when no con-tact
has been made between the creditor and the debtor within
the given time limit and only applies to residents of England and
Wales. Creditors are given a fixed period of 6 years to chase their
debtors, which is outlined in the Limitations Act 1980, and after
this time it is no longer possible to pursue their debt.
38.1.1.6 Accepted and Most Common
Payment Methods
The UK still operates on payment by cheque, although the pre-ferred
method is by Bank Transfer. If possible for long running
payment plans we will seek Standing Order or Direct Debit but
there is natural resistance to this by debtors.
38.1.1.7 Types of Companies
There are a number of company types and each has its own par-ticular
requirements, which are listed below. One of the prime
reasons why legal actions fail is because clients do not know the
trading style of their debtor. An account opening form is highly
recommended in order to support any legal action required at a
future time.
n Sole trader
This is a business run by one individual. They are personally
liable for the debt but in order to issue legal proceedings we
must first be sure of the identity of the individual, such as
name and, if possible date, of birth.
n Partnership
Business run by at least 2 individuals who have joint and
several liability. Again we need to be sure of the correct
identity of the individuals in order to pursue them legally. In
these businesses each partner is responsible for the debt and
can be pursued for the totality.
n Limited Company
This is a company run by Directorship. We can only pursue
the company and not the individuals themselves.
38.1.1.8 Sources of Information
Limited Companies must register with the Official Register Com-panies
House. Sole traders and partnerships are not required to
do so. We are able to use several credit reference agencies in or-der
to find out commercial details on Limited companies. In the
case of individuals we are primarily reliant upon a trace agent to
undertake personal on-line searches and qualify this information
by means of calls to neighbours and other businesses.
ATRADIUS COLLECTIONS - INTERNATIONAL DEBT COLLECTION HANDBOOK · MAY 2014 203
UNITED KINGDOM TABLE OF CONTENTS

38 UNITED KINGDOM
38.1.2 Retention of Title
There are 2 Types of Retention of Title
Simple and All Monies
n Simple – title of the goods only passes to the buyer in
respect of payment for each invoice relating to those goods
n All monies – title of the goods only passes when the buyer
has paid for all goods supplied
We will advise clients to enforce their retention of title. In the
case of all monies the goods must be identifiable and for this
reason it is not possible for Atradius Collections to enforce ROT
on behalf of our customers, however, we will assist in any way
we can.
38.1.3 Safeguarding Measures
Occasionally a debtor will offer a personal guarantee for the debt
but it is important to note that this must be legally enforceable.
38.1.4 Legal Procedures
38.1.4.1 General
Within the United Kingdom there are several different and sepa-rate
legal jurisdictions:
England and Wales; Scotland and Northern Ireland. While
in general you can take the same actions in each country,
these are the following differences:
n Different solicitors
n Different timescales
n Different costs.
Generally speaking, the first stage of legal action in every ju-risdiction
is the issuing of a Letter Before Claim (LBC). This is a
letter sent to the debtor from the solicitor informing them that
should they not make payment in full, legal proceedings will be
issued.
If the LBC is not successful there are three main options:
n County Court Judgement (CCJ)
n Full Court Proceedings, generally a trial
n Making a company insolvent, often called winding them up.
However, in the last option, there is no guarantee that making
a company insolvent will recoup any of your monies. There are
two steps to successfully recover your monies in the UK by tak-ing
legal action. The first is obtaining the judgement and then
the second is the enforcing of that judgement. Depending upon
whether your debt is insured or un-insured will affect the initial
stages of legal action. If your debt is insured and you have com-plied
with all obligations under your policy then in most cases
the Credit Insurance will contribute towards legal costs. You will
still be consulted about the legal action but where a claim has
been paid then Credit Insurance will direct such action. If Credit
Insurance does not cover your debt then we will require you to
agree legal action and costs in writing prior to commencement of
litigation. We will also ask you to make payment on account for
legal action, particularly if the case is defended.
38.1.4.2 Legal System
Court Process For Obtaining a Judgement in England and Wales

38 UNITED KINGDOM
38.1.4.3 Costs
These will differ greatly depending upon the type of legal action
necessary and the jurisdiction in which we are taking action. In
any case, our experienced collectors will have a full discussion
with you regarding costs and timescales before legal action is
commenced. Certain legal costs like some of the court costs can
be charged to the debtor. The decision to allocate costs lies with
the judge but in most cases approximately 60 – 70% of all costs
are charged to the debtor’s account after successful judgement.
We offer a highly competitive, fixed tariff for standard cases. For
England and Wales, we are able to issue the Letter before Claim
and proceedings from Atradius Collections. This offers a further
cost reduction to the client and has proved to be most successful.
Should the case become heavily defended at any time however,
then it must be transferred to a solicitor. Legal costs for defended
cases are charged at an hourly rate. This depends entirely on the
nature of the case and the seniority and experience of the le-gal
advice needed. Costs can range from GBP150 to GBP500 per
hour. It is not possible at the start of the case to make an exact
estimation of costs but it is clear to see that heavily-defended
costs can easily equal or in exceed the value of the debt itself.
For this reason we will advise on some form of negation and/or
mediation. Indeed the UK Government has recently ruled that
all cases must partake in some form of mediation before going to
litigation. Details of this process are not yet available but we are
currently working with a UK wide provider of these services to
explore the possibility of providing up to date information and
advice to our clients.
38.1.4.4 Expected Timeframe
On average pre legal actions like the LBC take 14 days after issue.
Litigation action takes approximately 12 weeks for a standard
case to reach judgment. The case is then transferred to the High
Court to obtain the relevant documentation to proceed to en-forcement.
This can take another 3 – 4 weeks. Enforcement can
take up to an additional 12 weeks but depends entirely on the
Sheriff’s ability to make contact.
38.1.4.5 Interests and Costs in the
Legal Phase
The solicitor will continue to add statutory interest and costs to
the debt.
38.1.5 Enforcement
38.1.5.1 Enforcement in Debt
There are two steps to successfully recovering your monies in the
UK, the first of which is obtaining the judgement followed by the
enforcing of that judgement. There are several options for en-forcement
but the most common is via an Enforcement officer or
Sheriff. Once a judgement is obtained, then enforcement action
can be taken. A judgement does not necessarily lead to a success-ful
collection. The enforcement officer will visit the premises to
try and collect the monies, this can be a lengthy process lasting
over several months.
38.1.5.2 Enforcement in Movable Goods
If the debtor is not able to make any payments then the Sheriff
can seize goods relating to the business as payment towards the
debt through a notification of seizure, followed by the seizure it-self.
Goods are sold by the Sheriff to realize funds, however, any
costs involved in making the sale are deducted form the monies
recovered.
38.1.5.3 Enforcement in Immovable Goods
If the debtor owns property then we can apply for a Judgement
Mortgage. This means that the property cannot be sold without
first discharging the debt. There can be several judgement mort-gages
against a single property so it is advisable to check the
likelihood of success before incurring additional costs

38 UNITED KINGDOM
38.1.6 Insolvency Proceedings
38.1.6.1 General
There are a variety of insolvency types within the UK, ranging
from a Voluntary arrangement offering a fixed percentage pay-out
to creditors or administration where an administrator is ap-pointed
to try and trade out the company, to liquidation where all
assets are liquidated. A company can move between these states
and we can best advise on a case-by-case basis. If we establish
that your debtor has become insolvent we will advise you wheth-er
there is any hope of a payment from them. We will also regis-ter
your debt with the insolvency practitioner, and if it is judged
that there will be dividends at some point in the future, we can
monitor the debtor to claim the dividends when appropriate.
38.1.6.2 Required Documents
n Copy invoices
n Copy orders, order confirmations and delivery notes
n Copies of general conditions of sales, should there be any.
38.1.6.3 Expected Timeframe and Outcome
Claims usually need to be lodged in a formal insolvency within
6 months. The IP will write directly to the client in the first in-stance.
In the UK Insolvencies can last up to 5 years.
38.2 Scotland
Generally all straightforward debt actions will be taken in the
Sheriff Court of the defendant’s residence or the court where the
defendant trades.
38.2.1 Summary Cause Actions
A court action is commenced by the claimant preparing a sum-mons
on a pre-printed form. Supporting invoices or a statement
of account should be produced to the court along with the sum-mons.
A copy of the summons will require to be served (issued)
on the defender. This is done by the claimant’s lawyer – usually
by recorded delivery post – and thereafter by sheriff officer if
postal service is unsuccessful. With any summons there will be
two critical dates -the return date and calling date. Generally the
return date is the day when the defendant must return any docu-ment
to the court whilst the calling date (always 7 days after the
return date) is the date the case will call in court for a hearing.
What happens if the claim is undisputed? If in response to the
summons the defendant does nothing, the pursuer can ask for
judgment (known as minuting for decree) by completing a pre-printed
form. Judgment will be granted at the ‘calling date’. The
court takes about three weeks to send the judgment to the claim-ant’s
lawyer. However, where appropriate (in cases where the de-fender
is an individual or small trader) the defender may admit
liability and offer to make payment of the debt by instalments
or by a deferred lump sum – known as a Time to Pay Direction or
Time to Pay Order.
38.2.1.1 Ordinary Actions
Unlike summary cause there are no pre-printed forms. The writ
will be drafted and forwarded to the court. The defender has
21 days after service of the writ to decide what action to take.
38.2.1.2 Defendant’s Responses
There are various ways the defendant can respond to the service
copy writ. They can do nothing meaning the claimant can, on
the expiry of 21 days, minute for decree. If the defendant admits
the claim and makes a payment offer, the claimant completes the
appropriate form and sends it to the court. If the offer is unac-ceptable,
the case will call in court and the court will decide if the
application should be granted. The court takes about three weeks
to send the judgment to the claimant’s lawyer.

38 UNITED KINGDOM
38.2.2 Enforcement of Decrees
The responsibility for enforcing sheriff court decrees falls on
sheriff officers. The generic term for Scottish enforcement is
known as ‘diligence’. Different measures are employed depend-ing
on whether the defendant’s moveable property is situated
either out with or within a dwelling house. The effectiveness of
diligence can best be described as a ‘filtering process’ with the
slow payers settling earlier on in the enforcement regime. Judge-ment
enforcement in Scotland was radically reformed by the
Debt Arrangement and Attachment (Scotland) Act 2002 and will
be enhanced following implementation of the Bankruptcy and
Diligence (Scotland) Act 2007. The legislation deals more sym-pathetically
with individual consumer debtors but commercial
debtors have less protection.
38.2.3 The Debt Arrangement Scheme
A central feature of the 2002 Act is the Debt Arrangement
Scheme available to individuals and sole traders, allowing them
the opportunity of repaying their debts in a managed way over
a given period of time without the threat of enforcement. Such
individuals should have surplus income to repay their debt by
instalments. During the existence of a DAS judgement, enforce-ment
and applications for the debtor’s bankruptcy will be pro-hibited.
It will also be considered incompetent to carry out judge-ment
enforcement whilst an application is being considered.
38.2.4 Charge for Payment
Before commencing judgement enforcement, the sheriff officer
serves a charge, which is a formal written request, on the de-fendant.
It requests payment of the principal debt, interest and
charges, and requires that it be paid within 14 days.
38.2.5 Detailed Examination of
Attachment Orders
Attachment orders will most often be used for business-to-business
debts where it is obvious goods are out with a dwell-ing
house. How does the Act define dwelling house? There is no
definition of ‘dwelling house’ but it does not include: A garage,
even although it forms part of the structure or building, which
consists of or includes the dwelling house, or other structures or
buildings used in connection with the dwelling house. The effect
of this is that all items stored within a garage, including a car, can
be attached by an attachment order even although it is obvious
the debt may be consumer.
38.2.5.1 How does the Sheriff Officer Carry
Out the Attachment?
Entry and valuation.
The enforcement officer enters the property and values the arti-cles
being attached at a price, which they are likely to fetch if
sold on the open market.
38.2.5.2 Reporting the Attachment
The attachment must then be reported to the court within
14 days (s.18).
38.2.5.3 Removal and Auction of
Attached Articles
Once the report of the attachment has been received by the
sheriff, arrangements can be made for the removal and sale of
the articles. The officer gives seven days notice to the debtor of
the date specified for the articles’ removal and may open, shut
and lock fast places for this purpose. Any articles which were
attached but not removed will no longer be subject to the attach-ment
order. The auction of the removed articles shall not take
place until at least seven days after the articles have been re-moved.
There are various actions in relation to the attached arti-cles,
which are unlawful after their attachment and prior to their
removal such as their removal, their gift, damage or destruction.
In these circumstances a further attachment may be competent.
Can a debtor stop the process? The debtor can make an applica-tion
to the sheriff requesting the attachment should be lifted on
the grounds that the aggregate value of the attached articles is
substantially below the aggregate of the prices they are likely to
fetch if sold at auction.
38.2.5.4 How to Attach Articles Kept in
Dwelling Houses
To provide improved debtor protection, the Act has introduced
the Exceptional Attachment Order. However, if granted, an ex-ceptional
attachment order will still allow for the debtor’s goods
being valued and attached by the order, which can thereafter be
removed for auction and subsequent sale.

38 UNITED KINGDOM
38.2.5.5 Examination of Exceptional
Attachment Orders
Unlike attachment orders which, in effect, will be available to
creditors on demand on all occasions (although subject to condi-tions),
an exceptional attachment order will only be granted on
a specific application being made by the creditor to the sheriff.
Creditors should note that a whole host of items are exempt leav-ing
only ‘luxury’ items being capable of attachment. Before com-mencing
the procedure a charge for payment has to be served.
38.2.5.6 How is an Application for an
Exceptional Attachment Order Made?
An Exceptional Attachment Order will only be granted on appli-cation
by the creditor, which the sheriff may grant on there being
certain matters satisfied, and also that there are exceptional cir-cumstances.
If these exceptional circumstances exist the sheriff
will grant the order. However, the order will only apply to ‘non-essential’
assets of the debtor kept in any dwelling house speci-fied
in the application. What are the exceptional circumstances?
The exceptional circumstances that must exist before granting an
exceptional attachment order are an effort to encourage less in-trusive
enforcement. They include negotiations, arrestment and
earnings arrestment (attachment of earnings), which should be
first attempted. Also the sheriff must be satisfied that there is a
reasonable prospect the sum recovered from an auction of the
debtor’s non-essential assets would be at least aggregate to a rea-sonable
estimate of any chargeable expense, minus £100. Sub-ject
to exceptional circumstances existing, what matters will the
sheriff take into account in deciding whether to make the order?
These include: The nature of the debt, and in particular, whether
the debt incurred relates to any tax or duty or any trade or busi-ness
carried on by the debtor. Whether the debtor resides in the
dwelling house specified in the application. Whether the debtor
carries on a trade or business in that dwelling house. Whether
money advice has been given to the debtor. Any agreement be-tween
the debtor and creditor for the settlement of the debt,
and whether a time to pay direction or time to pay order has
been entered into but not adhered to. So subject to the condi-tions
of the Act being fulfilled, the sheriff may more readily grant
an exceptional attachment order in relation to the jobbing builder
who carried on business from his house (essentially a commercial
debt) as opposed to a consumer who has fallen into arrears with
credit card repayments.
38.2.5.7 What is the Effect of an
Exceptional Attachment Order?
The exceptional attachment order shall have the following
effects:
n To authorise the attachment, removal and auction of the
debtor’s non-essential assets kept in any dwelling house
specified in the application. It will also specify a period
during which the order is executed.
n Empower the officer to open shut and lock fast places for the
purposes of executing the order. The officer must be satisfied
there is a person in the house not younger than 16 and
capable of understanding the procedures being carried out.
Failing this forced entry can still be taken subject to four
days notice being given.
Does the sheriff have any other powers? Before deciding wheth-er
to make an exceptional attachment order, the sheriff may
make an order for a visit to the debtor by a person specified for
the purpose of giving money advice to the debtor, or such other
order as the sheriff may think fit. When are the attached articles
removed? The sheriff officer shall ‘unless it is impractical to do
so immediately remove any article attached by an exceptional
attachment order from the dwelling house’. Where, however, it
is impractical to remove the articles immediately then the sheriff
officer shall give more notice to the debtor for the date arranged
for their removal. When can the articles be sold and can the debt-or
redeem them? Articles cannot be auctioned until seven days
have passed since their removal from the dwelling house. Within
the seven-day period the debtor can redeem the goods at the
value fixed by the sheriff officer, the consequences being that
once so redeemed the article will cease to be attached.

38 UNITED KINGDOM

UK debt collection legal procedures

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