A large proportion of the business conducted by the civil courts in England and Wales relates to debt claims and a high proportion of those claims arise under agreements regulated by the Consumer Credit Act 1974. As long ago as 2010 Lord Justice Jackson recommended that debt claims should be subject to a specific pre-action protocol. Since then a number of draft protocols have been put out for public consultation but progress towards an agreed final version has been slow, with creditors and representatives from the debt advice sector remaining polarised in their views. A recent joint statement from the Credit Services Association (CSA) and the Civil Court Users Association (CCUA) following a December meeting of the Civil Procedure Rules Committee (CPRC) suggests that a final protocol is being drafted and that it is likely to be implemented in 2017.
Following the latest consultation, which closed in January last year, creditors have voiced concern about the manner in which the Pre-action Protocol for Debt Claims (PAP) is being progressed. Although the current president of the CSA was co-opted onto the CPRC sub-committee in 2015, together with a representative from the CCUA and a debt advice provider, in order to ensure that relevant stakeholder's views were taken into account, a suspicion has remained that there is an unfair balance of representation on the sub-committee and that the "consumer voice" amounts to more of an attack against creditors than a genuine defence of consumers. This suspicion has been compounded by the business of the sub-committee being regarded as confidential and the CSA representative being unable to report on progress.
One particular area for disagreement over the last few years has been the volume of paperwork and information that creditors should be obliged to provide to the debtor under the provisions of the PAP. Initial drafts of the PAP required the creditor to provide detailed statements of account, a raft of other documents and information relating to the debt, a full copy of the PAP itself and a copy of the written agreement the debt is based on. Creditors argued that this was totally disproportionate, particularly given that approximately 95% of debt claims go undefended. Thankfully, as the PAP has evolved, a number of these requirements have been dropped. However a major bone of contention which remained was whether creditors should have to supply a copy of any written credit agreement when sending a letter before claim.
A market leading acquirer and manager of consumer debt, Cabot Credit Management, has estimated that the requirement to enclose a copy of any written agreement with the letter before claim could result in costs quickly running to tens of millions of pounds. Like other creditors, it regards the requirement to provide a copy as totally disproportionate, unnecessary and unfair, particularly when the vast majority of individuals do not want or need it. It argues that a much better course would be simply to allow the consumer to request a copy of the agreement if they want one.
Creditors have also questioned whether there is much point in introducing the PAP at all given that there are plans afoot to introduce a new "Online Court" in 2020 at which point all money claims under 25,000 (which would represent the vast majority of claims) will not require a PAP. If a new PAP is introduced before then it would have a limited shelf life and creditors might rush to issue claims before its introduction and then delay future claims until the Online Court is operational.
Members of the CPRC were urged to take these points into account at its meeting on 9 December 2016. Although the minutes for that meeting are not yet publicly available (and apparently will not be published until the next meeting in February 2017) the joint statement issued by the CSA and the CCUA following that meeting suggests that the requirement for the original agreement to be sent with the letter before claim has now been abandoned though there will be a requirement that creditors make it clear in the letter before claim that the customer has the right to ask for it.
RECENT DEVELOPMENTS AND CASES
We understand that despite the lack of consensus between stakeholders as to whether there is really any need for a PAP at all, the CPRC has decided that on balance a PAP would be helpful. The PAP will therefore now be redrafted and sent back to the sub-committee before the Master of the Rolls decides whether and when it will be implemented. Whilst the CSA and the CCUA representatives requested a sufficient implementation period for creditors to make necessary changes to their systems and processes, the likelihood is that the PAP will be implemented in 2017.