Debt Collection Agency United Kingdom
1.1. Amicable Collections United Kingdom
1.1.1. General information
Our collectors try to collect debts without recourse to legal action by telephone and letters. Cosmopolite Collections always try to obtain payment of debts in full but will negotiate to agree on 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 in 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.
When there is a dispute, we aim to reach an amicable solution between the creditor and the debtor. We do this by analysing all contractual 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 assistance and agreement of our legal team.
1.1.2. Local agents
We currently use a field agent partner to visit debtors to ascertain if they have any assets or means to make payment.
1.1.3. Debt Collection Interests in UK
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 commercial debts. It does not apply when one of the parties is not acting as a business; for example, sales to a private individual or consumer. The debts should have arisen in the course of business.
Both parties should be businesses, commercial entities or public sector organisations. Interest is claimed at the prevailing 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.
1.1.4. Debt Collection Costs UK
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 outstanding amount as follows:
Amount owed compensation:
- GBP 1,000 to GBP 9,999: GBP 70
- Up to GBP 999: GBP 40
- GBP 10,000 and over: GBP 100
1.1.5. Prescription
The Limitations Act 1980 outlines the time limit in which a creditor can chase a debtor for outstanding debts. This act only applies when no contact 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 six 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 debts.
1.1.6. Accepted and most common payment methods
The UK still operate on payment by cheque, although the preferred method is by bank transfer.
If possible, for longrunning payment plans, Cosmopolite Collections will seek a standing order or direct debit, but there is natural resistance to this by debtors.
1.1.7. Types of companies in UK
There are a number of company types and each has its own particular requirements, which are listed below.
One of the prime reasons why legal actions fail is because the client does 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.
- Sole trader
This is a business run by one individual. That individual is personally liable for the business’ debts, but in order to issue legal proceedings, Cosmopolite Collections must first be sure of the identity of the individual, such as name and, if possible, date of birth.
- Partnership
This is a business run by at least two individuals who have joint and several liabilities. Again, we need to be sure of the correct identities of the individuals in order to pursue them legally. In these businesses, each partner is responsible for debts and can be pursued for the totality.
- Limited Company
This is a company run by directorship. We can only pursue the company and not the individuals themselves.
1.1.8. Sources of information
Limited companies must register with the Official Register Companies House. Sole traders and partnerships are not required to do so.
We are able to use several credit reference agencies in order to find out commercial details on limited companies.
In the case of individuals, we are primarily reliant upon a trace agent to undertake personal online searches and qualify this information by means of calls to their neighbours and other businesses.
In the UK, using a debt collection agency is the most preferred method when outsourcing debt recovery.
1.2. Retention of title
There are two types of retention of title (ROT):
a) Simple
Title of the goods only passes to the buyer in respect of payment for each invoice relating to those goods.
b) All monies
Title of the goods only passes to the buyer when they have 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. For this reason, it is not possible for Cosmopolite Collections to enforce ROT on behalf of our clients; however, we will assist in any way we can.
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.
1.4. Legal Debt Collections in United Kingdom
1.4.1. General information
Within the UK, there are several different and separate legal jurisdictions: England and Wales, Scotland and Northern Ireland.
While in general, creditors can take the same actions in each country, these are the following differences: Different solicitors Different timescales Different costs.
Generally speaking, the first stage of legal action in every jurisdiction 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 commenced.
If the LBC is not successful, there are three main options:
- County court judgement (CCJ)
- Full court proceedings, generally a trial
- Making a company insolvent, often called winding up.
However, in the last option, there is no guarantee that making a company insolvent will recoup any monies.
There are two steps to successfully recover monies in the UK by taking legal action.
- The first is obtaining a judgment
and
- the second is the enforcing of that judgment.
Whether the creditor’s debt is insured or uninsured will affect the initial stages of legal action. If the debt is insured and the creditor has complied with all obligations under the policy, then in most cases, any credit insurance in place will contribute towards legal costs. The creditor will still be consulted on the legal action but, if a claim has been paid, the credit insurance will direct such action.
If the credit insurance does not cover the debt, then Cosmopolite Collections will require the client to agree to legal action and costs in writing prior to commencing litigation. We will also ask the client to make payment on account for legal action, particularly if the case is defended.
1.4.2. Debt Collection Costs in United Kingdom
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 the client regarding costs and timescales before legal action commences.
Court fees for England and Wales were increased in 2014 and 2015, details of which can be found at
www.gov.uk/make-court-claim-for-money/ court-fees
Certain legal costs, such as 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 judgment.
We offer a highly competitive, fixed tariff for standard cases.
Legal costs of defended cases are charged at an hourly rate. This depends entirely on the nature of the case and the seniority and experience of the legal advice needed.
Costs can range from GBP 150 to GBP 500 per hour. It is not possible at the start of a case to make an exact estimation of costs, but it is clear to see that heavily defended costs can easily equal or exceed the value of the debt itself.
For this reason, we will advise on some form of negotiation and/or mediation. Indeed, the UK government have recently ruled that all cases must partake in some form of mediation before going to litigation, and at the very least, be able to show an attempt to resolve disputed issues between the parties.
1.4.3. Expected time frame
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 enforcement. This can take another three to four weeks.
Enforcement can take up to an additional 12 weeks but depends entirely on the sheriff’s ability to make contact.
1.4.4. Interest and costs in the legal phase
The solicitor will continue to add statutory interest and costs to the debt.
1.5. Enforcement of a Debt in the UK
1.5.1. Enforcement in debt
There are two steps to successfully recovering monies in the UK:
The first of which is obtaining a judgment followed by the enforcing of that judgment.
There are several options for enforcement, but the most common is via an enforcement officer or sheriff. Once a judgment is obtained, then enforcement action can be taken.
A judgment does not necessarily lead to a successful collection. The enforcement officer will visit the premises to try to collect the monies; this can be a lengthy process lasting over several months.
1.5.2. Enforcement in movable property
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 itself.
Goods are sold by the sheriff to realise funds; however, any costs involved in making the sale are deducted from the monies recovered.
1.5.3. Enforcement in immovable property
If the debtor owns property, then Cosmopolite Collections can apply for a judgment mortgage. This means that the property cannot be sold without first discharging the debt. There can be several judgment mortgages against a single property, so it is advisable to check the likelihood of success before incurring additional costs.
1.6. Insolvency Procedures in the UK
1.6.1. General information
There are a variety of insolvency types within the UK, ranging from a voluntary arrangement, offering a fixed percentage payout to creditors; administration, where an administrator is appointed 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 the debtor has become insolvent, we will advise our client whether there is any hope of payment from the debtor.
We will also register the 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.
1.6.2. Required documents
- Copies of invoices
- Copies of orders, order confirmations and delivery notes
- Copies of general conditions of sale, should there be any
1.6.3. Expected time frame and outcome
Claims usually need to be lodged in a formal insolvency within six months. An insolvency practitioner will write directly to the client in the first instance. In the UK, insolvencies can last up to five years.
2. Collect a Debt in Scotland, Legal Proceedings Details
Generally, all straightforward debt actions will be taken in the sheriff court of the defender’s residence or the court where the defender trades.
2.1. Summary cause actions
A court action is commenced by the claimant preparing a summons on a pre-printed form. Supporting invoices or a statement of account should be produced to the court along with the summons.
A copy of the summons must be served (issued) on the defender. This is done by the claimant’s lawyer – usually by recorded delivery post – and thereafter by the sheriff officer if the postal service is unsuccessful.
With any summons, there will be two critical dates – the return date and the calling date. Generally, the return date is the day when the defender must return any document to the court, whilst the calling date (always seven days after the return date) is the date the case will call in court for a hearing.
If in response to the summons the defender 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 claimant’s lawyer.
However, when appropriate (in cases where the defender is an individual or a 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.
2.1.1. Ordinary actions
Unlike summary cause actions, there are no pre-printed forms for ordinary actions. The writ will be drafted and forwarded to the court. The defender has 21 days after the service of the writ to decide what action to take.
2.1.2. Defender’s responses
There are various ways the defender can respond to the service copy writ.
The defender can do nothing, meaning that the claimant can, on the expiry of 21 days, minute for a decree. If the defender admits the claim and makes a payment offer, the claimant completes the appropriate form and sends it to the court.
If the offer is unacceptable, 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.
2.2. Enforcement of decrees
The responsibility for enforcing the sheriff court decrees falls on sheriff officers. The generic term for Scottish enforcement is known as diligence.
Different measures are employed depending on whether the defender’s movable property is situated either out 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.
Judgment enforcement in Scotland was radically reformed by the Debt Arrangement and Attachment (Scotland) Act 2002 and has been enhanced following the implementation of the Bankruptcy and Diligence (Scotland) Act 2007.
The legislation deals more sympathetically with individual consumer debtors, but commercial debtors have less protection.
2.3. The debt arrangement scheme
A central feature of the 2002 Act is the debt arrangement scheme (DAS), available to individuals and sole traders, allowing them the opportunity to repay 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 debts by instalments. During the existence of a DAS judgment, enforcement and applications for the debtor’s bankruptcy will be prohibited. It will also be considered incompetent to carry out judgment enforcement whilst an application is being considered.
2.4. Charge for payment
Before commencing judgment enforcement, the sheriff officer serves a charge, which is a formal written request, on the defender. It requests payment of the principal debt, interest and charges, and requires that it be paid within 14 days.
2.5. Attachment orders
Attachment orders will most often be used for business-tobusiness debts and the objective is to enforce on the assets and property of the debtor. The process is similar to that in England and Wales, though the terms used are different.
The United Kingdom is a country located in Western Europe. Its capital city is London. The United Kingdom is divided into 4 constituent countries: England, Scotland, Wales, and Northern Ireland. The government system of the United Kingdom is a parliamentary democracy under a constitutional monarchy. The official language of the United Kingdom is English, and the currency is the British pound.
Collecting debts in the United Kingdom can be challenging for foreign businesses due to a number of factors, including the country's economic and political stability, the complexity of the legal system, and the difficulty of enforcing judgments. There are a number of debt collection agencies operating in the United Kingdom, and the industry has been in existence for several decades.
The national credit bureau in the United Kingdom is the Credit Reference Agency, and some of the private credit reporting companies operating in the country include CRIF, Equifax, and Experian. Debt collection laws in the United Kingdom are generally uniform throughout the country, although local laws may sometimes apply.
There are several benefits to using commercial debt collection services for the United Kingdom:
- Expertise: Debt collection agencies have specialized knowledge and experience in recovering debts, which can be particularly useful for foreign businesses that may not be familiar with the local legal and cultural environment.
- Efficiency: Debt collection agencies can often recover debts more quickly and efficiently than businesses can on their own, as they have the resources and expertise to pursue multiple avenues for recovery.
- Cost-effectiveness: Using a debt collection agency can be more cost-effective than trying to recover debts on your own, as you can avoid the time and expenses associated with pursuing legal action.
- Risk reduction: Debt collection agencies can help to reduce the risk of non-payment by providing credit risk assessment and monitoring services.
- Language skills: Multi-lingual debt collectors can communicate effectively with British debtors, which can be particularly helpful for foreign businesses.
- Local presence: Debt collection agencies with local presence and knowledge of the local legal and cultural environment can be more effective at recovering debts in the United Kingdom.
- Online services: Many debt collection agencies offer online tools and services, such as 24/7 debt recovery report websites, which can be convenient and efficient for creditors.
Our debt recovery agency has a very high success rate in the United Kingdom thanks to our multi-lingual debt collectors located in the country and our 24/7 online debt recovery report website.
We have local debt collection managers in the cities of London, Birmingham, and Manchester.
