Debt Collections In United Kingdom

1.1 Amicable Phase

1.1.1 General

Collection Agency Service United Kingdom seeks to collect debts on behalf of our clients without resorting the country’s legal system for full collection. For this reason, we may reserve the right to negotiate a settlement figure with the debtor, or we may offer a repayment plan to the debtor. If either of these options is to be suggested to a debtor we are pursuing, we will first consult with the client to make sure that any terms of recovery are agreeable and enforceable. As is common in the United Kingdom and Ireland, we will issue a Letter Before Claim to the debtor at the beginning of our collections process. This initiates a legal process with the debtor during the amicable phase, allowing Collection Agency Service United Kingdom to keep all options for recovery on the table at all times. This letter is issued in most cases, but will not be issued in cases where the client does not believe the debtor has the reasonable ability to satisfy the debt.

In the event of a dispute filed against Collection Agency Service United Kingdom by the debtor, it is our goal to first try to settle the matter amicably. This is done by conducting a thorough review of any contracts, delivery notices, orders, confirmations, or invoices. We will also review the terms and conditions agreed upon by the debtor. In the event that an investigation of the debtor is required, those processes will be completed in-house with the full assistance of our own legal team.

1.1.2 Local agent

There is currently no way for us to conduct field agent visits to debtors in the United Kingdom. This practice is generally frowned upon anyway, and has rarely been able to produce results when it has been used.

1.1.3 Interest

The United Kingdom’s Late Payment Act governs the relationship between a debtor and a client. This Act seeks to add standard terms and conditions to every contact between a supplier and a customer, essentially allowing for uniform collection of any interest due when a debt has become due to the creditor. It should be noted that this important piece of legislation is not valid between individuals. The terms and conditions of collecting interest set forth in the Late Payment Act can only be enforced on commercial transactions between a commercial supplier and a commercial customer who receives that company’s goods or services.

In the event that a debt becomes past due and the creditor attempts collection of the balance, the interest rate applied to the customer will be calculated via a standard formula comprised of two components. The first is the interest rate currently enforced by the Bank of England. At the present time, that interest rate is set at 0.5 percent. Next, an 8 percent increase is added to that rate, making the total interest charged to a debt 8.5 percent. This rate is known as the “clearing rate” or “repo rate” in the United Kingdom, and applies at the end of the day when the payment was declared past due.

1.1.4 Debt collection costs

The client is free to charge the costs of collection to the debtor that is being pursued. These charges cannot be arbitrary, however, as they are regulated by a formula set forth in UK regulations. We will calculate the proper amount of collection costs that can be charged to the debtor on a case-by-case basis for our clients and advise them of the amount prior to initiating the amicable phase.

1.1.5 Prescription

In the United Kingdom and Ireland, the preferred term for a debt’s ability to be collected is Statute of Limitations, rather than Prescription. It is subject to the Limitations Act of 1980.

The Limitations Act of 1980 outlines the limit during which time a collection agency or a creditor can reasonably expect a debt’s balance to be recovered. It applies only in those instances where no contact has been made between the creditor and the debtor within the regulated time limit, and applies to residents of England and Wales. Scotland is not included a part of the law’s regulations. The period of time permitted to creditors to recover any debt owed to them is six years. After this time, a collection agency or the original creditor cannot legally pursue a debt.

1.1.6 Accepted and most common payment methods

The preferred method payment in the United Kingdom is bank transfer, although a large number of debtors do still prefer to pay by using a cheque. Where a payment plan has been established, Collection Agency Service United Kingdom will often try to setup a direct debit plan to ensure timely payments toward the debt’s balance.

1.1.7 Types of companies

The United Kingdom has a number of different company types that are designed to empower everyone from individuals to large enterprises to establish a business within the country. Each of these different types is subject to different rules in terms of their required capital and their liability in the even that they owe debts to a creditor. Knowing these rules is the key to a successful collections process.

Sole trader.

This type of business is operated by a single individual. Typically, these businesses are entrepreneurial in nature. The individual who functions as the sole trader for the company is personally liable for the company’s debts. Before pursuing them, however, we must be sure of the individual’s identity and their date of birth.


This type of business is operated by at least two individuals in a partnership. They have joint and several liability for the company’s debts, and they can be pursued legally if their identity is known by Collection Agency Service United Kingdom. Partners can be pursued for the total amount of debt owed.

Limited Company

Operated under a directorship, it is possible to pursue this type of company only as a corporate entity. Individual directors cannot be pursued or held accountable for the company’s debts.

1.1.8 Sources of Information

Limited companies in the United Kingdom are required to register the country’s Official Register Companies House. Sole traders and partnerships are not subject to the same mandate.

Information relating to limited companies can be discovered by using credit reference agencies located throughout the UK. For individuals and sole traders, a trace agent must be hired to discover the same information. This can be done through online searches and other means, including contacting neighbors and business partners of the individual being pursued.

1.2 Retention of Title

Retention of Title in the United Kingdom is split into two distinct types, much like it is in neighboring Ireland:

Simple Retention of Title:

Ownership of delivered goods passes to the buyer as soon as the most recent invoice for those goods has been fully satisfied with the supplier.

All Monies Retention of Title:

In this case, goods pass into the ownership of the buyer only when all goods have been paid for, and all outstanding invoices are paid in full.

Because these two types of ROT can be confusing to many of our clients, we make sure to personally advise everyone we represent as to which ROT will apply to their situation. We cannot, however, enforce Retention of Title for the clients we represent. It is our policy to assist in any way possible during this process.

1.3 Safeguarding measures

Debtors may sometimes offer a personal guarantee to cover the outstanding balance of the debt, but this is often of little comfort to creditors or Collection Agency Service United Kingdom. Such agreements are not legally enforceable in the United Kingdom.

1.4 Legal Procedures

1.4.1 General

The United Kingdom’s legal jurisdictions are split into three parts, based largely on geographic regions. Those three parts are:

– England and Wale
– Northern Ireland
– Scotland

The same legal procedures generally apply in each of these three jurisdictions, allowing creditors to take virtually the same legal actions. However, there are different solicitors, associated costs, and timelines, for each country’s own system and process.

In every jurisdiction, a Letter Before Claim is the first step taken toward legal recourse during the recovery of a debt. This is sent from a solicitor to the debtor, and demands that they make payment in full in order to avoid any further legal actions. In many cases, this letter is successful. Sometimes, however, it is not. There are then three options for creditors to consider pursuing:

– A county court judgment against the debtor
– A traditional lawsuit against the debtor, typically inclusive of a trial
– Declaring a company insolvent and beginning winding up proceedings

It should be noted, though, that declaring a company insolvent would not necessarily guarantee the payment of any debt owed to the creditor. In many cases, only a portion of it will be paid.

In the United Kingdom, debts owed to a creditor can be recovered using a two-step process. The first is actually obtaining a judgment against the debtor for the full amount owed to the creditor. The second step involves enforcement of this judgment against the debtor. This process is relatively standard, although the procedure varies somewhat between insured and uninsured debts. If the debt is insured and creditors have complied with all regulations and obligations, the credit insurance company responsible for the debt will contribute toward legal costs. They will often take on the pursuit of the debt by themselves at this point. The original creditor will still be consulted, but it will not be their primary responsibility to decide the course and outcome of the debt’s collection unless the credit insurance company waives its right of pursuit.

If the credit insurance company does not cover legal costs, Collection Agency Service United Kingdom will require the creditor to agree to legal action — as well as all associated costs — in writing before the legal process can begin. A payment toward the costs of the legal proceeding will also be required, especially for defended cases.

1.4.2 Legal System

The defendant in a debt-related lawsuit has 14 days to respond to a notice that a claim has been filed against them. If they do reply, the process begins in the court of first instance. If no reply is issued, the court issues a default judgment that is typically in favor of the creditor pursuing the debt.

1.4.7 Costs

The costs for pursuing legal actions against a debtor in the United Kingdom vary greatly depending on the course the trial takes, the location where the lawsuit is filed, and the complexity of the case being pursued by the creditor. Our experienced and professional staff will meet with clients individually to advise them of the costs that will apply to the case in their specific area of the country. This estimation must be given on a case-by-case basis, especially considering the three independent jurisdictions for legal action in the UK.

In most cases, the judges who oversee a debt collection trial will permit for a significant portion of the expenses incurred by the creditor to be charged to the debtor. The most common amount of these costs charged to the debtor is between 60 and 70 percent of all costs incurred by the creditor after a successful judgment has been issued. Collection Agency Service United Kingdom offers an affordable, flat rate legal fee for lawsuits filed against creditors. This is a high value proposition for many creditors,

If the lawsuit does become heavily defended, it should be noted that costs would greatly increase in order to ensure a favorable outcome. Costs in these cases are not charged with a flat rate, but are instead charged on an hour basis. Costs can range from a low of GBP150 to a high of as much as GBP500 per hour. No exact estimation of these costs can reasonably be performed by Collection Agency Service United Kingdom; in many cases, the costs associated with a heavily defended case can actually exceed the amount of debt itself. We often encourage mediation as an alternative to these high costs.

In fact, new regulations in the United Kingdom actually mandate that all cases go through some form of mediation before they can be subject to heavily defended litigation. Though the finer points remain vague, Collection Agency Service United Kingdom is actively working to internalize and execute these new laws.

1.4.8 Expected timeframe

Pre-legal actions, including the Letter Before Claim, generally take fourteen days after they’ve been issued. Legal action takes about twelve weeks for a typical case to reach the issuance of a judgment. The case is transferred to a High Court after the judgment has been issued, where documentation is supplied that will help enforce the judgment. The enforcement process itself can take up to 12 weeks after this process has completed. It should be noted that the timeframe for enforcement depends heavily on the sheriff’s ability to make contact with the debtor.

1.4.9 Interests and costs in the legal phase

Interest and collection costs will continue to be added to the debt by the solicitor during the legal process.

1.5 Enforcement

1.5.1 Enforcement in debt

A judgment is the first option creditors have when seeking to recover a debt from the debtor. This is backed up by enforcement, which is done by local sheriffs in the United Kingdom. Enforcement offers can optionally fill in for the sheriff when requested or required. A judgment does not always lead to a successful collection process, and sheriffs are charged with visiting the debtor’s physical address and seeking to recover the debt through asset liquidation or other means.

1.5.2 Enforcement in movable goods

In the event that a debtor cannot make any payment toward an outstanding judgment, it is the right of the sheriff to seize any goods relating to the business that owes the debt. This is done first through a notification of the seizure, followed by the actual seizure of goods. The sheriff then sells the goods and deducts their value from the amount of debt owed to the creditor, less any costs due to the sheriff.

1.5.3 Enforcement in immovable goods

A Judgment Mortgage can be helpful when enforcing a judgment via immovable goods. This mortgage prohibits the property owner from selling to another buyer until the judgment has been satisfied. Multiple Judgment Mortgage documents can be attached to a single address, however, making this method a big gamble for creditors.

1.6 Insolvency Proceedings

1.6.1 General

Insolvency in the United Kingdom comes in a number of different forms, including reorganization, liquidation, and traditional bankruptcy. Voluntary arrangement of insolvency allows for an even percentage of the company’s liquidated assets to be paid to the creditors toward a debt. For full liquidation of a company, an independent liquidator is hired to oversee the process, liquidate the assets, and make payments to creditors.

Companies are permitted to move between different types of proceedings, making things somewhat complex. Collection Agency Service United Kingdom will work on a case-by-case basis to help clients navigate the insolvency process.

We will also advise our clients as to whether or not there is any hope of a payment toward their debt with the company during liquidation on a case-by-case basis. The debt will be registered, regardless of its payment status, with the insolvency practitioner assigned to the case. It will be paid in some portion of the practitioner judges that dividends can be reasonably issued after the liquidation of the company’s assets.

1.6.3 Required documents

To file an insolvency claim, we will need access to the following documents:

– Copies of invoices
– Copies of conditions of sales, if relevant
– Copies of orders, delivery notices, and confirmations

1.6.4 Expected timeframe and outcome

Claims must be filed within six months for formal insolvency. Cases can last for as many as five years in the United Kingdom.