Case Study

No such thing as an empty threat when it comes to debt recovery

11th October 2019

No such thing as an empty threat when it comes to debt recovery

In his latest article, Debt Recovery Manager Arshad Mohammad looks at how a no collection no fee situation can benefit those organisation who may have written off a ‘lost debt’.

“Organisations faced with situations where debt may not be recoverable, often feel the matter is not worth pursuing due to the level of costs that may be incurred. However using a ‘no collection, no charge’ fee structure can offer a possible solution.

In the following scenario a client (Client X) had come to us as he they wanted to pursue a debt owed to them by Debtor X. At the time they thought there was little chance of success.

Due to the complexity of the matter a bespoke letter before action was required to address all the issues that were seen to be a cause for concern for the Client.

The letter before action was sent and no response was received from Debtor X. Upon reviewing the matter and knowing full well that all the issues were addressed within the letter, we advised the Client to issue County Court proceedings for the full amount, including late payment interest and charges as there was no reason for Debtor X to withhold payment.

Within a week of the claim form being served we received a call from Debtor X asking how much was due. We explained that as they had not dealt with the letter before action and a claim was issued, it was the full amount on the Claim Form. We then received confirmation from Debtor X that the full amount was transferred to the Client, and the Client confirmed receipt of cleared funds, which including interest, charges, costs and fees.

This is a clear example of a debtor falsely believing that the warnings the Client or the legal representatives are giving them are empty threats and no further action will be taken. As a result, they have had to pay much more than the principal amount, which is what they could have paid had they dealt with the letter before action.

It is important for clients to act quickly when chasing debts to ensure they carry forward what they claim. Equally debtors should understand that if they fail to respond to a letter before action, legal proceedings will take place, especially if every opportunity has been given to them to resolve the matter.

For further information on anything contained in this article, please contact Arshad Mohammad


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