A. The United Kingdom

4. Legal collections

4.1. General information

Within the UK, there are several different and separate legal jurisdictions: England and Wales, Scotland and Northern Ireland. Whilst in general, creditors can take the same actions in each country, there are differences in:

  • Solicitors
  • Timescales
  • Costs

Generally speaking, the first stage of legal action in every jurisdiction is the issuance of an 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
  • Full court proceedings, generally a trial
  • Making the debtor company insolvent, often called winding up

However, in the last option, there is no guarantee that making the debtor company insolvent will recoup any monies. There are two steps to successfully recover monies in the UK by taking legal action. The first step is obtaining a judgment, and the second step is enforcing that judgment.

Whether your debt is insured or uninsured will affect the initial stages of legal action. If the debt is insured and you have complied with all the obligations under the policy, then in most cases, any credit insurance in place will contribute towards the legal costs. You will still be consulted about the legal action, but, if your claim has been paid, the credit insurance will direct such action. If the credit insurance doesn't cover the debt, then we will need you to agree to legal action and its costs in writing prior to commencing litigation. We will also ask you to make payment on account for legal action, particularly if the case is defended.

4.2. Expected time frame

On average, pre-legal actions like the LBC take 14 days after their issuance. Litigation actions take approximately 12 weeks for a standard case to reach a 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 it depends entirely on the sheriff’s ability to make contact.

4.3. Cost and interest in the legal phase

Costs will differ greatly depending on the type of legal action necessary and the jurisdiction where we take legal action. In any case, our experienced collectors will have a full discussion with you regarding costs and timescales before legal action commences.

The court fees for England and Wales were increased in 2014 and 2015. You can find more details 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% to 70% of all the 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. These costs can range from GBP 150 to GBP 500 per hour. It’s not possible at the start of a case to make an exact estimation of its costs, but it’s clear to see that heavily defending costs can easily equal to or exceed the value of the debt itself. For this reason, we will advise on some forms of negotiation and/or mediation. Indeed, the UK government has recently ruled that all cases must partake in some forms of mediation before going to litigation, and, at the very least, be able to show the attempts to resolve the disputed issues between the parties. The solicitor will continue to add the statutory interest and costs to the debt.

(End of chapter 4 - Legal collections)

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