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Recovery costs for late payment

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7 years 2 weeks ago #967 by Safe_UK

Mrs June Davison wrote: Hi David

Many thanks for your reply.

As the invoices, which totaled almost £8,773.20 (including VAT) were dated 6 March 2013, it would appear from your comments with regard to the new legislation that we are not legally entitled to pursue the debtor for collection charges.


That is our current understanding of the legislation, it isn't retrospective so only applies to invoices raised after the 16th of March.

Mrs June Davison wrote: We did add on some interest, which was eventually paid along with the original debt, but have not as yet sent a demand for statutory compensation, which I understand would only be £70!! Perhaps you could clarify whether this needs to be demanded in the form of a letter or an invoice?


You can charge fixed collection costs on each and every invoice paid late. So if you have 10 invoices you can add 10 lots of collection charges.

We would suggest outlining the specific invoices paid outside of terms in a formal demand letter.

Mrs June Davison wrote: This is the first time we've used a collection agency and in fairness to them, their Contract did state that they would attempt, but could not guarantee, collection of their costs (15% of monies collected, payable on each amount collected).


Basically what that means is they will ask for collection costs to be paid, but as you correctly state elsewhere unless your own terms and conditions allow for the addition of extra costs they can not legally force the debtor to pay these charges on invoices raised prior to the 16th of March 2013.

Mrs June Davison wrote: What has actually caused some misunderstanding is that at the initial meeting with my Son, their representative implied that as all our paperwork (except the Contract), pointed out that failure to pay would result in a collection agent being instructed and/or court proceedings being commenced, then we had a fair case for recovering their costs.


That may well potentially be the case, but we would wager that kind of argument would end up in front of a judge.

Mrs June Davison wrote: This clearly has not been the case. The collection agency have stated that they cannot legally pursue the debtor (who has now paid off the original debt) for their costs as this was NOT outlined in the Terms & Conditions of our Contract with them. I assume that this is actually the case?


That is our understanding, unless your agreed terms explicitly state you will add collection costs you have no legal recourse for their recovery.

Mrs June Davison wrote: We have now added a clause to our Contract which we hope will cover us if this situation ever arises again.


It should help, although you are covered by the new legislation stating it again can't hurt!

Mrs June Davison wrote: Thus far we have paid the collection agents a one-off lifetime membership fee of £700 (inc. VAT) together with £900 recovery costs.


Ouch!

Mrs June Davison wrote: It looks to me that as the debtor refused to pay these costs, he knew how to work the system well enough to be confident he would get away with it.


Quite possibly, we see similar situations all the time. The problem is that some agencies can promise the earth to get you to sign on the dotted line. Especially if they get paid in advance...

Mrs June Davison wrote: Extremely unfair to a small company who rely heavily on customers paying on time.


Agreed and one of the reasons we and people like David lobbied hard for the ability to add the full collection costs on to overdue invoices.

Mrs June Davison wrote: I suppose we will now have to put this down to experience and right-off the collection fees.


Look at this customers payment history, you can theoretically reclaim fixed costs on any invoice they have paid late in the last six years. That may go some way to negating the recent outlay.

On the plus side, the agency at least managed to recover the principle sum plus a small amount of interest :)

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7 years 2 weeks ago #968 by Littlemac
Hi John

Again, thanks for this. I'll certainly give it some consideration.

One thing is for sure, our debtor knew his way round the system and exploited the loopholes prior to 16 March. He probably does it all the time.

Thank you to everyone for the input, it's been very helpful and extremely enlightening! Lesson learned!

Regards
June Davison
B & C Building Contractors Ltd

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7 years 1 week ago #978 by Littlemac
Hi John

Just as a follow-up. The collection agents wouldn't consider trying to recoup the remaining statutory interest or statutory compensation as it wasn't added at the beginning. I decided there was no further mileage in arguing the point with them and opted for addressing this myself directly to the debtor.

A letter was sent detailing the remaining statutory interest and the statutory compensation. The debtor was given until Wednesday 26 June to pay, failing which court action was threatened. Guess what? They didn't pay.

My question now is whether you may think that court action would be successful. The debt can be proved, but from what I've read about other people's experiences, it would seem the courts make their own decisions. So what is the point of the Law?

We don't want to end up with further costs to pay and egg on our face!

Any advice you or anyone else can provide in relation to taking this to the small claims court, would be very much appreciated.

Regards
June Davison
B & C Building Contractors Ltd.

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7 years 1 week ago #979 by john@termsandconditions.co.uk
Hi June

Look, our court system is slow and costly and won't always give you the results you hope for. BUT I think it may be worthwhile going ahead with a small claim IF:
i) you're prepared to wait - a small claim takes on average 6 months to be heard by a judge according to recent figures by the Ministry of Justice. And by no means do all claims get a hearing.
ii) the amount you are claiming is worthwhile vs the claim fee.
iii) your claim is solid and the supporting documentation is in order. Use Dave's payontime calculator to work out the numbers correctly.
iv) you are prepared to enforce the County Court Judgement when successfully awarded. Upgrade your warrant of execution to a High Court writ if the amount is over £600. High Court Enforcement Officers have much greater powers than bailiffs.

If you haven't made a claim before if might be worthwhile just for the experience. It'll add steel to your correspondence with future debtors. Don't worry about 'egg on face'.

One thing that could save you the court fee is to work out the claim, fill in a paper version and give the debtor one last chance to pay what is yours by statute. Give them 7 days and add that you are all good to go. It does work sometimes in which case you can save the claim fee and a 6 month wait. Some say that sending the debtor a copy of an unsigned but completed claim form to the debtor is a legal grey area but it has worked for me in the past as it shows you are serious.

Good luck and keep us posted.

Best Regards
John Hackwood

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7 years 1 week ago #980 by Littlemac
Hi John

Thanks for your reply and for the suggestion about considering going ahead with a claim for the experience, which is certainly worth thinking about. We're now looking into the procedure and will keep you posted of developments.

Thank you for all your help, advice and support with this.

Regards
June Davison

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6 years 11 months ago #988 by Littlemac
Hi John

As promised I'm keeping you up-to-date with developments.

Firstly, I have to say a very big thank you. I decided to go ahead through the Courts and put in a claim for the statutory interest and statutory compensation owed, and for good measure I also claimed for half of the recovery costs (amounting to £350). As you suggested I also sent a copy of the completed claim form to the debtor prior to the Court serving the paperwork. I am happy to say we had a great result. The debtor paid up.

All-in-all the exercise was successful and we're more than happy with the outcome.

So on behalf of B & C Building Contractors Ltd, please accept my thanks for all your help.


Regards
June Davison

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