Several debt recovery news articles over the past few days have mentioned the positive effects of a ‘Letter Before Action’, but what exactly is one of those?
When you hire a debt recovery firm to pursue a debtor for an overdue payment, the first steps are to try and secure full payment of what is owed, without having to go to court.
One part of this is to threaten all of the legally allowable penalties – such as a fixed fee, reasonable debt recovery costs, and statutory interest.
But usually when you do this, in the first instance it is because the threat of extra charges can be enough to make the debtor pay the original bill – and if they do so promptly enough, it’s normal to waive those extra fees.
A Letter Before Action bridges the gap between informal reminders of what is owed, and formal action to recover the debt – and it’s important you don’t miss out the LBA completely.
So what should be included in an LBA?
- Your name and contact details
- The reason for the letter
- The action required
- The amount owed – including reasons for any extra charges
- A list of the evidence you have to prove your claim
- An offer of mediation or other alternative dispute resolution
- A deadline for a full response (typically 7-14 days)
- A request for any documents the debtor must provide
- A clear warning that you will take the matter to court
- A reminder of the rules that apply to both creditor and debtor
It’s sensible to clearly mark the document ‘Letter Before Action’ at the top, and to send it by registered post so that you have proof of the date of delivery.
An LBA can be an effective debt recovery tool in itself, as it will often trigger the debtor to pay what they owe – usually while turning a blind eye to any interest and fees you have added to the total.
When the deadline for a response has expired, it’s up to you to decide what to do next – whether you are satisfied with any amount received, or if it’s worth taking the matter to court.
If you would like to talk to a member of our team about our debt recovery services please do not hesitate to contact 0808 149 9167.
Alternatively if you found this article helpful we would recommend reading our previous blog, ‘Four steps on the debt recovery escalator.’