The Protocol applies to all businesses claiming payment of a debt from an individual debtor and it will therefore apply to the collection of all school fee debts.
More information is required in and with letters of claim, standard forms have been introduced and debtors should be given more time to respond and an opportunity to make payment proposals throughout the pre-action process.
The new procedure requires 'enhanced' letters of claim, which set out the following information:
In addition, the school needs to enclose:
Please note that schools are now required to allow parent/debtors 30 days to respond to a letter of claim. They should respond on the reply form provided.
If a parent/debtor does not reply within 30 days, the school can usually commence court proceedings. However, the 30 day grace period may be extended if the parent/debtor indicates that he or she is seeking debt advice, requests further documentation from the school or requires more time to pay.
If the parent/debtor indicates that he or she is seeking debt advice, the school is required to allow the debtor a reasonable period to obtain such advice.
Should the parent/debtor request copies of any relevant documents from the school, these should be provided within 30 days.
If the parent/debtor then requires more time to consider them before responding to the claim, a reasonable extension should be given.
If the parent/debtor requires more time to pay, the Protocol requires the school and the parent/debtor to try to reach an agreement for the debt to be paid by instalments, based on the parent/debtor’s income and expenditure. If the school is unwilling to agree this, it should say why in writing (for example if an previous instalment arrangement has been broken without reasonable justification).
If the parent/debtor fails to complete the reply form fully, the onus is nevertheless on the school to contact them to obtain any further information needed to properly understand their position.
If the debt is disputed, the parties should exchange information and disclose documents sufficient to enable them to understand each other’s position and the school must provide any document or information requested or explain why the document or information is unavailable within 30 days of receipt of the request.
If settlement cannot be reached, the parties are obliged to take appropriate steps to resolve the dispute without commencing court proceedings and, in particular, should consider the use of some form of alternative dispute resolution (ADR).
The school should give the parent/debtor a minimum of 14 days’ notice of its intention to commence court proceedings (unless, for example, the limitation period is about to expire).
As a result of the changes, the issue of proceedings can now be delayed by up to 90 days.
Failure to comply with the new Protocol for debts where letters before action have not been sent before 1 October may result in:
the stay of court proceedings to remedy failures to comply with the Protocol and delayed collection of debt
additional cost sanctions (such as payment of the debtor’s legal costs or a failure to recover the school's own costs)
an inability to recover interest from a debtor (or recovery at a reduced rate)
The Protocol demands more patience when collecting outstanding debts and an acknowledgement that the recovery of school fee debts will be more time consuming in the future. Court proceedings should be an option of last resort.
In order to mitigate the effect of these changes on cash flow, we recommend that:
your admission arrangements are robust
you consider undertaking credit checks against parents before a place is offered
you react swiftly to default, using exclusion procedures where appropriate, to avoid the unnecessary escalation of debt
you seek a written record of a debtor/parent's:
income and outgoings before entering instalment plans
admission of their liability to pay the debt if it is allowed to accrue
debts are referred to us earlier for action
action sheets are accompanied by copies of relevant contractual documents and an up to date statement of account and additional charges in all cases
you consider issuing standard instructions to us about means checks, ADR and the issue of proceedings for referred cases