Can You Claim Compensation For An Unpaid Debt?
Introduction
“Can you claim compensation for an unpaid debt?” is a question we are often asked. For recovering the cost of debt recovery is crucial for businesses of all shapes and sizes.
In this blog post, we will look at the law on compensation for unpaid debts, set out how much you can claim, ask if compensation is available for every type of debt, look at how terms and conditions of business can help and set out the process of claiming compensation for an unpaid debt.
The Law On Compensation For Unpaid Debts
The law on compensation for unpaid debts is governed by the Late Payment of Commercial Debts Regulations 2002. These were introduced in the UK on 7 August 2002 in order to implement Directive 2000/35/EC of the European Parliament.
Directive 2000/35/EC was adopted on 29 June 2000, with the aim of streamlining late payment laws across EU member states.
The Late Payment of Commercial Debts Regulations 2002 were later amended by the Late Payment of Commercial Debts Regulations 2013.
How Much Compensation Can You Claim?
As a result of the above legislation, compensation can be claimed on unpaid debts. This compensation is sometimes referred to as ‘statutory compensation’ because it is available as a result of an Act of Parliament.
Compensation for unpaid debts is available, as follows:
- For a debt less than £1,000.00, you can claim £40.00.
- For a debt of £1,000.00 or more, you can claim £70.00.
- For a debt of £10,000.00 or more, you can claim £100.00.
These sums are fixed.
In addition, by reason of Sub-Section (2A) of Section 5A of the Late Payment of Commercial Debts (Interest) Act 1998, “If the reasonable costs of the supplier in recovering the debt are not met by the fixed sum, the supplier shall also be entitled to a sum equivalent to the difference between the fixed sum and those costs.”.
Can You Claim Compensation For Every Type Of Debt?
Statutory compensation for unpaid debts can only be claimed in relation to contracts for the supply of goods or services where the purchaser and the supplier are each acting in the course of a business.
Compensation cannot, therefore, be claimed for debts where the debtor is not a business.
How Terms & Conditions Of Business Can Help
Although helpful, statutory compensation alone is unlikely to cover the cost of debt recovery for businesses. This is why it is important to have terms and conditions of business that place an obligation on a customer to pay legal and administrative costs in the event they pay you late.
How To Claim Compensation For Unpaid Debts
The process of claiming compensation for unpaid debts is relatively straight forward. At first, you must send a late payment letter to demand payment. If that does not work, you must issue court action and include the amount of compensation you are entitled to in your particulars of claim.
Conclusion
If you require help in claiming compensation for an unpaid debt, it is advisable to seek the assistance of a firm of debt collection solicitors. At Bennett Williams Solicitors, we can help you with every stage of the debt recovery process.