Debt Recovery - Frequently Asked Questions

James Guthrie and the Veritas Legal debt team have many years of debt recovery management experience. We’ve included answers to some of the most common queries covering debt, credit control and debt recovery legislation. We help businesses across the South West and the UK. For further advice call us on 01392 498686 or 01803 617077.

To see the full answer to each question, simply click on the (↓ click to read more...) link.

Q: Will I lose my customers by using Veritas Legal?

A: The use of Veritas Legal will not lose customers – quite the contrary. Our services, when applied to your delinquent accounts at the soonest opportunity, will highlight problems, which if solved, will actually strengthen customer relationships. (↓ click to read more...)

By moving quickly on unpaid debts you will identify problems/queries at the earliest opportunity. A debtor with a genuine query quite rightly will not be happy to be asked to pay for something they shouldn't, but an apology for your oversight and your swift response to the problem will be much appreciated and remembered.

Using a simple example, it's always very sobering to remember that with a 10% profit margin a bad debt of 750 will require an extra 7,500 of turnover simply to replace the profit lost.

We will help you differentiate between those customers who can't pay and those that won't pay. We have the know how to apply the appropriate degree of pressure to your debtors, whilst at the same time remaining tactful, polite and diplomatic.

Q: Surely asking my client for interest and compensation will lose their custom then?

A: Not in our experience. However from a purely tactical point of view the first thing you should consider when deciding whether to invoke this legislation is whether the claim for compensation and late payment interest will delay the payment of the principal sum. (↓ click to read more...)

If you are very anxious to get a large sum owed to you into your bank account you will have to think twice as to whether you wish to aggravate the situation by making a claim for compensation when without it you may get paid without any fuss.

In addition, if you have a cherished client that has only defaulted once and is not likely to again, why undo months, if not years, of good work by your sales force to secure that client, with one ill placed demand? It is after all better to have customers that pay a little slowly than to have no customers at all.

There is a very fine balance, between slow and late, but the sooner you act, with or without the demand for late payment interest and compensation, the better reputation you will gain for your company, as your customers will become better educated that this is the way in which you will act if payment is late.

By incorporating the legislation into your terms and conditions, it should act as a deterrent against future default.

Q: How can you offer this FREE debt recovery service, as nobody else seems to?

A: Simple – we make a claim for interest and compensation under the Act over and above the value of your debt. In 98% of cases your debtor will at the very least pay the debt owing to you, if not the interest and the compensation. (↓ click to read more...)

If everything sought, ie the debt, interest and compensation are paid all well and good. You get your debt paid with interest and we get paid too.

If only the debt is paid, or the debt and interest, then you either consent to us pursuing the interest and/or compensation on your behalf at no cost to you, or alternatively you pay us the sum equivalent to the compensation payable under the Act having regard for the size of the debt, as per the illustration below.

Size of unpaid debt Sum to be paid to the creditor ("Compensation)
Up to £999.99 £40
£1,000.00 to £9,999.99 £70
£10,000.00 or more £100

Q: Who can claim late payment interest and compensation?

A: The Late Payment of Commercial Debts (Interest) Act 1998 as amended by the Late Payment of Commercial Debt Regulations 2002, provides that From 1st November 1998 - small businesses have a statutory right to claim interest from large businesses and the public sector on debts incurred under contracts agreed after that date. (↓ click to read more...)
  • From 1st November 2000 - small businesses have a statutory right also to claim.
  • Interest from other small businesses on debts incurred under contracts agreed after that date.
  • From 1st November 2002 - all businesses and the public sector will have a statutory right to claim interest from all businesses and the public sector on debts incurred under contracts agreed after that date.

Q: If a business is consistently paying late for the service we provide them, can we start to charge interest under the Act, even though we did not agree that we would at the start of doing business with them?

A: It is not necessary for you to have notified your customer at the start of your relationship with them of your intention to charge late payment interest and you do not have to refer to it in your contract. However, it is advisable [but not obligatory] that you amend your terms and conditions and make reference to your statutory right to interest in future contracts, as this may act as a deterrent against late payment. (↓ click to read more...)

The matter becomes complicated if you already have a term that provides for contractual interest that will be charged on overdue accounts as this is deemed to be a "substantial remedy" and therefore you cannot rely on the Act.

However, if you have no terms at all relating to late payment, then you can rely on the Act to safeguard your position.

It is advisable, in addition to informing clients verbally of the right to charge interest as part of standard payment terms, suppliers of goods or services should state clearly on all written communications, credit application forms, order confirmations, invoices and all contracts:

"We understand and will exercise our statutory right to interest under the Late Payment of Commercial Debts (Interest) Act 1998 if we are not paid according to agreed credit terms."

If you are in any doubt, please send us a copy of your terms and conditions and we will examine them for you and advise you as appropriate. There is no charge for this service.

Q: Does anybody produce a user friendly publication that will tell me more about this subject and my rights under the Act?

A: We have always found the information at www.payontime.co.uk to be a good source of information for companies.

Q: I need to recover some bad debts but they are quite old. Is it worth taking action?

A: Provided the debts are no older than 6 years, then it is certainly worthwhile instructing us to issue a letter before action and chase the account by telephone, as this will cost you nothing in any event, unless money is recovered on your behalf. (↓ click to read more...)

However, we would advise you to ascertain an up to date address for any legal letters to be sent to if the debt is old, as it is a pointless exercise chasing a debt at an old address.

If you need a trace report, that can be arranged at a cost of 40 plus VAT on a no trace - no fee basis. At least that way, you know that your debtor will receive our letter and there is a good address for service of legal proceedings.

Under the Limitation Act 1980 a debt will be "statute barred" i.e you cannot bring legal proceedings on it, if it is more than 6 years from the date when the debt became due.

For example, an invoice issued on 1 September 2012 that was due on 1 October 2012 will be statute barred on 30 September 2018, if you have not issued proceedings in the County Court before that date.

It makes it all the more important to ensure that you have a good address beforehand, otherwise time could run out on you.

Call Veritas Legal Debt Recovery Services on Exeter 01392 498686 or Torquay 01803 617077
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