Court fees on the rise again

On Wednesday 22 July 2015, the Government announced a new consultation that could see Court fees rise yet again!  This news is likely to rub salt in the wound of those who have already expressed deep concerns over the previous rise in March of this year.

Much of the backlash will be that this is yet another change that favours the debtor, but should the debtors themselves have concerns over the increase?

Summary of changes

In March the Government increased Court fees so that for any claim issued for sums over £10,000, the Court fee would be 5% of the value of the claim.  This is up to a maximum cap of £10,000 for any claims over £200,000.  Under the new proposals, for claims over £10,000, claimants will be required to pay 5% of the value of the claim, up to a maximum cap of £20,000 for any claims over £400,000.

To put that into perspective, under the previous changes a claim issued for £360,000 would attract a Court fee of £1,920.  Currently, the Court fee would be an expensive £10,000. Under the new proposals, the Court fee would be an eye-watering £18,000. That would be a staggering increase of 838% if the proposals were adopted.

We must stress that the proposed increase in fees is only at the consultation stage, and we would encourage you to contribute to the debate here if you want to have your say.  The consultation will close on 15 September 2015, after which a formal decision will be made.

Implications for creditors

Businesses looking to recover overdue or disputed debts will need to consider carefully which cases to pursue through the courts.  It’s now more important than ever for companies to ensure that credit management is a focus area of their business.

The credit control process needs to be robust and have a defined and effective process in order to maximise your chances of recovery.  Once you have exhausted your internal chasing procedures, ensure that your external debt recovery partner:

– Has a deep understanding of your business, and your order-to-cash process.
– Is effective in collecting your overdue and disputed debts through ‘pre-legal’ methods.
– Provides you with proactive solid legal advice as to where there are good prospects of success before taking a case to court.
– Ensure that thorough checks have been made as to the debtors ability to pay before issuing court proceedings.

Implications for debtors

Where the court rules in favour of the creditor, the debtor will then endure the pain of these substantial increase in court costs being added to the amount that they have to repay.

And perhaps this could actually be used to your advantage by warning the debtor at an early stage how much more their liability will be if court proceedings are issued. The minute a debt claim goes into court, the debt essentially becomes 105% of the substantive sum, and this is before interest, late payment compensation and any allowable fixed costs are added.

Recommendations

The smartest credit controllers and debt recovery practitioners will try to use the increased court fees to enhance the effectiveness their pre-action collections, both by ensuring that an even greater emphasis is placed on the pre-legal efforts and using the increase to persuade debtors to pay earlier.

The focus should be on avoiding court claims wherever possible, in which case the court fee rises will not hugely affect your cash flow. This means improving your processes and policies and utilising the services of a credible debt recovery provider. Remember that DCAs ordinarily cannot issue proceedings on your behalf and therefore may not be able to use the threat of the increase in court fees to your advantage. A law firm, on the other hand, can do just that, as well as better advise you on those cases that are cost-effective to pursue.

“Over the past fourteen months, our experience of working with Flint Bishop has been extremely productive, with our cases handled professionally by their experienced team. Their fast, efficient turnaround of our requests has resulted in 93.5% of cases being resolved without the requirement to progress through litigation or court, thus keeping our legal costs to a minimum”

Alison Martin, AR Manager
Marley, Shared Services

For more information, please contact us on 01332 226 474 or email: .