Invoice collection is the process of pursuing payment of debts owed by businesses. If you have unpaid invoices then the company you owe may employ a debt collection organisation - you may be aware that there have recently been changes in the way these invoice collections will be dealt with.
New rules came into effect on 4th May 2021 requiring collectors to provide more support and to avoid intimidation of the customer when attempting to retrieve debt payments.
To help understand these changes and the affect it will have on you and your business, we have put together a few simple steps outlining how the new invoice collection changes work:
1. Legal requirements
First and foremost, to collect any debt in the UK, the collection company needs to be registered as a Debt Collection Agency and only then are they able to recover debt on behalf of your creditor. The registration is to make sure that the company collecting the debt follows ethical and legal debt recovery rules, ensuring all liabilities are collected within the legal requirements.
2. Debt letters
If you fall behind on your payments and the collection agency writes to you asking for payment, these letters can no longer threaten and intimidate. This means they must:
- Use simple, easy to understand language - not complicated legal jargon that you struggle to understand. Letters must also be written in plain English, with all legal terms explained.
- No longer use capital letters to intimidate. If a point needs to be made it should be underlined. Capital letters are often interpreted as aggressive.
- Deadlines cannot be assigned for payment if they know you are unlikely to be able to meet these.
- All correspondence must now include information on free debt advice services to help if you are struggling to pay.
3. Debt recovery
Before debt recovery action is taken, creditors must send reminders in the form of a letter, email, text message or phone call. Meetings must be arranged to help the customer with a possible payment plan. The creditor can now no longer add charges to the debt unless they were included in the original contract you had with them. Any charges added are not to be more than 8% plus the Bank of England interest rate.
Contact from a debt recovery agency can no longer be outside the standard working hours of 8am to 9pm and no contact or information about your debt can be put on public social media profiles. All contact must be restricted to your company, not family members or acquaintances.
5. Breathing space – debt respite scheme
There are now regulations to help that allow you to have space and time to sort out your financial problems. This is called a Breathing Space Period, allowing time for you to resolve any financial problems you might have. There are 2 types of Breathing Space Periods:
a. Standard breathing space
This is available to anyone with problem debt, giving them legal protection from creditor action for up to 60 days. In most cases, interest and debt charges will be frozen and any attempt to action debt enforcement will be stopped with no contact from creditors.
b. Mental health breathing space
If you are receiving mental health crisis treatment for any reason then the breathing space will last as long as your treatment plus an extra 30 days. During mental health breathing space, unless there is permission from a court, no enforcement action can be taken against your company and no contact can be made regarding payment or any steps taken to recover payment.