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The BBA welcomes the opportunity to respond to the Civil Justice Council (CJC) consultation paper setting out proposals recommending the introduction of a General Pre-Action Protocol.
Ms Kitty Doherty
Civil Justice Council
Royal Courts of Justice
The BBA is the leading association for the UK banking and financial services sector, speaking for 223 banking members from 60 countries on the full range of UK or international banking issues and engaging with 37 associated professional firms.
Collectively providing the full range of services, our member banks make up the world's largest international banking centre, operating some 150 million accounts and contributing £50 billion annually to the UK economy.
We welcome the opportunity to respond to this Civil Justice Council (CJC) consultation paper setting out proposals recommending the introduction of a General Pre-Action Protocol that will be used in cases where existing or any future subject-specific Pre-Action Protocols do not apply.
We understand that a key factor in the decision to propose a General Pre-Action Protocol is the perceived success of these subject-specific protocols. However, we suggest that this success is a result of the very fact that these protocols are tailored to the specific situations they are intended to address, which is difficult to achieve when trying to cover a range of situations.
Our response to these proposals first considers some general points relating to the potential impact on our members. We then address the detailed questions set out within the consultation paper.
1. We understand that the most significant area in which the General Pre-Action Protocol would apply would be in relation to debt claims. This is an area of particular concern to our members and we are limiting our response to this area of application.
The BBA does not consider that there is a need or any benefit in having a general pre-action protocol or a revised Practice Direction, for debt claims in particular, the majority of which are likely to be uncontested.
2. The proposal contained in the consultation appears to lack understanding of our members' issues. We feel that there is a potential confusion in the language that is used in the consultation document, in particular, with the use of the word dispute with regards to debt claims. It is not a dispute in the sense that the debtor disagrees with the amount owing.
Litigation is typically only commenced as a last resort by creditors because the debtor, without reason, simply refuses to pay and all other courses of action to recover the debt have already been exhausted.
3. The proposals do not take into account existing regulatory requirements. Lenders are already required to undertake a number of pre-action steps under the Consumer Credit Act (e.g. arrears and default notices) and voluntary codes like the Banking Code, which requires subscribers to deal sympathetically and positively with all cases of financial difficulty.
Customers in financial difficulties potentially have a range of options to choose from to manage payment and debt problems with their lenders' help, or support of debt advisers.
4. A 'one size fits all' approach for every cause of action that is not already subject to a specific protocol would be unworkable, especially for debt cases.
The vast range of debt remedies available (including debt consolidation; debt management plans; Individual Voluntary Arrangements (IVAs); Administration Orders; and bankruptcy) are examples of the variety of circumstances that apply to individuals. The appropriateness of each solution needs to be considered on the merits of the case.
5. The Financial Ombudsman Service (FOS) already provides independent arbitration between firms and consumers on many aspects of financial services, including credit and debt, as an Alternative Dispute Resolution (ADR) service available to consumers.
We wish to point out that referral of complaints to FOS is not optional as far as firms are concerned. Also, debt consolidation, debt management plans and IVAs are all available to consumers as means of avoiding court action, in addition to court led debt remedies, such as Administration Orders and bankruptcy.
6. There are already sufficient mechanisms in place in respect of debt claims to fulfill the aims of the pre-action protocol. The pre-action protocols appear to be attempting to further regulate the industry, rather than the court process. We do not feel that this is the responsibility of the court. The protocol should not conflict with the industry's existing requirements and should not go beyond existing requirements.
It is for businesses, when serving the particulars of the claim, to indicate the relevant regulatory regime that applies and to confirm compliance. It is for the individual to claim and show that compliance has not taken place. It is for courts to ensure that, where applicable, businesses are complying with the regulatory requirements that already exist.
7. Duplication of existing regulation will increase costs, as well as confuse parties. An additional layer of 'regulation' would increase administration for lenders and have an impact on costs. The costs of implementing procedures and adjusting systems to accommodate the General Pre-Action Protocol would not give rise to any additional benefit to the industry or consumers.
8. There is no further requirement for a pre-action protocol. A further layer of regulation would be unnecessary and, worse, confusing. Debt claims should, therefore, be excluded from the General Protocol.
Please find below our responses to the specific questions posed in the consultation document.
Should you have any further questions or require any further information in relation to this consultation response, please let me know.
Yours sincerely
Helen Banks, Director
Responses to consultation questions
1. Question: Do you agree with the proposed new structure of a shorter Practice Direction highlighting the court's case management powers and a General Pre-Action Protocol setting out the requirements on parties to a dispute? Please give reasons for your view.
No. Whilst there may be advantages of the existing specific pre-action protocols, there is no need or benefit for further pre-action protocol in areas such as debt claims, for the reasons explained above.
The BBA believes that a General Pre-Action Protocol is not necessary, given that debt claims would make up the vast majority of cases covered and that other protocols are already in place dealing with other specific situations. Therefore, it is the BBA's view that the Practice Direction in its current format does not require any amendment.
2. Question: Are there particular classes of cases or types of circumstances where the General Pre-Action Protocol should not apply? If so please specify.
We believe that the requirement for a General Pre-Action Protocol is unnecessary. However, if a protocol is to be introduced, the BBA considers that debt claims should be exempt from any General Pre-Action Protocol. Debt claims are already regulated by the Consumer Credit Act and other relevant legislation.
A General Pre-Action Protocol will be a duplication of existing regulation and will increase costs, as well as confuse parties. The BBA believes that a 'one size fits all' measure is inappropriate for cases of debt, as previously explained, and will not work effectively.
3. Question: Do you have any comments on the language used and the drafting of the revised Practice Direction and General Pre-Action Protocol? If so, please specify.
Yes. The BBA considers that there is potential confusion in the proposals, regarding the reason why creditors resort to litigation to recover debts. Not withstanding the explanations under the section headed 'Language' on page 9 of the consultation paper, this is suggested by the frequent references to the word 'dispute' implying that there is disagreement, which the creditor wishes the Court to adjudicate.
It is not a dispute for the reason that the debtor disagrees with the amount owing. In reality the creditor litigates because the debtor, without reason, simply refuses to pay. Litigation is typically only commenced as a last resort by creditors because all other courses of action to recover the debt have already been exhausted.
4. Question: Do you agree with the approach taken to ADR in the General Pre-Action Protocol?
No. The BBA believes that, as the vast majority of debt claims have no valid dispute or defence, ADR does not apply at this stage. The very few cases where a dispute is raised, ADR is already well promoted prior to claims being issued, e.g. general notification of access to FOS as part of the firm's complaints procedure and the provision of FOS rights in the firms' final response to complainants. It is also worthwhile noting that it is mandatory for firms to apply and follow FOS rulings, but not necessarily for individual litigants.
The financial services industry, including the banking and credit sectors, have their own comprehensive checks to ascertain whether or not any dispute exists and, if it does, there are internal procedures to resolve disputes sympathetically and positively, as well as quickly as possible. Creditors are unlikely to issue claims when a valid defence or dispute is indicated and until all avenues of dispute resolution have been exhausted. To do so otherwise is not commercially sound.
5. Question: Do you agree with the required steps set out in the General Pre-Action Protocol, and in particular the approach taken to time limits. Please give reasons for your view.
The BBA does not support the altering of statute on limitation or extending the statutory time-limit, but suggests that it could be in the interests of justice to provide mechanisms, which permit the parties to agree to not raise the statutory defence of time-bar particularly for debt actions, as further explained in the answer to question 9.
6. Question: Would it be helpful to include a 'model' letter (non-mandatory) before claim (for a standard consumer claim) as an annex to the General Pre-Action Protocol?
No. There is no need for additional letters to be included, even if it is non-compulsory, as it will serve no further purpose and may confuse consumers or lead them to the feeling of being harassed by creditors over their debt. Relevant standard information is already provided as part creditors' routine in keeping customers informed of the situation.
7. Question: Do you agree that the General Pre-Action Protocol should include the additional requirements in simple debt claims?
No. As stated in the consultation paper, creditors already provide specific information during their usual account management process. This is further acknowledged by the fact that the Protocol does not require this information to be provided again in letter format, before the claim is issued, because in many cases it would have already been provided as part of the creditor's arrears management process and the debt collection routine.
Creditors engage with debtors at an early stage as possible. Information is provided to consumers at early arrears stage, usually at 1 or 2 months, of the various payment options (e.g. payment holidays) and free debt advice agencies available to help them with their payment and debt problems. Customers in financial difficulties potentially have a range of options to choose from to manage payment and debt problems with their lenders' help, or support of debt advisers.
All cases of financial difficultly are treated sympathetically and positively by our members, who subscribe to the Banking Code. To repeat the same processes again at the claim stage would serve no useful purpose and further delay resolution.
8. Question: Do you agree with the approach taken to experts in the General Pre-Action Protocol? Please give reasons for your view.
We do not envisage that the vast majority of debt claims, which are undisputed, would require the involvement of experts or that individuals would seek expert opinion. However, the BBA considers that the use of experts may become too restricted and interfere with an individual's entitlement to seek their own independent expert opinion.
9. Question: Do you agree that, where limitation is an issue, parties should be encouraged to agree not to take the 'time bar' defence?
To help prevent deliberate delaying tactics from those who wish to avoid their liabilities and/or gain time particularly from debt actions, which are in the main undefended, the BBA considers that, where limitation is an issue, parties should be encouraged to agree not to take the 'time-bar' defence.
Ms Kitty Doherty
Civil Justice Council
Royal Courts of Justice
The BBA is the leading association for the UK banking and financial services sector, speaking for 223 banking members from 60 countries on the full range of UK or international banking issues and engaging with 37 associated professional firms.
Collectively providing the full range of services, our member banks make up the world's largest international banking centre, operating some 150 million accounts and contributing £50 billion annually to the UK economy.
We welcome the opportunity to respond to this Civil Justice Council (CJC) consultation paper setting out proposals recommending the introduction of a General Pre-Action Protocol that will be used in cases where existing or any future subject-specific Pre-Action Protocols do not apply.
We understand that a key factor in the decision to propose a General Pre-Action Protocol is the perceived success of these subject-specific protocols. However, we suggest that this success is a result of the very fact that these protocols are tailored to the specific situations they are intended to address, which is difficult to achieve when trying to cover a range of situations.
Our response to these proposals first considers some general points relating to the potential impact on our members. We then address the detailed questions set out within the consultation paper.
1. We understand that the most significant area in which the General Pre-Action Protocol would apply would be in relation to debt claims. This is an area of particular concern to our members and we are limiting our response to this area of application.
The BBA does not consider that there is a need or any benefit in having a general pre-action protocol or a revised Practice Direction, for debt claims in particular, the majority of which are likely to be uncontested.
2. The proposal contained in the consultation appears to lack understanding of our members' issues. We feel that there is a potential confusion in the language that is used in the consultation document, in particular, with the use of the word dispute with regards to debt claims. It is not a dispute in the sense that the debtor disagrees with the amount owing.
Litigation is typically only commenced as a last resort by creditors because the debtor, without reason, simply refuses to pay and all other courses of action to recover the debt have already been exhausted.
3. The proposals do not take into account existing regulatory requirements. Lenders are already required to undertake a number of pre-action steps under the Consumer Credit Act (e.g. arrears and default notices) and voluntary codes like the Banking Code, which requires subscribers to deal sympathetically and positively with all cases of financial difficulty.
Customers in financial difficulties potentially have a range of options to choose from to manage payment and debt problems with their lenders' help, or support of debt advisers.
4. A 'one size fits all' approach for every cause of action that is not already subject to a specific protocol would be unworkable, especially for debt cases.
The vast range of debt remedies available (including debt consolidation; debt management plans; Individual Voluntary Arrangements (IVAs); Administration Orders; and bankruptcy) are examples of the variety of circumstances that apply to individuals. The appropriateness of each solution needs to be considered on the merits of the case.
5. The Financial Ombudsman Service (FOS) already provides independent arbitration between firms and consumers on many aspects of financial services, including credit and debt, as an Alternative Dispute Resolution (ADR) service available to consumers.
We wish to point out that referral of complaints to FOS is not optional as far as firms are concerned. Also, debt consolidation, debt management plans and IVAs are all available to consumers as means of avoiding court action, in addition to court led debt remedies, such as Administration Orders and bankruptcy.
6. There are already sufficient mechanisms in place in respect of debt claims to fulfill the aims of the pre-action protocol. The pre-action protocols appear to be attempting to further regulate the industry, rather than the court process. We do not feel that this is the responsibility of the court. The protocol should not conflict with the industry's existing requirements and should not go beyond existing requirements.
It is for businesses, when serving the particulars of the claim, to indicate the relevant regulatory regime that applies and to confirm compliance. It is for the individual to claim and show that compliance has not taken place. It is for courts to ensure that, where applicable, businesses are complying with the regulatory requirements that already exist.
7. Duplication of existing regulation will increase costs, as well as confuse parties. An additional layer of 'regulation' would increase administration for lenders and have an impact on costs. The costs of implementing procedures and adjusting systems to accommodate the General Pre-Action Protocol would not give rise to any additional benefit to the industry or consumers.
8. There is no further requirement for a pre-action protocol. A further layer of regulation would be unnecessary and, worse, confusing. Debt claims should, therefore, be excluded from the General Protocol.
Please find below our responses to the specific questions posed in the consultation document.
Should you have any further questions or require any further information in relation to this consultation response, please let me know.
Yours sincerely
Helen Banks, Director
Responses to consultation questions
1. Question: Do you agree with the proposed new structure of a shorter Practice Direction highlighting the court's case management powers and a General Pre-Action Protocol setting out the requirements on parties to a dispute? Please give reasons for your view.
No. Whilst there may be advantages of the existing specific pre-action protocols, there is no need or benefit for further pre-action protocol in areas such as debt claims, for the reasons explained above.
The BBA believes that a General Pre-Action Protocol is not necessary, given that debt claims would make up the vast majority of cases covered and that other protocols are already in place dealing with other specific situations. Therefore, it is the BBA's view that the Practice Direction in its current format does not require any amendment.
2. Question: Are there particular classes of cases or types of circumstances where the General Pre-Action Protocol should not apply? If so please specify.
We believe that the requirement for a General Pre-Action Protocol is unnecessary. However, if a protocol is to be introduced, the BBA considers that debt claims should be exempt from any General Pre-Action Protocol. Debt claims are already regulated by the Consumer Credit Act and other relevant legislation.
A General Pre-Action Protocol will be a duplication of existing regulation and will increase costs, as well as confuse parties. The BBA believes that a 'one size fits all' measure is inappropriate for cases of debt, as previously explained, and will not work effectively.
3. Question: Do you have any comments on the language used and the drafting of the revised Practice Direction and General Pre-Action Protocol? If so, please specify.
Yes. The BBA considers that there is potential confusion in the proposals, regarding the reason why creditors resort to litigation to recover debts. Not withstanding the explanations under the section headed 'Language' on page 9 of the consultation paper, this is suggested by the frequent references to the word 'dispute' implying that there is disagreement, which the creditor wishes the Court to adjudicate.
It is not a dispute for the reason that the debtor disagrees with the amount owing. In reality the creditor litigates because the debtor, without reason, simply refuses to pay. Litigation is typically only commenced as a last resort by creditors because all other courses of action to recover the debt have already been exhausted.
4. Question: Do you agree with the approach taken to ADR in the General Pre-Action Protocol?
No. The BBA believes that, as the vast majority of debt claims have no valid dispute or defence, ADR does not apply at this stage. The very few cases where a dispute is raised, ADR is already well promoted prior to claims being issued, e.g. general notification of access to FOS as part of the firm's complaints procedure and the provision of FOS rights in the firms' final response to complainants. It is also worthwhile noting that it is mandatory for firms to apply and follow FOS rulings, but not necessarily for individual litigants.
The financial services industry, including the banking and credit sectors, have their own comprehensive checks to ascertain whether or not any dispute exists and, if it does, there are internal procedures to resolve disputes sympathetically and positively, as well as quickly as possible. Creditors are unlikely to issue claims when a valid defence or dispute is indicated and until all avenues of dispute resolution have been exhausted. To do so otherwise is not commercially sound.
5. Question: Do you agree with the required steps set out in the General Pre-Action Protocol, and in particular the approach taken to time limits. Please give reasons for your view.
The BBA does not support the altering of statute on limitation or extending the statutory time-limit, but suggests that it could be in the interests of justice to provide mechanisms, which permit the parties to agree to not raise the statutory defence of time-bar particularly for debt actions, as further explained in the answer to question 9.
6. Question: Would it be helpful to include a 'model' letter (non-mandatory) before claim (for a standard consumer claim) as an annex to the General Pre-Action Protocol?
No. There is no need for additional letters to be included, even if it is non-compulsory, as it will serve no further purpose and may confuse consumers or lead them to the feeling of being harassed by creditors over their debt. Relevant standard information is already provided as part creditors' routine in keeping customers informed of the situation.
7. Question: Do you agree that the General Pre-Action Protocol should include the additional requirements in simple debt claims?
No. As stated in the consultation paper, creditors already provide specific information during their usual account management process. This is further acknowledged by the fact that the Protocol does not require this information to be provided again in letter format, before the claim is issued, because in many cases it would have already been provided as part of the creditor's arrears management process and the debt collection routine.
Creditors engage with debtors at an early stage as possible. Information is provided to consumers at early arrears stage, usually at 1 or 2 months, of the various payment options (e.g. payment holidays) and free debt advice agencies available to help them with their payment and debt problems. Customers in financial difficulties potentially have a range of options to choose from to manage payment and debt problems with their lenders' help, or support of debt advisers.
All cases of financial difficultly are treated sympathetically and positively by our members, who subscribe to the Banking Code. To repeat the same processes again at the claim stage would serve no useful purpose and further delay resolution.
8. Question: Do you agree with the approach taken to experts in the General Pre-Action Protocol? Please give reasons for your view.
We do not envisage that the vast majority of debt claims, which are undisputed, would require the involvement of experts or that individuals would seek expert opinion. However, the BBA considers that the use of experts may become too restricted and interfere with an individual's entitlement to seek their own independent expert opinion.
9. Question: Do you agree that, where limitation is an issue, parties should be encouraged to agree not to take the 'time bar' defence?
To help prevent deliberate delaying tactics from those who wish to avoid their liabilities and/or gain time particularly from debt actions, which are in the main undefended, the BBA considers that, where limitation is an issue, parties should be encouraged to agree not to take the 'time-bar' defence.
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