Outsourcing debt recovery

The Civil Proceedings Fees (Amendment) Order 2014 brings about the latest hike in fees for starting proceedings to recover money. At the lower end of the scale, the minimum issue fee to recover a sum up to £300.00 has increased from £15.00 to £25.00. At the top end of the scale, the creditor fee to recover a sum exceeding £50,000.00 has increased from £500.00 to £815.00.

Indeed, these are the lowest fees possible to issue claims ‘electronically’ (through the County Court Bulk Centre) and the increases are even more dramatic to issue claims ‘in paper’ (through the County Court Money Claims Centre). The bottom end of increases starts with a £20.00 rise to an issue fee of £115.00 to recover sums between £1,500.00 and £3,000.00, and a whopping £250.00 increase to recover sums exceeding £300,000.00, now up to a £1,920.00 issue fee!

What do you get for a Claim?

The Fees Order refers to these fees as being payable “to recover a sum of money” but this is only a fraction of the story – additional costs may be incurred in entering Judgment and yet more Court fees and costs on applying to enforce a Judgment.

Fortunately for creditors, the Court fees payable for applications to enforce Judgments remain unchanged in this latest tranche of increases, as do the Civil Procedure Rules’ Part 45 Fixed Costs. However, the latest changes continue an upward trend in Court fees, when most other service providers are under pressure to reduce costs to remain competitive or even stay in business. What’s more, there is no guarantee of any improvement in terms of service, with limited availability for direct contact and long listing periods.

As a result, it is becoming ever more important to maximise your investment in litigation to maximise your prospects of successful recovery.

Maximising your investment

A number of businesses rely on their internal credit control function to manage cases through the legal recoveries process – however, are they really best-placed to do this? We are seeing an ever increasing number of examples that make the case for outsourcing debt recovery:

  1. Overheads: Many businesses don’t have the internal resource to even chase delinquent customers with the frequency that is often necessary to achieve a recovery or monitor instalments. This problem is exacerbated when the volumes of debts increase or reduce, as too little resource means that defaults may go unpursued and, conversely, too much resource increases capacity unnecessarily. This is a difficult balancing act. Concentrating on the core and profitable side of a business by maintaining and growing existing customer relationships and identifying and developing new sales opportunities is money better spent than focusing resources on debt recovery. 
  2. Uniform approach: Good customer relationships are vital to maintaining repeat business – the involvement of an outsourced legal function represents a clear distinction between you and your product or service on the one hand and your debts on the other. Keeping debts at ‘arm’s length’ also maintains an element of objectivity. Whereas retaining matters internally may mean that only the strengths in a case are seen and weaknesses not even considered, outsourcing provides a ‘fresh set of eyes’. Matters of principle, unfortunately, cost money and a third party review can highlight the commercial realities in taking legal action, which could otherwise be overlooked. Escalating recoveries through specific stages within certain timeframes is also a strict requirement of some credit insurance policies. A credit policy which details an outsourced legal recoveries function may result in favourable premiums. 
  3. Threat - the power of a solicitor’s letter: It’s a common misconception many credit controllers hold that if a customer hasn’t paid them on a receipt of a letter or telephone call from them, then they won’t pay anyone else. However, a solicitor’s letter has the power to collect where a credit control letter cannot because it is the clearest indication of a matter being escalated through the legal process. Not only should a Letter Before Claim be compliant with the Practice Direction on Pre-Action Conduct but, if sent from a solicitor, it will also carry with it an implicit capability for escalating the claim quickly and efficiently through the legal process. 
  4. Staying current: Significant changes occur regularly in the sphere of recoveries, with ever-developing case law and new/amended legislation enacted to keep pace with changes in European Law. Recent changes brought in by the Late Payment of Commercial Debts Regulations 2013, for example, have significantly improved a creditor’s position, entitling them to the ‘reasonable costs’ in recovering the debt if not met by compensation. ‘Staying current’ is key to maximising both your ultimate recovery and your rate of recovery, particularly with a renewed emphasis on the insolvency process as a method of debt recovery. 
  5. Obstacles: When it is necessary to escalate the legal process, credit controllers are sometimes faced with a difficult task of identifying the exact legal entity that a sales force has contracted with or that a logistics department have delivered to… Even in what seems a relatively straightforward business-to-business relationship there are a variety of different entities and contractual arrangements that can be at play. What are the implications in terms of liability? These are not uncommon dilemmas and it is equally regular for a Defence to be filed or, perhaps worse, enforcement to be frustrated. That is, if the party still exists, given the growing number of dissolutions and a variety of forms of insolvency. 
  6. Ubiquity: A credit controller cannot be everywhere at once and an expert in all areas of law; however, a full service international top 20 law firm, with relationships and strategic partnerships with service providers nationwide and out of jurisdiction, can be. Our offices and solicitors agents cover the length and breadth of England & Wales, Scotland and Ireland. Our Enforcement Officers and Trace Agents conduct site visits, doorstep enquiries and execute against goods & property nationwide on a daily basis. We are a full service law firm, providing expert services for businesses in all industries. Further afield, we have a seamless global network of agents around the world, who specialise on the law in their individual jurisdictions.
  7. Risk: There is a growing risk in debt recovery and consumers, largely brought about by yet more debtor-centric legislation to protect the rights of consumers against creditor businesses. Risks lie in the appropriateness and compliance of collection techniques being employed, with pre-action conduct a keen focus of the current Rules and costs sanctions a real possibility for creditors found in breach of them. In enforcement, risks lie in adopting an appropriate method of enforcement and executing it correctly – too many Charging Orders are ineffective because of incorrect registration. Instructing solicitors immediately reduces the risk to your business. 
  8. Cost – the ‘bottom line’ for any business: The good news is that whilst Her Majesty’s Courts & Tribunals Service’s fees are increasing, the amount allowed in respect of legal representatives’ charges is actually falling in real terms. Part 45 Fixed Costs on issuing Claims, entering Judgment and applying to enforce Judgments has not increased since 1998. Commencing a claim to be served by the Court for a value between £25.00 and £500.00 remains at £50.00; calculations indicate that this should be equivalent to £76.83 now. Likewise, commencing a claim for a value over £5,000 remains at £100.00; calculations indicate that this should be equivalent to £153.66, accounting for inflation. We are also a County Court Bulk Centre (CCBC) user, which means that we are able to further reduce the outlay incurred in court fees by issuing through the Claims Production Centre (CPC) – savings start at £10.00 and rise to £95.00, depending on the sum claimed. 
  9. Experience: We have developed a variety of tactics and styles of approach to elicit a response and payment from even the most difficult types of debtors. We take literally hundreds of payments on a daily basis, with a variety of methods of payment. As well as expertise in the law of debt recovery and enforcement, we have experience in volume of a myriad of different debtor types and sectors. We foster sharing of information, knowledge and best practices to all of our Clients’ benefit. Ultimately, there is no substitute for professional training and experience and the volume (whether low or high) of matters that you choose to refer is no bar to instructing us. There is a recoveries solution we can provide for every Client. 

How to move forward with outsourcing?

Our Recoveries Department is experiencing a surge in SMEs and large blue chip companies requesting advice on outsourcing. We offer an initial consultation service to define the scope of your outsourcing requirements, understand your business and your legal recoveries needs and provide an individual Risk / Reward analysis to demonstrate the reasons why outsourcing part / all of your debt recovery function will promote the success of your business in the longer term.

We appreciate the sensitivities that our consultation may involve and, therefore, any advice you seek from us in respect of such projects would, of course, remain confidential between key stakeholders. If outsourcing is then determined to be a viable proposition, we can assist with mapping process objectives to ‘make it happen’, in either the short, medium or long term.

There will, no doubt, be solutions that we can offer for all stages of the collections and legal recovery process and we would be happy to discuss these further with you.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Neil Jinks


I am a Director within the recoveries team at DWF. I have over 25 years of experience working in law firms, the credit industry and High Court enforcement sector, managing and developing debt recovery operations and client relationships.