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What costs should you consider when pursuing debt recovery and unpaid fees?

29 May 2019, at 9:30am

Practices may have to use multiple strategies to collect unpaid fees from clients

When faced with a pet in need of emergency treatment, naturally the owner’s primary concern is for their pet. Often the means to pay comes secondary to an animal’s welfare and health, particularly in desperate and life-threatening conditions where treatment is required immediately.

For practices with customer payment delays there is reputational concern of the adverse effect debt chasing can have on vet–pet owner relationships. However, if practices are to operate profitably, there must be a real focus on the recovery of debts from those pet owners who do not pay at all.

Pursuing legal action

The need for legal action should not be the first response to any unpaid vet fees. Practices should make reasonable efforts to obtain payment prior to any alternative action.

Unfortunately, the exercise of sending repeat demands for payment does not always yield the desired result and it may be necessary for practices to have an alternative strategy in place.

Before practices are able to pursue any debt against a pet owner, it is crucial to consider the costs involved with instructing a solicitor to begin the process. This is in addition to any court fees that will be incurred if a practice decides to issue a claim against the debtor.

Prior to court action, the debtor will need to be sent a pre-action letter to allow them the opportunity to make full payment of the debt (or propose a repayment plan) within 30 days. This letter is to be sent in accordance with the Pre-Action Protocol for Debt Claims which applies to any business claiming a debt from an individual or sole trader.

The primary aim of this protocol is to avoid court proceedings where possible and allow the parties to come to a resolution without interference from the court, though this is not always the outcome reached.

The costs associated with issuing the pre-action letter can vary depending on the nature and complexity of the claim. In cases where the debtor is simply ignoring the obligation to pay, a letter containing the threat of court action can prove to be a cost-efficient way of prompting payment or agreeing a repayment plan.

Practices need to bear in mind that it is sometimes simply not cost effective to pursue smaller debts

Thinking strategically

Practices need to bear in mind that it is sometimes simply not cost effective to pursue smaller debts. However, it is likely that non-payment of some fees will stem from larger levels of debt, particularly for treatments or surgeries which attract higher fees. A practice should be able to assess their debts and filter out those which are not worth carrying through to a pre-action letter or court proceedings.

On the other hand, it is also worth bearing in mind that pursuing the larger and more significant debts can attract higher fees when it comes to issuing a claim at court after the pre-action letter “30 days” has expired. Whilst costs for issuing a court claim will need to be fronted by practices, these costs are generally included in the claim and form part of the overall debt to be paid by the debtor.

There is no obligation for practices to continue with court proceedings if payment is not made following the pre-action letter, and whether they are worth pursuing beyond that stage will need to be assessed on a case-by-case basis.

Independent practices may be faced with the most difficulties, particularly where the risk of bearing the upfront costs of issuing court claims may be too great. However, there may be some solace found in the effect of pre-action letters for those practices.

Harrison Clark Rickerbys

Dan Godfrey leads the debt recovery team at Harrison Clark Rickerbys and has extensive experience in collecting debts for a wide variety of professional services. He advises on every aspect of the debt recovery process, from pre-action letters to enforcement of judgments.

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