Barely a year goes by without an increase in the court fees for civil claims, including taking a debtor to court – and the increases in just the past three years have been truly eye-watering.
It began on April 22nd 2014, when fees for claims worth over £1,500 went up by at least a fifth. The cost of claiming for a debt of between £5,000.01 and £10,000.00 alone rose by a staggering 86%, from £245 to £455.
But on March 9th 2015, claims over £10,000 got even more expensive as the previous fixed fee system gave way to a cost calculated as 5% of the claim amount, up to a maximum fee of £10,000 per claim.
The percentage increases here, compared with the fees charged prior to April 2014, are quite astonishing, and on a debt of exactly £200,000.00 the rise from £1,080 to £10,000 represents an 826% increase.
If you regularly make claims against non-paying customers for sums of over £1,500, the changes to the court fee structure are quite punishing in scale, and in many cases you are unlikely to be able to claim those fees back.
On top of this, there is always the risk that you will lose the claim, or even that the debtor will fail to pay after a judgment is made against them – which leaves you in the position of either dropping the case at your own cost, or paying to take them back to court.
Court fees for money claims, 2013-17
Up to £300.00
5% of claim
5% of claim
5% of claim
5% of claim
5% of claim
The above table shows the court fees for claims made prior to April 22nd 2014, from that date until March 9th 2015, and since then until the present day.
Before 2015, debts of £5,000.01-£15,000.00 were treated as a single fee band. From March 9th 2015, the fee for debts of £10,000.00-£15,000.01 changed to 5% of the total claim amount – up to 206% more than in 2013.
It’s worth noting that the switch from a fixed fee to a percentage on debts of £10,000.01-£200,000.00 means that the increase in the fee depends on how much you are claiming.
Remember also that the value of your claim includes any interest you may have added to the original debt as per your terms and conditions – so claiming statutory interest can actually increase the court fee you have to pay, if it takes you into a higher claim bracket.
How can debt recovery help?
Debt recovery is a very different process from going to court, and even sending your initial letters via a debt recovery agent can be preferable to writing via your solicitor.
For a start, the stated aim of debt recovery is to recover the debt. While that might sound obvious, the aim of the courts is to enforce the law in principle – even after a judgment, the debtor might be unwilling or unable to pay you what the court says they owe, and it can take further costly court action to enforce the ruling.
A reputable debt collection agency will not charge setup fees, but instead will charge a contingency based on the amount that is ultimately recovered.
That means, compared with taking no action at all, you always come out in profit – you just pay a small percentage of the claim amount to the debt recovery agent, and only when the claim is successful.
The fee structure is transparent upfront, with no hidden costs, and again the only increase in the amount you pay will come if you decide to take the case to court later.
Your first port of call
So when an invoice goes overdue, who do you turn to first? If you have a trusted solicitor, you might reasonably go to them for advice, but they are likely to take you down the legal route towards court action.
When you approach a debt recovery agency first, you are able to explore the less costly (and often more effective) options instead.
Debt collectors can make more frequent calls and send more letters to your debtor, all at no extra cost per call or letter on top of your agreed fee for the claim.
The tone of the communication can be tailored to the nature of the claim too – more understanding for debtors who are genuinely trying to pay, and more stern for those who are maliciously withholding payment.
It’s also a great opportunity to uncover the facts behind any legitimate disputes that could harm your case if you do end up in court – so that you don’t pay a court fee only to lose your case on a technicality.
Controlling your credit
As always, we would recommend incorporating prompt and persistent debt recovery action as part of your overall commitment to effective credit control.
By appointing CPA to handle your credit control overall, you can give your customers a dedicated telephone number for enquiries related to payments and invoices – this will ring directly through to our team, but we will answer it with your company name.
We can keep on top of your invoicing, take immediate authorised action on any overdue invoices and unpaid debts, and ease the administrative burden on you of looking after your company’s finances in those respects.
Compared with both the cost and the time it takes to pursue even a single claim through the courts, it’s easy to see why debt collection is the first port of call, leaving the threat of court action as a backup for those debtors who still refuse to pay.
The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.