A letter before action is the last letter you should send before commencing legal action to recover a debt. A final demand letter formally reminds and requests your client or customer one last time to make payment before you take legal action. This letter before claim details all the necessary information including the date the debt was owed, any interest that is to be paid, and how long the debtor has to pay before legal proceedings will take place.
Overview of the Letter before action
WWhen should I use a letter before action?
Use this letter before action:
- when you want to recover a debt that is owing to you or your organisation
- when you want to take further action after a second payment reminder letter has been sent and the debt remains outstanding
- when you intend to give a last chance for payment before commencing legal proceedings for collection and enforcement of the debt
What's included in a letter before action?
This letter before action covers:
- the amount owing (the debt)
- the date the debt owing should have been paid
- whether interest is payable on the debt
- automatic calculation of the amount of interest to be paid in total
- automatic calculation of the continuing daily amount of interest charged as long as the debt remains unpaid
- the threat of issue of legal proceedings for a county court judgment (CCJ) which will be taken if the debt is not paid by a deadline
- other enforcement procedures to recover the debt
What's a letter before an action?
A letter before action is a final demand letter that reminds and requests your client or customer one last time to make payment before you take a legal action. It sets out the amount that is owed, the date the debt owed should have been paid, whether interest is payable and the deadline for paying off the debt in order to avoid legal proceedings.
Do I need a letter before an action?
You need a letter before action when you want to recover your debt and when you intend to give the debtor a last chance for payment before commencing legal proceedings for collection and enforcement of the debt. This letter will ensure that your customer or client understands that this is the last chance to pay and what will be the consequences of not complying with it. It is also important to show the court (in the event of legal action) that you have made all possible effort to contact the debtor and resolve the issue outside of court.
Can you use this letter if there was no contract between the debtor and yourself?
You can use this letter if there is no contract between the debtor and yourself. However, if there was no contract, and you wish to charge interest you can only claim statutory interest. This only applies to business-to-business transactions. Currently, the statutory interest is 8% plus the Bank of England base rate for business-to-business transactions. You cannot claim statutory interest if your customer is consumer and not acting in the course of business. In such scenarios, you can only claim interest if the contract sets an interest rate.
What are the next steps if you receive no response to this letter before action?
If you receive no response to this letter within 14 days you may commence legal proceedings.
Further advice
Ask a lawyer for:
- advice on debt recovery and dispute resolution procedures
- advice on debt recovery outside England and Wales
- advice as to whether an insolvency procedure is appropriate
This letter is used for debts which are subject to English law or organisations based in England and Wales.