Why the latest BIS report is like a weak cup of tea

Is the Department of Business, Innovation and Skills (BIS) just like a very, very weak cup of tea?  Perhaps – and I hate weak tea.  I had an excess of it at an educational institution in the 1960’s and thought it had long since disappeared until I stopped at some services on the M1 recently.

There it was again! Pale coloured, insipid dishwater. Ugh!  Only this time it was £1.70. Not even good enough to dunk a digestive.

A report like weak tea…

Yes, you’ve guessed it, BIS has produced a 34 page report ‘Building a Responsible Payment Culture’ saying very little indeed of substance.  In fact it lacks clarity and firm foundation throughout.

To give you a feel for the weakness of the document, the strongest assertion was in one area of reform in the public sector which was “subject to parliamentary time”.  I smell the delicate aroma of long grass there, don’t you?

The Foreword states that “The measures we set out will mark a significant step forward in establishing the responsible payment culture that UK businesses need to thrive”. So where is this significant step forward? Where is the real bite that UK industry so badly needs?

Whilst it is true that legislation cannot solve the endemic refusal to pay on time – the under-used and under exploited Late Payment Acts have shown us that – I do believe that strong support for our legal system, and late payment remedies, at the legal end of the chain can only help. 

Weak and slow government action

Sadly the Government has form when it comes to late payment. They have acted too slowly, too weakly and implemented changes that run contrary to their proclamations of support for businesses, particularly the small businesses that serve as the engine room of the UK’s fragile economy.

The European Directive last year (2011/7/EU) was adopted by the Government as late as possible, and I have seen no initiatives at all for buttressing “the recovery of costs” for legal collections, or anything like it.

It’s no good implementing regulations if you don’t give businesses the wherewithal to take advantage of them. Then earlier this year Court fees were doubled – a classic own goal by the Government and a massive step in the opposite direction!

Regardless of party affiliations, we all know that politics is the art of sounding like they might do the possible, and then doing nothing.  There are some nice sounds about supporting industry organisations like the ICM, and the Prompt Payment Code, but they’re not really taking on board the heart of the issue about Big Business imposing ‘unfair payment terms’.

I have to wholeheartedly support Chief Executive of the ICM, Philip King’s response that the Government has ducked the issue stating that “what is critical is the certainty of payment, more than being caught in arguments over 30 or 60 day terms.”

At the end of the day, we all know who the serial late payment offenders are and it’s about time the Government implemented some changes with real clarity and bite.

And on that note, I’m off for a good strong mug of builder’s brew.

Written by Charles Wilson, CEO, Lovetts PLc

News from the CCUA Conference

Conference

As always the CCUA conference was a great success and this was followed by a hugely enjoyable gala dinner.  Although I was unfortunately unable to attend I managed to keep up to date with the events via  Twitter which proved very successful. I particularly enjoyed the photos and thought the celebratory cupcakes looked delicious!

Congratulations And Thanks

I am sure you will join with me in congratulating Central Region member, Jeremy Chaplin as he takes up his post as Chairman of the CCUA and Amir Ali, as he continues in his role as Vice-Chair. With changes coming into force next year with the new PCOL  and MCOL systems and continued issues with the court service, it will be a busy year for all concerned and ‘as many hands make light work’ if we all pull together we can make the work load a little lighter for all concerned.

A huge thank you must go to Brian Havercroft for all the hard work and dedication he brought to the role of Chair and although he will no doubt be kept busy, he may be able to take it a bit easier.

Another thank you must go to Anthony Sharp as he steps down from role as conference Chair and congratulations to Lisa Keating as she takes on this role.

Regional meetings

Looking forward now to the regional meetings for November…

Greater London and South East Region – next meeting will be taking place at BDO offices in Baker Street, London on Thursday 21 November starting at 10.30am. David Philpott, Conduct Redress and Standards at The Financial Conduct Authority (FCA) has agreed to come and address the meeting.

South West Region – next meeting will be on Wednesday 27 November also starting at 10.30am and will take place at the Offices of Burgess Salmon in Bristol.

Diary dates for December

The Northern Region meeting – 5 December 2013

Central Region meeting – 10 December 2013.

 

Author: Christine Power FCILEx – specialising in Debt Recovery at Lightfoots LLP

Is the economic cake now rising?

Signs of recovery

We all know what happens when you bake a cake with plain flour and forget to put the baking powder into it. It comes out rather flat, leaden and unappetising.

Just like our economy over the past few years. However, I’m beginning to see signs of recovery, are you?  Confidence is to the economy what baking powder is to cakes.  It’s the tiniest ingredient, but absolutely essential for success.

Rising figures

I noted recently that the Council of Mortgage Lenders’ June figures show that lending was up a huge 26% on the same month in 2012.  The quantity of goods sold at retail level is up 2.2% to June (ONS), small yet significant if sustained across the whole sector. So it looks hopeful.

At Lovetts, we’ve seen more companies prepared to ‘get tough’ with their customers, with our July Claims showing the strongest month since mid 2011. This makes me think that companies are more confident in their own future, and that they can safely take legal action against their customers, without that ‘fear’ of finding themselves bereft of business.

‘Fear’ and ‘confidence’ are probably more significant in business than anything else.  It is easy to blame the banks and rightly so. Even today’s headlines show that the cost of putting right the PPI scandal is over £18 billion, twice the entire cost of the Olympic Games!  But even without bank support for business, confidence can lead to winning ways.

It is the same in Credit control.  How confident is the CEO in getting future business, so he/she will allow the FD and credit manager to go strong on recovering outstanding funds?  More confident now, it seems to me.

Beware…

But beware – companies, particularly SMEs, are prone to struggle for cash as they start growing again.  Most small businesses underestimate the liquidity required for even single figure % growth in Sales. So they’ll hold onto the creditor’s money for longer, particularly as their banks will not yet have loosened their lending strings.

So the cake is cooking nicely we trust, but none of us can afford to take our eyes off ledger overdues lest we get our fingers burnt just when things look more positive.

Author: Charles Wilson, CEO of Lovetts plc, Debt recovery solicitors

Hitting a moving target?

Last night, tennis commentators were saying that yesterday was one of the most extraordinary days in Wimbledon history.

An unprecedented number of top stars dropped out of the tournament, either through injury or through unforeseen loss to a much lower-ranked opponent.  Federer, Sharapova, Tsonga, Azarenka, Cilic, Isner all went home.

Coincidentally, I was asking my legal claims manager at Lovetts to complete the online survey about HMCTS service levels which all CCUA members have just received from chairman Brian Havercroft.  (I shall be analysing the results in July for the CCUA as a follow-on from my speech at last year’s Annual Conference).

What is the connection between Wimbledon and the CCUA?

Well, it’s this.  As I’ve talked with my managers recently, it is clear that the problems in the Court Service are changing all the time. Like tennis balls. So too is our feedback to HMCTS, it’s a moving target.

It takes repeated effort to obtain it, and then feed it back to senior Court staff. And they’re asking for it…if you know what I mean. For instance, last year, our CCUA and CCBC members scored our local courts as relatively high for competence, helpfulness and response.

I suspect this year, our views may be different.  Resourcing for local courts is patchy, and delays and mistakes are, in Lovetts experience, more rife than ever before.  How sad, when you think how dedicated the local court staff have been over so many years.

The huge performance difference between courts

Two weeks ago, I was shown a report produced by HMCTS South-Eastern region at a CCUA meeting.  It showed that some local courts in the South-East were performing very badly compared to others.

The exact timescales for handling claims in top and bottom performing courts were shown. Thus, a small claim in Brighton in 2012-13 typically took 25 weeks from Claim to Hearing.  A small claim in Reigate (a few miles up the A23 from Brighton) took 44 weeks.

That is a staggering 19 weeks difference, or 4.5 months longer to get a case heard and resolved.

Let’s keep feeding back

Wimbledon stars are knocked out when they cannot hit the moving target of a small yellow ball.

If we don’t keep feeding back to HMCTS – through CCUA – the detail of what is happening in our Courts, then that moving target will not be hit, and we’ll be in danger of being knocked out of the tournament. Bluntly, our debtors may, by then, be bust.

Author: Charles Wilson, CEO of Lovetts plc, Debt recovery solicitors

£600 – arbitrary and irrelevant

When the High Court and County Courts Jurisdiction Order was brought in in 1991, it set a clear distinction between the jurisdiction of County Court Bailiffs (CCBs) and High Court Enforcement Officers (HCEOs), with CCBs enforcing judgments up to the value of £5,000, and HCEOs who could only enforce judgments of £2,000 and above.

A constraint with no relevance

While the £5,000 upper limit for CCBs has remained, the lower limit for HCEOs has steadily come down and now stands at just £600. Even judgments below that amount can be enforced by an HCEO if court fees take it over the £600 mark.

In my opinion this constraint no longer has any relevance: it is such a low amount and prevents many claimants from accessing the many advantages of using an HCEO.

Over-stretched and under-resourced

I regularly hear complaints from claimants that CCBs were either unable to recover their debt, or did not have the capacity to attend promptly. They are definitely over-stretched and under-resourced, often through no fault of their own.

Yet when these claimants instruct an HCEO as a next step (providing the judgment is for £600 or more), many have been pleasantly surprised to find that their case was, after all, enforceable, when a different approach was taken.

HCEOs do have several advantages, most notably they are private sector businesses paid only on results, not salaried civil servants. They can also force entry to commercial premises and tend to work beyond regular office hours, so they can reach more judgment debtors at home.

Removing of the lower limit

I would strongly suggest that the £600 minimum should be removed completely, allowing HCEOs to enforce judgments regardless of value.

I do acknowledge that the charging structure may need to differ for sub £600 judgments, to ensure they are proportional to the original debt, but I believe that the jurisdiction order is creating an artificial and now irrelevant barrier. It is time to give claimants access to a more results-oriented enforcement agent.

Author: David W. Carter, Joint Managing Director – The Sheriffs Office

Salford Business Centre – The Highs and (more often that not!) the Lows

I thought that this month would be good time for a review of the Salford Business Centre as myself and my colleagues are continuing to experience problems with the service provided.

Unfortunately this would indicate no improvement has been made in respect of the service they provide despite the hard work of Brian Havercroft and the CCUA team which is somewhat disheartening.

A few incidents

Maybe I’m being too harsh on Salford and maybe improvements have been made but from where I’m sitting, I have yet to find them.

l’ll start with a few incidents that have occurred in our office over the last couple of months:

  • Two requests for judgment sent in respect of two defendants. Only one Judgment Order received, so we chased to see if the second judgment request had been dealt with. In response we received a further copy of the Judgment Order we already had and a letter with no reference to our query.
  • Request for judgment in respect of the first Defendant sent on 20 March 2013 and chased up on two occasions in April.  Received a response from Wakefield County Court on 7 May 2013 to advise judgment has not been entered in respect of the first Defendant. It appears Salford sent our letters chasing for the Judgment Order to Wakefield as the case had been transferred out for enforcement in respect of the second Defendant. Letter of complaint sent to Salford 10 May 2013.
  • Judgment in default entered and application for Charging Order made. Subsequently received a Varied Order as it appears an admission form was received by them and not dealt with appropriately.

I’m sure the above examples are not isolated incidents but look forward to being corrected if they are.

The next step

However, moving on, the next step is to look at how the service can be improved and how we can assist with this process. Is further training required? Do they need more staff? Is the process of work allocation flawed?

One idea we came up with in our office was that it would be really useful if any correspondence could be logged on their system as soon as they receive it to ensure actions are carried out in chronological order.

At least then if we need to call them, they could inform us if they have received the relevant document and we can continue with action accordingly.

And on a positive note…

To finish on a positive note and to show light at the end of the tunnel, I have one example of very good service. A  Judgment Order was received whereby the defendant’s name was spelled incorrectly.

A telephone call was made to the Business Centre to inform them of this and two days later we received a informing us the incorrect spelling had been amended.

Maybe in a few months time, we can write a list of positive comments!

Author – Christine Power FCILEx – specialising in Debt Recovery at Lightfoots LLP

Update on Directive 2011/7/EU – Combating Late Payment in Commercial Transactions

The Directive

The Directive has been designed ‘to combat the culture of late payments in commercial transactions..’, however, it also indicates that companies should undertake their own checks to ensure customers are in a position to make payment and furthermore, protect themselves by preparing accurate and timely invoices.

The Consultation Process

The Department for Business, innovation and Skills (BIS) prepared and distributed a consultation which asked for views on four main areas. This resulted in 80 responses from individuals, businesses and their representatives which BIS advise was ‘satisfactory’ number for a consultation of this type.

Outcome

The Government response to the consultation has been published by BIS with the results as follows:

  • Public sector payment terms will remain at the current 30 day payment period.
  • The directive will be implemented by amending the existing Late Payment of Commercial Debts (Interest) Act 1998 rather than repealing and replacing it.
  • The three tiered approach to compensation on debts will remain. (£40, £70 or £100 can be claimed dependant on the size of the debt).
  • Any contract concluded before 16 March 2013 will be not be subject to the Directive.

Additional Information

Further questions were posed on the consultation to assess the impact of late payment and in particular where this may impact on the survival of a business. It appears from the responses received indicate that reduced cash flow leads to a lack of investment and in turn, results in increased borrowing.

Credit agencies reported that many small businesses were not aware of the Late Payment Interest Act and therefore were not claiming this. Once they became aware of the provisions of the act they started to use it.

Views from small businesses indicated that they are spending time chasing debts which could lead to a loss of profit as this is time that could be spent generating business.

Time for Change!

The changes will come into effect on 16 March 2013, but please note they will only affect contracts concluded after this date.

Written by Christine Power – Chartered Legal Executive