Court fee hike could deter SMEs from taking action

11/03/2015

Civil court fees for claims over £10,000 increased dramatically this week – a move that could deter British SMEs from taking action against late payment.

Under the new rules, which came into force on Monday, the fee for issuing a civil claim worth more than £10,000 has increased to 5% of the sum claimed, with a maximum fee set at £10,000.

The controversial fee increase, of up to 600% in some cases, affects both specified and unspecified claims. A 10% discount remains on all money claims made online and fees for claims in the Small Claims Court, for claims worth up to £9,999, remain unchanged.

The controversial hike has sparked outrage in the business community and critics fear that the increase will prevent small and medium firms from taking action. Research conducted last year found that British SMEs are missing out on billions of pounds because a fear of costs has stopped them taking legal action.

The main reasons listed for not pursuing legal action were: because it’s too expensive (15%), because of the time it takes (14%) and fear of losing (10%). And the new fee increases will only make matters worse for small businesses.

With late payment a threat to the survival of SMEs, the increased fees are particularly worrying for small businesses who may find the change crippling. But, fortunately there are other options available to businesses looking to take action on late payment.

Outsourcing outstanding debts to a debt collection agency can, in some instances, be all that’s required to encourage a difficult customer to pay without the need for litigation.

The involvement of a reputable third party will add further weight to your collections process, often enabling the collections company to play ‘bad cop’ to secure payment whilst you retain your ‘good cop’ role, protecting customer relationships.

Most collection services are success-only, which means there’s no fee unless your money is recovered. Prices vary depending on the value and age of the debt, so it pays to get debt collection companies in early on to minimise costs, maximise your cash flow and hopefully remove the need to seek litigation.

To see how we could assist your business, contact our team on 0800 9774848 or collections@hiltonbaird.co.uk. Alternatively, get an instant debt collection quote to find out how much we would charge should we successfully recover your outstanding debt.