Description of the programme

Her Majesty's Courts Service (HMCS, now the Courts and Tribunal Services HMCTS) launched the Pre-Action Notice (PAN) pilot scheme in 2005.

The PAN is a letter encouraging debtors to make contact with creditors to avoid court proceedings. The letter sets out the steps a debtor should take to avoid court action and includes details of organisations providing free debt advice and assistance on debt-related matters.

The evaluation compares the effectiveness of two versions of the PAN and the standard warning of impending court action issued by creditors. Two versions of the PAN were trialled; one issued on a creditor's letterhead by the creditor, the other issued on court letterhead by the County Court Bulk Centre (CCBC). Control groups received standard warnings of impending court action from the creditors.

The study involved people who owed money to utility companies, government departments, local authorities and debt collection agencies.

The study

The University of Exeter conducted an impact evaluation of the PAN pilot. Published in 2007, the study assesses the effectiveness of the PAN pilot on debtor engagement with their creditors prior to court proceedings being issued. Two versions of the PAN were tested, and findings compared to those from a control group receiving the standard warning from creditors. The impact of the PAN was assessed by analysing data from creditors about debtor engagement with them. The findings were validated using HMCS data, alongside questionnaires completed by debtors (274) and qualitative follow-up depth interviews with 44 of the debtors (Questionnaires were sent by post to 5,704 people who owed money. A response rate of 5% was achieved).

Key findings

The evaluation found:

• The PAN had no overall effect on the frequency of debtors engagement with creditors, although it improved engagement rates for some group, it reduced it for others.
• The PAN was not well remembered by debtors. However, respondents’ who recalled receiving a warning of court action did commonly make contact with the creditor to try to negotiate more time to pay the debt.
• Warnings of court action were taken seriously by debtors but this did not mean that they would respond. Factors influencing the likelihood of a debtor seeking to engage with a creditor include: past and current debt experience, beliefs about court action, and beliefs about ultimately getting out of debt.
• Low levels of debt advice seeking amongst debtors were identified, with debtors being more likely to seek advice when they perceived their problems to be critical.
• Some debtors welcomed the possibility of having debt repayments deducted from their social security payments at source.

The evaluation findings suggested that there are two main ways to increase debtor engagement with creditors:

• Firstly, measures creditor organisation can take as soon as debtor behaviour changes emerge in relation to bill payment, such as bills being paid later or not at all. Measures include offering alternative payment models (i.e. more frequent payments).
• Secondly, taking into account all claims against an individual at the same time, both the advisory stage and when seeking a settlement with creditors.

The evaluation concludes that there is no evidence that the pilot forms of the PAN increased debtor engagement with creditors. Therefore, there was no obvious case for making the PAN mandatory and the standard practice adopted by creditors to warn debtors of impending court action was deemed sufficient and appropriate.

Points to consider

Only 247 completed questionnaires were received, with very low response rate (5%).

The findings showed that overall the PAN had no effect on creditor engagement rates. However, these findings should be viewed with caution. Given the low response rate noted above, these findings cannot be generalised as representing the behaviour of all debtors (However, several points of the study, conclusions are validated by agreement with the HMCS data, which are at the level of the entire debtor population involved in this pilot