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Default risk fuelling surge in court debt recovery option

Of 1,120 UK businesses it polled, business information
provider
Creditsafe
says 75% intend to start legal proceedings against debtors in the next 12
months.

Fears that customers may default is driving many to leapfrog alternatives
such as negotiating a mutually suitable repayment agreement, or better credit
terms. It says 65% think defaults will continue rising throughout 2009 and adds
that court petitions are expected by many to balloon as companies become
increasingly desperate.

The survey also found that in anticipation of default risk, companies are
writing far more stringent late payment penalties into contracts, with 22%
reporting they will do this into the middle of 2010. Sixteen percent have
already moved to introduce ‘punitive’ measures on suppliers and partners, it
says, as far back as May 2008.

In one case, it found one company had written a clause into its terms and
conditions allowing it to charge 100% interest on debt outstanding after the
30-day payment period.

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