Defended money claims under £10,000 that fall within the Small Claims Track are now subject to the compulsory Small Claims mediation scheme. While the mediation scheme is now a compulsory part of the Court process, neither party is required to reach an agreement at mediation.

Mediation gives the creditor an opportunity to decide whether an agreement would resolve the account more effectively.

The purpose is not to settle at any cost, but to decide whether the offer provides a better outcome than continuing the claim, based on the circumstances of that account.

How to prepare for mandatory small claims mediation

Before the meeting the representative needs a current account position and a clear understanding of the defendant’s point. A dispute about how payments were applied cannot be answered by quoting the latest balance alone because the payment history needs to explain how that figure was reached. If the defendant challenges liability, the question is whether the available evidence supports the claim and addresses what they have raised.

The creditor should also decide its settlement parameters in advance. Which terms could the representative discuss without seeking further instructions, and where would they need to pause? An hour can pass quickly if each change to an offer requires a call back to the client.

When should a creditor settle a defended money claim?

For creditors managing bulk litigation or higher-volume portfolios, blanket settlement instructions would typically be agreed in advance. These may include a settlement figure the representative is authorised to negotiate down to, avoiding the time and cost of referring every offer back to the client. Any case that appears unsuitable for those agreed parameters can still be flagged for separate instructions.

The figure offered will matter but the terms may tell the creditor more about whether an agreement will work. If instalments are discussed, are they realistic in light of what the defendant has said? Can the creditor administer the arrangement on those terms? A settlement that looks acceptable during mediation but cannot be maintained may leave the parties dealing with the same account again.

The creditor also needs to decide whether the claim should continue. Further proceedings take time and involve cost, but avoiding a hearing is not enough reason to accept a poor agreement. Equally, issuing a claim does not oblige a creditor to pursue it to a hearing when a workable resolution becomes available. That decision should take account of the defence and the proposed terms.

Should creditors try to resolve a debt before court action?

Mediation should not be the first meaningful occasion on which a creditor finds out why an account remains unpaid. Earlier contact may open a discussion about an arrangement before proceedings are needed. If a claim is later issued and defended, the representative can approach mediation knowing what the defendant has already said and what has been tried.

Restons’ Litigation Team handles defended actions and can help clients prepare an approach to mediation across higher volume portfolios. The aim is to give representatives reliable information and authority before the appointment, while retaining the judgement needed for the account in front of them.