If you’ve fallen behind with payments to a company you owe money to (a creditor) – they may pass or sell your debt on to a third party company.
These other companies are debt collection agencies; debt collectors who make it their business to get back the money you owe.
Here, we’ll take a look at what happens when your debt is sold by your creditors, what rights you have when you’re dealing with debt collection agencies, what they can do to get what’s owed from you, and what options you’ve got if you need debt advice.
If your debt has been sold to a collection agency, the original creditor and the debt collection agency will usually write to you to let you know.
You’ll usually get phone calls from the company – but may also send messages and emails too, depending on which contact details you’ve given when you signed up as a customer originally.
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Unfortunately, a debt can be sold or passed on even if you’ve got a repayment agreement in place with the company you owe money to.
The reason is tucked away in the small print terms of the credit agreement you signed with the original creditor. In line with the consumer credit act, it will explain that your debt can be sold on, even if you just drop behind by one payment. So, any payment arrangement you set up after missing a payment (or making a part payment) won’t necessarily stop them getting debt collectors involved.
Shortly after the debt has been sold, the agency will get in touch and usually ask you to make a full payment straight away. Don’t worry though; it’s unlikely that you have to do this – they’ll usually just ask to see if they can get the debt tied up as quickly as possible.
More realistically, they’ll expect you to set up a repayment plan with them.
At this stage, you should explain to them your situation. Don’t worry – debt collectors talk to people who owe money all day, every day – so they’ll usually be friendly and professional. It’s important not to let debt collectors pressure you into making unrealistic payments or payments that will leave you short elsewhere. Instead, it’s better to work out how much you can afford, then stick to paying that each week or month.
Although it depends on the type of debt you have, collection agencies often authorised and regulated by the Financial Conduct Authority (FCA) – so they follow strict ‘Standards of Lending Practice’ rules about how they pursue debt. Generally, if your debt has been sold – each of the companies involved will have followed the rules exactly.
You’ll find an explanation of what could happen in the credit agreement or contract you signed when you got the credit or product. It will outline what happens if you slip behind – and it may even name the collection agency that will be instructed to get the money back.
One of the most common disputes that comes up when debt collection agencies get involved is about how much is owed. Even a small debt may suddenly increase when creditors decide to sell the debt. This is because debt collectors add their own charges and interest. If you think the amount is too much, you should ask for a breakdown of all costs – which they should send to you in writing.
If you feel like you’ve been unfairly treated and the company isn’t willing to resolve the problem, you may decide to pursue a complaint with the Financial Ombudsman Service.
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No system is completely free from errors – so if you think a creditor has contacted you about a debt that isn’t yours, you should talk to the debt collection company about it.
If you still think the debt isn’t yours but they insist it is, the best way to check is to ask for a copy of the original creditor agreement. This should be the document you signed when you took the credit out – and it should have your name and/or signature on it.
It might feel like owing money to a debt collector is more serious than the original creditor – but it’s not. The consequences of not paying a debt collection agency are the same as not paying any other creditor you have debts with.
If you continually fail to pay, you will usually get information in a letter telling you that you’ll be taken to court. This is the first step towards a County Court Judgement (CCJ) – where the court will order you to pay.
Debt collection agencies cannot send bailiffs to enforce their debt. They may tell you they’re going to send a ‘debt collector’ – but this is not a bailiff, and a debt collector does not have the same legal powers as a bailiff.
Although you might have got into debt with the original creditor (the company you took the credit out with) – if the debt has been sold, you’ve lost the opportunity to pay them directly.
You may even find that if you call them, they can’t process any payment or talk to you about your balance – instead, they’ll usually give you the collection agency’s name and phone number.
Yes. Quite simply, you still owe the money – even if it’s passed to a different company.
There are different ways a creditor can pass or sell your debts on. They might have a company that deals with debt and recovery services on their behalf – or they might just sell it and wash their hands of the debt completely. Either way, it had to be repaid – and, if it’s not, the local county court will order you to pay it back.
Yes – a collection agency might send someone to your home – but don’t panic, they’re not bailiffs.
Effectively, a home visit from a debt collector is just the same as the phone calls you’ve received. They cannot put any pressure on you to make payment toward your debts – and they cannot force their way into your home. What’s more, they have no right to take anything from your home to pay off the debts – or give you the impression they might.
The trouble is, when debt purchasers send people to your home, they tend to add additional fees to your balance for the visit. With this in mind, it’s a good idea to make a payment arrangement as soon as possible and stick to it.
Ignoring any kind of debt is a bad idea – because it never makes it go away.
In fact, if you ignore debt collectors, they’ll usually just up the pressure – calling you at different times of the day and possibly sending people to your home. Ignoring debt collectors could put you in a worse situation – owing a lot more than you did previously.
Yes. A debt collection company is the same as any other creditor – they can take you to court if you don’t pay.
If you end up facing court action, it’s very unlikely that it will come as a surprise. Usually, you’ll be sent lots of letters and receive lots of calls to tell you that you must pay. They will also explain what happens if you don’t. If the agency does take you to court, there’s a strong possibility you’ll get a County Court Judgement (CCJ) – a legal order from the court, demanding that you make repayments.
A CCJ will have a huge impact on your credit rating too. In fact, you might find that you struggle with mobile phone contract, credit cards, overdrafts, and other common types of credit.
Debt collection companies don’t give up. You’ve got to remember that collecting debts is their job – so they’re very good and very persistent.
When a collection firm buys your debt from the original creditor, they’re taking a bit of a risk. If they don’t manage to get the money that is owed, they would have to write-off what they’ve spent. With this in mind, you can expect them to do everything legally possible to get in touch with you and get their money.
If a debt or debts you owe has been sold or passed to a collection agency, the very first thing to do is talk to them. You might feel like it’s the last thing you’d like to do – but communicating with them is absolutely vital.
Remember, you’re going to be talking to a professional person who deals with this kind of thing every day. Debt trends are increasing – and more and more creditors are seeking the help of debt collection agencies. Virtually everyone has unsecured debts – and millions of people experience debt problems – so you’re not alone.
When you talk to the agency you owe the money to, it’s important to be as realistic as possible. As much as they might like the sound of you promising to clear the debts quickly – the best way is to commit to an affordable amount without falling behind again.
If you’re struggling to keep up with payments – or your money worries are getting on top of you, you might want to track down trustworthy debt advice from industry experts who can provide support. Remember to look for a company that is authorised and regulated by the Financial Conduct Authority – so you can be confident you’re getting good information.
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