If you’ve been struggling to pay an account for some time and you’ve fallen behind on your repayments, the person or company you owe (your creditor) can sell the debt to a debt collection agency.
Being informed that your debt has been passed on to another company can be daunting, but knowing why it happens and what to expect can help put your mind at ease about the whole process.
In this article, we’ll explain what a debt collection agency is, how the debt recovery process works, and what you should do if a credit control company takes over the responsibility of collecting your outstanding debt.
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What is a debt collection agency?
A debt collection agency is a third-party organisation that specialises in collecting outstanding debts on behalf of companies or private individuals.
They’re also sometimes referred to as debt recovery companies or credit control companies.
Many companies simply don’t have the resources to chase unpaid accounts. Given the costs involved in the debt recovery process, it’s often more cost-effective to pass the debt to professional debt collection services, who often return a portion of the principal debt to the lender.
It’s important to know how debt collection agencies operate, how the debt collection process works, and where you can find debt advice if you owe debts that have been passed to a debt collection agent.
How do you know if a debt has been sold to debt collection agencies?
If your debt has been sold on, you’ll be notified by both the original company and the debt collection service that it’s been passed to.
Here is a brief summary of the steps typically involved:
Step one: Debt letter
Companies who specialise in debt collection services will normally contact you by post to let you know that they’re now in control of your debt.
From this point, your original creditor is no longer in charge of the debt and you will have to deal with the debt recovery company directly.
It’s important to note that your original lender can sell your debt at any time – even if you’ve both already agreed on a repayment schedule.
This is because most credit agreements contain a paragraph that gives your creditor the right to assign the rights for the debt to a third party at any point if they wish.
Once you receive this letter from the third party, you will need to contact them to make an arrangement on how best to repay the debt as soon as possible.
Step two: Follow-up phone calls
Some debt collection agencies will follow up with a phone call after writing to you – especially if they haven’t received a response to their initial letter.
This will give you the opportunity to explain your situation and work something out with them. It can be confusing to receive phone calls from a company claiming to be in possession of your debt but you should try to communicate with them in a calm and respectful manner.
It’s also not uncommon for certain debt collection companies to threaten to issue legal proceedings, but you shouldn’t let them pressure you into a payment arrangement you can’t afford or you’re not comfortable with.
Can you dispute a debt sold to debt buyers?
Because your credit agreement will most likely contain small print that covers your creditor selling the debt, there is usually very little you can do to dispute it.
However, you may be able to challenge the amount you are being asked to repay.
For example, if you think the balance is too high, you have the right to ask for a breakdown of all payments and charges.
There may, however, be interest and fees added to the debt to cover the administrative tasks required to do this.
If you think the debt doesn’t belong to you, on the other hand, you should contact the debt collection agency directly.
If they insist that it is indeed owed by you, you must ask them to send you proof in way of the original agreement.
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What happens if I don’t pay a debt after it’s been sold to a debt collection service?
Most collection agencies must follow the same rules as the original lender, which means they have the same legal rights and don’t have any extra powers to recover payment.
However, it’s never a good idea to ignore the person or company you owe – whether that’s your original creditor or a debt collection agency.
Here are some of the actions a debt collector can take if you continue to ignore their attempts to recover the debt:
County Court Judgment (CCJ)
If you don’t make any payments towards the debt, the debt collection agency can take you to court and register a CCJ against you, which is a court order that instructs you to make payments towards the debt. CCJs can have a drastic impact on your credit file so are best avoided if possible.
However, it’s important to note that debt collection agencies don’t have the power to send bailiffs to your door and will likely send one of their agents to your home instead.
They may put extra pressure on you to make payment at this point but for the most part, they will be willing to come to an agreement with you.
Attachment of Earnings Order
If a debt collection agency registers a CCJ against you and you still don’t pay, they can apply to take the money directly from your employer before you get paid.
They can only do this if a CCJ has gone unpaid for some time and they have the permission of the court.
The court decides how much money to take and for how long. They will then make arrangements with your employer to deduct a certain amount each time you get paid – this will be clearly stated on your payslip and can’t be more than 40% of your wages.
Do I have to pay debt sold to debt collection services?
If a debt has been sold to a collection agency, you will still have to pay what you owe. The only difference is that you now owe the debt collection agency instead of your original creditor.
As such, it’s important to contact them straight away to explain your situation and let them know your affordability, especially if you’re vulnerable.
Your original creditor may know more about your situation but a debt collection agency is unlikely to know more than how much you owe and who you owe it to.
It’s a debt collection agency’s duty to offer you additional support, if necessary, to help you pay back the balance owed comfortably.
Where can I get more advice on What to do if your debt has been sold to a debt collection agency and other debt solutions?
To discuss your options and get the support you need to deal with your debt today, contact us now on 0800 0431 431 or click the button to get started
Can a debt collector initiate legal proceedings against me?
A debt collector can initiate legal proceedings against you but must follow a certain process to do so. We’ve outlined each step in more detail below:
Default notice
If you don’t make payment, the debt recovery company is within their right to take you to court. This normally happens if they have been chasing you for some time and have yet to get a response from you.
However, they will first have to send you a warning letter to ask you to make payment to avoid court, normally in the form of something called a ‘default notice’.
This is a document warning you that your account is at risk of being closed if you don’t make up for the money owed within a certain period.
County Court Judgment
If the debt is still not resolved after this point, the agency can put a claim into the local court for a County Court Judgment (CCJ) to be registered against you.
This essentially orders you, the debtor, to make payments towards the debt, and if you ignore this, then further action may be taken.
The best way to avoid a CCJ is to arrange a payment plan with the debt collector as soon as possible and attempt to clear the balance owed.
If you do have a CCJ lodged against you for money owed, you should seek legal advice as soon as possible.
When do debt collectors give up?
Most debt collectors will chase you for a long time to get payment for what you owe. At the end of the day, it is their job to make sure the debt is paid, so they will do whatever they can to collect the balance.
If you do not receive contact from a debt collector for a lengthy period, it could mean that the debt is ‘statute barred’.
Statute barred debt is debt that is no longer legally enforceable because a certain length of time has passed since it’s been acknowledged.
The Limitation Act (1980) puts a six-year limit on most debts like payday loans and personal loans, but you must have had no contact from the lender within that timeframe.
Certain debts, such as income tax and capital gains tax owed to HMRC, however, have no time limit.
If a debt collector contacts you or you acknowledge the debt within six years, then the debt recovery process is still valid. Even contacting the creditor to ask a simple question about the debt is enough to reset the six-year limitation period.
What power do debt collectors have to recover outstanding debts?
As mentioned above, private debt collection companies have the same rights as the lender they bought the account from and don’t have any special powers to collect debts owed.
This means that they will call, email and write to you to ask for payment and encourage you to clear the outstanding debt.
Debt collectors do, however, have the power to send one of their agents to your door. It’s important to remember that this is not the same as a bailiff and they cannot take any of your belongings, they’re simply there to try and arrange payment.
What should I do if I face debt collection action?
If your debt has been sold to a debt collection agency, communication is key. Contacting them to explain your situation will put you in good stead and the agency could be more willing to work with you to create an affordable payment plan.
In cases where you’re unsure who is contacting you regarding the debt, the best thing to do is to contact the original lender to find out.
If you don’t want to speak to the debt collection agency, you should seek advice on how to deal with them as soon as possible.
Where can I get more advice on dealing with debt recovery agents?
Dealing with debt collection firms can be extremely stressful, especially if you’re not sure who they are, what powers they have, and what rights you possess to protect yourself against them.
At Creditfix, we have helped thousands of people deal with debt collectors through reliable debt advice and formal debt solutions. If you’re going through financial trouble, there is always help available.
To discuss your options and get the support you need to deal with your debt today, contact us now on 0800 0431 431 or click the button to get started.
