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What to do if your debt has been sold to a debt collection agency


What to do if your debt has been sold to a debt collection agency

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If you’ve been struggling to pay an account for some time and you’ve fallen behind quite a bit, your debt can be sold to a debt collection agency.

Many companies simply don’t have the resources to chase unpaid accounts, so will instead employ someone else to do it for them or pass it on entirely. This is because they are better at lending you money than collecting it.

Most unsecured debts; such as credit cards, loans and overdrafts are regulated by the Consumer Credit Act, which allows them to be sold on at any point after you have stopped paying.

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How do you know if a debt has been sold?

You’ll be notified by both the original company and the debt collection agency that your debt has been sold on. This will normally be by way of a letter.

The lender can sell your debt on even if you have made a payment arrangement that has been accepted. The reason for this is that when you originally signed your agreement the small print will contain a paragraph that states they can assign the rights for the debt to a third party.

Once you receive this letter, you will need to contact them to make an arrangement as soon as possible. They’ll likely phone you after writing to you, so you’ll have the opportunity to explain your situation and work something out with them – and it’s important to remember not to let them pressure you.

Can you dispute a debt sold to debt buyers?

A lot of the time, your debt has been sold fair and square due to the terms mentioned above. As such, this means you don’t have a leg to stand on when it comes to disputing it.

The only exception to this is if you want to dispute the amount. If you think the balance is too high you can ask for a breakdown of all payments and charges; however, remember that there will be interest and costs added to the debt for admin etc.

If you think the debt you’re being contacted for doesn’t belong to you, you can dispute this with the agency. If they insist that the debt is indeed owed by you, ask them to send proof by way of the original agreement.

How does the collection process work once my debt is sold to a debt collection service?

Debt collection agencies must follow the same rules as the original lender, which means they have the same legal rights. As such, this means they do not have any extra powers.

If you do not make payments, then they are able to take you to court to register a CCJ against you – which will order you to make payments. However, they do not have the power to send bailiffs to your door.

They instead can send one of their own agents to your home. At this point they may put pressure on you to make payment, but for the most part are willing to come to an agreement with you.

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Do I have to pay debt sold to debt collection services?

Yes. When a debt is sold to a collection agency, you then owe the money to them instead, meaning you still have to pay what you owe. This is the case whether your debt has been sold to an agency, or the original lender has passed it to one to act on their behalf.

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. It’s a debt collection agency’s duty to offer you additional support, if necessary, to help you pay back the balance owed comfortably.

Can the debt collector initiate legal proceedings against me?

Default notice

If you do not make payment, the debt collection agency 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 a default notice.

County court proceedings

If the debt is still not resolved after this point, then the agency can put a claim in to the local county court. A County Court Judgment (CCJ) will then be registered against you. This essentially orders you to make payments towards the debt, and if you ignore this, then further action may be taken.

If you do have a CCJ lodged against you for money owed, you should seek legal advice. The best way to avoid this is to arrange a payment plan with the debt collector as soon as possible and attempt to clear the balance owed.

Do debt collection agencies ever give up?

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 of time, then the debt could become ‘statute barred’. This means that the debt will no longer be enforceable due to breakdown of communication.

The limit on this is six years. However, you must have had no contact from the lender within that timeframe. If a debt collector contacts you within six years, then the debt recovery process is still valid.

What will happen if I ignore the debt collectors?

Ignoring debt collectors’ is never the best idea when it comes to dealing with an unpaid account. Sure, you could get lucky and they could give up, but the chances of this are very slim.

Pretending they don’t exist isn’t going to work, they’re still going to send letters and call you multiple times a day. The debt is also just going to get bigger and bigger as they add interest and charges onto the balance.

This could also be the steppingstone to the collection agency beginning court action and a CCJ being registered on your credit file.

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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; they don’t have any special powers.

This means that they will call, email and write to you to ask for payment and encourage you to clear the debt outstanding. It’s very important to engage with them as soon as possible to avoid high levels of interest etc. being added on.

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, then 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 them, then you should seek advice on how to deal with them.

If you’re struggling to deal with debt collection agencies and aren’t sure what to do, we can help. Our experts are on hand to provide you with free and confidential advice, no matter what your situation is. Contact us today on 0808 2234 102 or click the button below to be connected.