Debt Collection Agencies

Debt collection agencies act on behalf of creditors to recover overdue payments. They use various methods, including communication and negotiation, to encourage people to repay what they owe.

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If you have outstanding debts that you're struggling to repay, your creditor (the individual or business you owe) may reassign your debt to a debt collection agency (DCA) with more time and resources to recover the money owed.

Finding out your debt has been sold to a debt collection agency can be daunting, and it's normal to have more questions than answers. For example, is a debt collector the same as a bailiff? And, why do debts get sold to debt collection agencies in the first place? The debt collection process can vary, but doing your research can help you know what to expect.

What is a debt collector?

"Once a debt collector takes over your debt, they become the legal owner of the debt and will start pursuing you for the money owed."

The term 'debt collector' can sound scary, but it's simply the name given to individuals who are hired to collect unpaid invoices and debts. Most debt collectors work for debt collection agencies but a small minority work for private companies or even themselves. Some also specialise in certain types of debt or large or small debts.

Usually, a debt collector will be brought into the recovery process when your creditor has been unsuccessful in recovering the debt themselves. They can be hired to collect debts from individuals with problem debt as a result of missed payments and businesses with unpaid invoices due to poor credit control and cash flow.

Once a debt collector takes over your debt, they become the legal owner and will start pursuing you for the money owed. This means that your original creditor will stop contacting you about the debt.

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What can a debt collector do?

The most important thing to remember about debt collectors is that they don't have any special legal powers and can't make changes to your original credit agreement. Some people even view their debt being sold to a debt collector as a blessing in disguise as it often leads to greater flexibility and fewer interest and charges. 

They can get in touch with you by phone, text, email, or post and will likely keep contacting you until you respond and arrange a payment plan. They can also take court action against you if you don't pay, but this is rare and is usually only considered as a last resort.

However, debt collectors can't lie or mislead you about their legal powers or contact you so often that it could constitute harassment or abuse. They must also refrain from threatening you with violence, using obscene language, and refusing to tell you their name or who they are when they call you.

Are debt collectors the same as bailiffs?

The terms 'bailiff' and 'debt collector' are often used interchangeably, but while they are both authorised to collect unpaid debts, there are several differences between them that you should know about.

For example, bailiffs are count-appointed officers with the legal power to enter your home and seize your belongings to repay a debt while debt collectors are only authorised to ask you to make payment or arrange a payment plan.

Furthermore, bailiff action can only be arranged by going through the court while a debt collector can be hired to collect an unpaid debt without a court order or warrant. So while bailiffs have greater legal powers to recover a debt, debt collectors may be able to yield results quicker.

What should I do if I'm contacted by a debt collection agency?

When a debt collector contacts you, it's in your best interest to respond promptly and make an offer of payment you know you'll be able to comfortably afford. The sooner you can agree on a payment plan, the sooner you can deal with your debt and avoid further legal action.

They are legally required to provide you with certain information about the debt when they first contact you, including the name of your creditor, the total amount you owe, and how to dispute the debt. This is known as 'validation information' and can help you confirm whether the debt is yours to pay or should be disputed.

Whether you can't afford to pay the debt or don't believe there is a debt to pay, it can be tempting to ignore all letters, phone calls, texts, and emails in the hope that the debt collector simply stops contacting you. However, this will only make the situation worse as you'll likely be asked to repay the debt in full or in instalments you can't afford.

This can also have a direct impact on brand reputation as a business as debt collectors are only likely to increase their debt collection efforts the more you ignore their attempts to collect payment.

Do I have to let a debt collector into my home?

"When a debt collector visits you, you don't have to let them in and if you ask them to leave, they must respect your decision."

Typically, a debt collector will contact you by sending you letters, texts, or emails. They may turn up at your door and try to discuss the debt with you in person, but this is rare and will usually only happen if you have ignored all previous attempts at trying to get in touch with you. Some debt collectors may also send a 'doorstep collector' or 'field agent' to your home instead of visiting themselves.

However, before a debt collector does visit you at home, it's crucial you understand what they can and can't do and, more importantly, how to recognise signs of abuse or harassment. For example, while a debt collector can't threaten you into making payment, there is no rule stating that they can't put pressure on you as long as they stay within the confines of the law.

Furthermore, despite what a debt collector says, you don't have to let them into your home and, if you ask them to leave, they must respect your decision and vacate the premises immediately. They must also present their ID upon arrival and can't, under any circumstances, remove items from your home to repay the debt.

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Can a debt collector take me to court?

When you repeatedly fail to make payment towards a debt and all other methods of debt recovery have been unsuccessful, a debt collector may resort to court action, such as a County Court Judgment (CCJ), to force you to repay what you owe. 

The court will then decide how much is owed, if extra interest or charges should be added, and how payment must be made.

However, before being threatened with court action, a debt collector must send you a warning letter or 'default notice' warning you that your account is at risk of being closed or 'defaulting'. 

Once you receive a default notice, you'll have 14 days to repay what you owe or arrange a repayment plan before your account defaults. When your account defaults, a marker will be added to your credit file for six years, during which time your credit score will be significantly lowered and you'll find it difficult to get approved for further credit. 

What rights do debt collectors have?

The Financial Conduct Authority (FCA) regulates all debt collection agencies that deal with consumer credit collections in the UK and is responsible for ensuring all debt collectors follow a certain set of rules, responsibilities, and guidelines.

For example, while there is no law stating that a debt collector can't visit you in person, they must provide you with proper notice of the intended date and time of their visit. They must also introduce themselves and clearly outline the reason behind their visit.

Similarly, a debt collector can't enter your property without consent and must leave immediately if they are asked to do so. They are also prohibited from discussing your debt with anyone else without your permission or tricking you into paying more than what is outlined in your original contract.

Remember, if you feel like you're being harassed by a debt collector, you have the right to complain to the company they work for and, if that proves unsuccessful, the necessary legal body.

Do I have to pay a debt collector when they visit me?

When a debt collector visits you in person, you don't have to pay the full amount owed or even hand over any cash at all. This is because, unlike bailiffs, debt collectors have no legal powers to enter your home and remove your belongings and must leave as soon as you instruct them to do so.

However, if you are in a position to make payment, you must only do so if the debt collector has a valid ID and can provide you with proof of payment (e.g. receipt). The amount you pay must also be realistic and you should never feel threatened into a payment schedule you know you won't be able to afford.

Why do debts get passed to debt collection agencies?

There are several reasons why debts get passed to debt collection agencies but, in most cases, it's because your creditor doesn't want to waste any more time or money chasing a debt that they've been unable to recover.

Furthermore, creditors primarily deal with the lending side of the credit agreement process and would rather not deal with the recovery side of things if they can help it. So, if they can pass an unpaid debt on to a third party with more time and resources to help them collect the money owed, they most likely will.

This often happens when the debt is a few old years old and your creditor has tried various things to try and recover the money owed. Some creditors also rely on the fact that you may be more willing to repay a debt if you're being chased by an external debt collector instead of the original creditor.

Can a debt collector chase me for a statute barred debt?

In the UK, most unsecured debts become 'statute barred' and are no longer legally enforceable after six years. This essentially means that your creditor has run out of time to take legal action against you and the deadline for issuing a CCJ against you has expired.

However, while your creditor won't be able to take legal action against you, the debt will still exist and they may still try to recover the debt through other forms of debt collection. This may include hiring a debt collector or debt collection agency with more time and resources to chase the money owed.

Remember, a statute barred debt can never be enforced using legal action and a debt collector should never threaten you with legal action to try and intimidate you into making payment.

How should a debt collector treat me if I'm vulnerable?

The FCA sets out the rules and guidance debt collection agencies should follow when they operate in the UK, including the policies that should be put in place for vulnerable customers.

For example, if you suffer from a mental health issue, you must inform the debt collection agency as soon as possible. They must then refer you to a dedicated team who will determine the best way to deal with your case.

This may include only contacting you at a certain time of the day (e.g. the afternoon) or in a specific way (e.g. by letter). They may also agree to put a stop to any further action until you've had time to talk to a debt advisor.

Can debt collectors add interest and charges to my debt?

When your debt is sold to a debt collector, interest and charges usually come to a halt. This can also happen when your original credit agreement defaults, but not always.

However, once a debt collector inherits your outstanding debt, they will be prohibited from adding interest and charges unless your original credit agreement clearly states that this is allowed.

Furthermore, the only time your original creditor can continue adding interest and charges to your principal debt is if they retain full ownership. This can also only be at the rate clearly outlined in your credit agreement.

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Finding out your debt has been passed on to a debt collection agency can be daunting, but the more you know about debt collectors and what they can and can't do, the more confident you can feel about the whole debt collection process.

The most important thing to know is that debt collectors have no special legal powers to chase you for an unpaid debt and can only try to come to an agreement with you over how to make payment. This means that, unlike bailiffs, they can't enter your home or seize your belongings to repay a debt.

There are also certain rules debt collectors must follow if you're classed as a vulnerable customer. Once a debt collector knows you're vulnerable, they may agree to only visit you at certain times of the day or only contact you in certain ways.

Key Takeaways

  • Bailiffs are court-appointed enforcement officers who work on behalf of the court to collect unpaid debts
  • Despite both being authorised to collect unpaid debts, bailiffs and debt collectors are not the same
  • There are several different types of bailiffs authorised to enforce debt in the UK, including a High Court enforcement officer, County Court bailiff, civilian enforcement officer, and family court bailiff
  • Most bailiffs will let you keep your belongings in exchange for making regular payments towards the debt with a controlled goods agreement
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