If you’re being chased by debt collectors for a delinquent debt, you may be wondering how they find your bank account and what they might do once they have access to your finances.
However, it’s not as straightforward as them simply taking the money you owe directly from your bank account and there are certain rules they must follow.
What is a debt collector?
The term ‘debt collector’ is often used to describe an individual that can visit you at your home to collect payment of a debt.
However, despite carrying out similar duties, it’s important to note that a debt collector is not the same as a bailiff.
Put simply, a debt collector is an individual hired to collect unpaid debts on behalf of a creditor (the individual or organisation you owe money to).
They have the same legal powers as your creditor and, unlike bailiffs who work for the court, they don’t have the authority to seize your items to get you to pay.
Some debt collectors work for themselves on a self-employed basis or only enforce certain debts, such as consumer debts, but most tend to work for larger debt collection companies and can collect all types of debt.
How does the debt collection process work?
The debt collection process can vary slightly but most debt collectors follow the same set of steps. We’ve outlined them below:
Debt is passed on
If your creditor has been unsuccessful in collecting payment of the debt, they may decide to pass the debt on to an external debt collection agency that specialises in collecting delinquent debts.
This usually happens after you’ve missed around five monthly payments and your account defaults (is closed by your creditor) as a result.
Debt collection letter
If your debt has been passed on to a debt collection company, you’ll be informed via a letter (known as a validation notice) sent to your address.
This is a document outlining the debt in more detail, including how much you owe, who you should make payment to, and how to dispute the debt if you don’t believe you owe what you’re being asked to repay.
Set up a repayment plan
If you’ve received a validation notice, it’s important to make a plan to deal with the debt as soon as possible – whether this involves making full payment upfront or setting up a monthly payment plan.
Remember, you don’t have to hand over money to a debt collector when they visit you at your home and you should be given time to think about how much you can realistically afford to pay.
Further legal action
If you choose not to cooperate with debt collectors, you could be subject to further legal action to get you to repay what you owe.
In most cases, you’ll be served with a County Court Judgment (CCJ), which is a court order ordering you to repay what you owe as per the terms and conditions laid out by the court.
What can a debt collector do?
It’s useful to know what a debt collector is allowed to do before they visit you to collect payment of a debt. Here are some of the things they can do:
Contact you about the debt
Debt collectors can contact you in a number of ways to arrange payment of a debt. They may do this by sending letters, calling you, or visiting you at home, but they can’t enter your home or remove your belongings to recover what you owe.
Take court action against you
Though debt collectors have little power to get you to repay what you owe, they may pass the debt back to your original creditor who can take court action against you.
This is usually done as a last resort if you don’t respond or fail to cooperate.
What is a debt collector not allowed to do?
It can be useful to familiarise yourself with the various things a debt collector can’t do during the debt collection process. Here are some of the things they can’t do:
Enter your home
Debt collectors can visit your home to discuss repayment of your debt, but they have no power to enter your home or seize your belongings.
They must also show a valid ID to prove they are who they claim to be.
Exaggerate their powers
Some debt collectors exaggerate or lie about their powers in an attempt to pressure you into repaying what you owe.
For example, they might threaten you with legal action or claim to have been sent from the court when they haven’t.
Harass or mistreat you
There are laws governing how debt collectors should treat you when they contact you to recover payment of a debt.
This includes bullying you into making payments they know you can’t afford or pressuring you into paying when you’re not ready.
Provide false information
Debt collectors shouldn’t provide false or misleading information when visiting you about a debt by adding excessive fees to your balance or claiming to have already visited you when they didn’t.
“First-class from start to finish. Any queries were always answered quickly. Always help and advice available. I would recommend to anyone.”
How do debt collectors find your bank account?
In the UK, debt collectors can’t typically access your bank account, checking account, or savings account to gain a better understanding of your financial situation, including your income and expenses.
However, they can pass the debt back to your original creditor who can apply for a court order known as an ‘order to obtain information’ that allows them to access your bank accounts.
This may mean you’re invited to a court hearing to answer questions about your financial situation under oath.
The aim of an order to obtain information is to find out more information about your finances, such as your current bank balance.
This then helps your creditor determine what type of legal action to take (e.g. whether they should take the money from your wages or your bank account).
Can debt collectors take money from my bank account?
Debt collectors can’t take money directly from a consumer’s bank account to repay a debt, but your creditor can apply to the court for a warrant that gives them permission to do so.
This is known as a ‘third-party debt order’ and is a way for your creditor to recover money they are owed from where it is being held if you have a CCJ you haven’t paid.
Once your creditor has a third-party debt order in place, your bank account balance can be frozen and money can be taken without your approval.
This can be applied to any account that may be holding your money, such as a bank account, building society, or business account.
However, only the money in your bank account at the time the order is applied and up to the value of the CCJ can be frozen.
This means that, if you add money at a later date or have more money in your account that you owe, you should be able to withdraw it as normal.
Does debt collection affect my credit score?
Having unpaid debt can affect your credit history as it shows that you’ve failed to stick to a credit agreement and there is a chance you might struggle to keep up with any future payments on a loan or a mortgage.
This has a direct impact on your credit score and your creditworthiness, which can make it difficult to get lenders to approve you for credit products for several years.
However, it’s important to note that the negative effects of debt collection don’t last forever and credit reports usually reset every six years.
Remember, debts are usually only passed to a debt collection agency once they’ve been past due for a while.
By the time this happens, the missed debts will be listed on your credit file and your credit score is likely to have already been affected for some time.
What should I do if I can’t repay the money I owe?
If you’re being contacted by debt collectors but can’t afford to repay what you owe, it’s important to take action to resolve the problem as soon as possible.
It can be tempting to ignore a debt collector in the hope that they realise and back off, but this is extremely unlikely to happen and in most cases, it will only encourage them to ramp up their collection efforts.
Remember, debt collectors may not have any legal powers to enforce a debt, but they can send your debt back to your creditor, who can escalate it to the court if they feel it is necessary.
This could lead to you being issued with a CCJ.
Even if you can’t afford to repay the debt in full, most debt collectors will let you make payment arrangements to repay what you owe in a way that’s manageable for you, ensuring you deal with your debt and they receive what they’re owed.
Let's solve your debt together
Where can I get further advice for dealing with debt?
If you need free, impartial advice to deal with your debt, don’t hesitate to reach out to a debt help company or charity, such as Citizens Advice.
They will review your financial situation and offer a tailored solution to suit your circumstances.
Reaching out for debt help can be daunting and it’s normal to want to bury your head in the sand and hope the problem goes away, but this will only make the situation worse.
The sooner you take the first step towards dealing with your debt, the sooner you can improve your financial outlook and make a fresh start.
Conclusion
If you’re being chased by debt collectors for an unpaid debt, it’s important to familiarise yourself with your rights so you know what to expect from the collection process.
For example, while debt collectors have less legal power than bailiffs, they can pass the debt back to your creditor and they can take legal action against you if they wish.
This includes applying for an order to obtain information which gives them access to your bank account.
The best way to deal with debt collectors is to repay what you owe in full or set up a payment arrangement to repay what you owe in regular instalments.
