Getting letters from debt collection agencies can be a worrying and stressful experience, but knowing how to deal with them – and potentially stop them – can help put your mind at ease.
In most cases, you’ll continue to receive letters from debt collectors until you come to an agreement over how to pay the debt. However, there may be certain situations in which you can stop them altogether.
What is a debt collection agency?
A debt collection agency is a company that aims to collect unpaid debts from individuals or businesses on behalf of a creditor (the person or business you owe money to). The type of company that typically uses debt collection agencies includes a credit card company and a utility bill company.
Usually, a debt collection agency will be brought into the recovery process when your creditor has been unsuccessful in collecting the debt themselves and no longer has the time or resources to continue chasing it.
There are various debt collection agencies currently operating throughout the UK, some of which only collect small debts or certain types of debt while others are authorised to collect all types of debt, from credit cards and overdrafts to parking fines and court orders.
How does the debt collection process work?
The debt collection process differs from company to company but tends to follow the same basic set of steps, which we’ve outlined below:
Your creditor passes the debt to a collection agency
The first step in the debt collection process is your creditor passing the debt to a collection agency. They usually do this after their in-house collection department has been unsuccessful in recovering the debt or you miss about four or five payments and have defaulted on your credit agreement.
It’s rare that your debt is passed to a debt collection agency after only one missed payment.
You receive a debt collection letter
Once the debt has been passed on, you’ll receive a letter from the collection agency informing you that they are the new owner of the debt. This letter, which is called a ‘validation notice’, should come with a form attached that you must complete and return.
The validation notice provides information about the debt, including how much you owe and how to dispute it. Some debt collectors send forms designed to look like court forms to pressure you into making payment.
You can set up a payment plan
Most debt collectors would prefer if you could clear your balance quickly but if you’re not in a position to repay the full balance immediately, they should let you set up a payment plan to repay the debt in regular instalments.
Remember, you don’t have to hand over cash to a debt collector when they visit your home. If you can afford to make regular payments towards the debt, you should call them to set up a standing order.
You could be subject to legal action
If you choose not to pay the debt or fail to respond to debt collectors’ attempts to reach out to you, this won’t make them go away and you could be subject to legal action. The court will then decide how much is owed and how it should be repaid.
Even if you can’t afford to pay anything towards the debt, most debt collectors will be willing to come to an agreement with you. This will put a stop to any further action being taken against you.
What should a debt collection letter include?
There are certain things a debt collection letter should include, such as:
- The name and contact details of the debt collection agency
- The name of the original creditor you owe
- The account number associated with the debt
- The amount of debt owed (including interest, fees, payments etc.)
Once you’ve received a debt collection letter, you should respond as soon as possible (ideally within 14 days). The letter should come with instructions on how to respond, as well as the deadline for responding.
It’s important to review the debt collection letter carefully to ensure there are no errors or outdated information. If anything looks wrong (e.g. a debt level that’s too high or an included debt that has been repaid), you must dispute it as soon as possible.
How to stop debt collection letters
If you owe a legitimate debt, debt collectors must have a means of communication with you and sending letters is usually considered the least invasive method. For most people, this is preferable to being visited at home or being called multiple times a day.
It can be difficult to stop debt collectors from contacting you when you still owe the full balance they are chasing but there are several options available to you depending on your situation. We’ve outlined them below:
Apply for Breathing Space
Breathing Space‘ is a government scheme designed to give you temporary relief from paying your debts and put a stop to all creditor contact.
This means that, if a particular debt has been included in the scheme, the original creditor or debt collection agency that it’s been passed on to can’t contact you or ask you to pay the debt.
Pay the debt
The only other way to stop debt collection letters is to pay the full amount you are being chased for – whether that involves making a lump sum payment (called a full and final settlement) or setting up a payment plan.
However, it’s important not to agree to pay the debt in full or offer a payment plan you can’t afford if it would lead to further financial hardship.
What will happen if I ignore a debt collection letter?
It can be tempting to ignore debt collection letters in the hope that they stop contacting you. However, this is unlikely to put a stop to the debt collection process and, in some cases, they will only become more persistent.
Most debt collection agencies will send multiple follow-up letters if they don’t get a response to the first validation notice. This can then escalate to at-home visits and ultimately court action in the form of a County Court Judgment (CCJ).
CCJs are a type of court order that instructs you to pay the debt as per the court’s instructions. This may mean you’re asked to repay the debt at a rate you can’t afford or pay the full amount upfront when you don’t have the funds readily available.
There is no need to ignore letters from debt collection agencies – even if you can’t afford to repay the debt, most debt collectors will let you set up a payment plan where you gradually pay it off at a rate you can comfortably afford.
What do I do if a debt collector contacts me for someone else’s debt?
It’s not uncommon to receive debt collection letters for someone else’s debt so it’s important you know what to do in the event it happens to you. Here are the steps you should follow if you’re being chased for a debt you don’t believe you owe:
Check the debt isn’t yours
The first thing you must do before you respond to a debt collection letter is verify that the debt isn’t yours.
First, check if you have any joint credit agreements, if you ever agreed to be a guarantor for someone else’s loan, or if there’s a chance you may have missed payments.
Next, you should look at your credit file to find out if you have any outstanding debts. This should tell you if you have any missed or reduced payments, if you defaulted on any loans, or if you have any court orders issued against you.
Contact the debt collectors
Once you’re satisfied the debt isn’t yours, you should contact the debt collection agency with proof, such as a council tax bill or tenancy agreement showing that the person listed on the debt collection letter no longer lives there.
They may ask for further supporting information to prove that you don’t owe the debt but this should be enough for them to stop all further contact.
Submit a complaint
If you’re confident the debt isn’t yours and have supplied the debt collection agency with proof but are still being chased for payment, you should submit a complaint to the Financial Ombudsman Service (FOS).
This service is free to use and will ensure your case is thoroughly investigated by an impartial party. Most complaints are responded to within 90 days.
Conclusion
Receiving debt collection letters can be nerve-wracking – especially if you’ve received multiple letters in a short space of time or you don’t think you owe the debt you’re being asked to pay.
The key to dealing with debt collection letters is to respond as soon as possible. Even if you’re not in a position to repay the debt in full, most debt collectors will be willing to come to an agreement with you.
If you’re worried about debt collectors or just need debt advice, don’t hesitate to reach out for help. The sooner you take action, the sooner you can resolve your debt problems.
