Sometimes, a creditor will assign your debt to a third party if they don’t have the time or resources to continue chasing you for payment. When this happens, you’ll be served with a ‘Notice of Assignment’ (NOA) informing you that another company has taken over the debt.
But what is a Notice of Assignment and how should you respond? Dealing with debt can be stressful enough without the added pressure of receiving letters from a company you don’t recognise but, in most cases, the only thing that will change is who you owe.
What is a Notice of Assignment?
For a debt
A Notice of Assignment is a document you will receive if your lender has assigned your debt to another company, such as a debt collector or debt purchaser. The company that inherits the debt will become the ‘assignee’ and take over from your original lender to chase you for the money owed.
The main aim of a Notice of Assignment is to simply inform you that your debt has been passed on to another company, not to demand payment or to change the terms of your original repayment plan. The assignee may resort to court action to get you to pay but should try to come to an agreement with you first.
Most debt collectors are hired directly by creditors while debt purchasers tend to buy unpaid debts in bulk in the hope of making a profit. For example, they may purchase a £100 debt for £70, giving them a £30 profit once the full amount has been recovered.
For a mortgage
A Notice of Assignment is also used when a leasehold property is sold and the lease is transferred to someone else. When this happens, the buyer’s solicitor must send a Notice of Assignment to their local authority alongside the correct fee within a month.
Similarly, a ‘Notice of Charge’ is a document confirming that a mortgage has been secured as a charge against the land registry. This also requires a fee and is compulsory if you:
- Buy a property with a mortgage
- Add someone to your mortgage
- Remortgage a property (get a new mortgage or borrow more money on your existing mortgage)
What are the different types of assignments?
The Law of Property Act (1925) outlines two main types of assignment: legal and equitable – both of which require your creditor to notify you that your debt has been assigned in writing.
Here is a quick guide to each type of assignment and what they mean:
Legal assignment
With a legal assignment, the purchasing company takes over both the debt and the right to enforce it. This means that they can take you to court over the debt if they wish.
Equitable assignment
When it comes to equitable assignments, only the amount owed is transferred to the purchasing company. This means that they don’t have the power to initiate enforcement action and can only do so in collaboration with your original creditor.
What will happen after I receive a Notice of Assignment?
Once your debt has been transferred, the purchasing company will inform the main credit reference agencies (Experian, Equifax, and TransUnion) that they are now responsible for chasing the money owed.
When this happens, your original creditor’s name will be removed from your credit report and replaced with the purchasing company’s name.
They will then start pursuing you for the money owed or hire a debt collection agency to recover the money on their behalf. When a debt collector contacts you about the debt, it’s in your best interest to repay what you owe or agree to repay what you owe in instalments.
Some people view their debt being sold as a blessing in disguise as most purchasing companies tend to be easier to deal with and more flexible than lenders when it comes to extra interest and charges.
Remember, your debt being assigned has no impact on the statute of limitations. This means that the limitation period on the debt won’t be automatically reset when it’s passed on to a third party and the timer will simply continue running.
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Why has my debt been assigned to another company?
The most common question among debtors whose debts have been assigned is why – especially if they had already agreed on a debt repayment plan or had repaid a significant portion of the debt.
However, most credit agreements contain a clause that states that the creditor can ‘assign their rights to a third party’, making it perfectly legal to pass the debt on to another company at any point in the debt collection process.
This clause – which you would have read and signed when you took out the original credit agreement – means they don’t need to ask you before they assign the debt and can do so without your permission. Unfortunately, this also means that you can’t dispute their decision.
What powers do debt collection agencies have?
Being told your debt has been taken on by a debt collection agency can be daunting, but it’s important to remember that they have the same rights as your original lender. This means they don’t have any special powers to enforce the debt and can only encourage you to repay what you owe by calling you, writing to you, or turning up at your door.
Debt collectors are not the same as bailiffs and can’t force entry or seize your belongings to recover the debt. They are simply there to try to arrange a repayment plan with you, whether that involves weekly or monthly payments until your balance has been repaid.
However, while debt collectors don’t have any extra powers to force you to pay, it’s in your best interest to agree on a repayment plan as soon as possible. This can prevent any extra charges or interest from being added to your total balance.
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Conclusion
When your creditor assigns your debt to another company, you’ll be sent a Notice of Assignment in the post informing you of the reassignment and what it means for the debt collection process going forward.
This can happen for various reasons but usually happens when your creditor has decided they no longer have the time or resources to continue chasing you for the money owed and would rather pass it on to another company.
Receiving a Notice of Assignment can be worrying but it can also be a blessing in disguise as purchasing companies tend to be more lenient when it comes to interest, charges, and repayment terms.
