HELP WITH DEBT
Debt Collection Help & Advice

What is a debt collector?,

Put simply, a debt collector is someone who is employed to collect an unpaid debt on behalf of another business. They can work for almost every type of creditor (someone you owe money to), including banks, credit card companies, high street shops, and online catalogues.

There are many debt collection agencies operating across the UK – from small companies that only deal with certain types of debt to larger companies that operate across several countries.

Typically, debt collection agencies operate under a ‘no win no fee’ model, meaning they only get paid if they successfully collect the debt. This is usually a percentage of the sum recovered.

The main responsibilities of a lender are to lend and collect money. They simply don’t have the time or resources to chase accounts that are in arrears and that’s where debt collectors come in.

The Consumer Credit Act dictates that any debt covered by the act (e.g. credit cards, personal loans, catalogues) can legally be passed on or sold at any point after payments have stopped and the account has fallen into arrears.

Put simply, a debt collector is employed to collect unpaid debt on the behalf of other businesses. They can work for almost every type of creditor (someone you owe money to), including banks, credit card companies, high street shops, and online catalogues.

There are many debt collection agencies operating across the UK – from small companies that only deal with certain types of debt to larger companies that operate across several countries.

Typically, debt collection agencies operate under a ‘no win no fee’ model, meaning they only get paid if they successfully collect the debt. This is usually a percentage of the sum recovered.

The main responsibilities of a lender are to lend and collect money. They simply don’t have the time or resources to chase accounts that are in arrears and that’s where debt collectors come in.

The Consumer Credit Act dictates that any debt covered by the act (e.g. credit cards, personal loans, catalogues) can legally be passed on or sold at any point after payments have stopped and the account has fallen into arrears.

Why are debts passed or sold to debt collectors?,

When you’re locked into a credit agreement, several things can happen that mean you’re unable to make your next repayment. From losing your job to separating from your partner, a single event can have a knock-on effect on your finances, making debt repayment a challenge.

However, while lenders are generally understanding to some degree, they will likely put pressure on you to bring your account up to date when you miss a certain number of payments (typically three or more).

More often than not, lenders will go down the debt collector route if an account has been defaulting for some time. This is their way of collecting the debt before further action is taken against you and the next step would be taking you to court or having a CCJ registered against you.

There are often additional costs involved in chasing unpaid debts – especially if legal action is required – so passing the debt onto a collection agency can save lenders time and money when they’re already out of pocket.

Is a debt collector the same as a debt purchaser?,

The terms debt collector and debt purchaser are often used interchangeably, but there are some key differences that you should know about. We’ve outlined each role in more detail below:

Debt collectors

Debt collectors work on behalf of creditors to chase individuals who are in arrears. The creditor keeps most of the money owed after it has been recovered but the debt collector will typically be paid a percentage of between 25% and 50%.

Most debt collectors work under debt collection agencies but they can also be self-employed and work for themselves.

Debt purchasers

Debt purchasers buy debts from creditors and chase the money owed for themselves, keeping 100% of the money recovered.

Usually, debts are purchased in bulk for less than they’re worth but are chased for the actual amount. For example, if you owe £150, a debt purchaser might purchase the debt from your creditor for £100 but chase you for the full £150, meaning they make a profit of £50.

How does the debt collection process work?,

The debt collection process differs between companies and depends on a number of factors, such as how they operate and their terms and conditions.

For example, some lenders may be unwilling to extend sympathy or flexibility while others may be happy to give you a little more time before sending the debt to a collection agency.

Remember, even if a debt is passed on to a debt collector, the original creditor still retains full ownership and the debt collector simply takes home a percentage of the total balance owed. The only time ownership will be passed on is if the debt is sold to a debt purchaser.

We’ve outlined the basic steps involved in the debt collection process below:

Receiving letters in the post

Usually, you’ll be informed that your debt has been passed on through two separate letters – one from your original creditor and one from the debt collector.

The letters will state the amount of outstanding debt due, who payment should be made to going forward, and what will happen if you don’t pay.

Receiving letters in the post can be daunting, but there’s no need to worry. Before responding, it may be useful to contact a financial advisor or debt management company for advice.

Receiving follow-up letters and phone calls

Debt collectors will try to get in touch with you through letters and phone calls until they receive a response.

During your first contact, it’s important that you clearly explain your financial situation and how much you can afford to pay towards the debt.

Most debt collectors will be willing to work with you to find a mutually beneficial solution, but you should be wary of debt collectors who try to pressure you into paying more than you can reasonably afford.

Setting up a repayment plan

The ideal outcome for a debt collector is the debtor agreeing to repay the debt in full.

However, in most cases, they’ll agree to you setting up a repayment plan that allows you to repay your debt at a rate that’s manageable for you.

Debt collectors can be convincing, but you should never agree to repayments that could plunge you deeper into financial hardship.

What powers do debt collectors and debt collection agencies have?,

Both debt collectors and bailiffs are responsible for collecting unpaid debts, but they are not the same.

The main difference between them is that a debt collector doesn’t have the legal power to force you to repay a debt while a bailiff does. For example, while a bailiff can force entry into your home under certain circumstances and remove belongings, a debt collector can’t force entry into your home or remove goods from your home to repay a debt.

The types of debt collected also differ with bailiffs generally hired to collect debts of higher legal importance, such as criminal fines and child maintenance payments, and debt collectors specialising in smaller debts, such as credit cards and personal loans.

Overall, debt collectors are authorised to collect a wider range of debts, but have fewer legal powers in the event you refuse to cooperate. Bailiffs, on the other hand, are reserved for certain debts but carry more serious consequences if you don’t pay.

What powers do debt collectors and debt collection agencies have?,

Understanding the legal rights of debt collectors is key to navigating the debt collection process with ease. Being visited by a debt collector can be daunting but knowing what they can and can’t do can help you assert your rights and identify when you’re being exploited.

Before they visit your home

Debt collectors can only carry out the same process as the original lender and have no additional legal powers to force you to pay.

They’ll try to make initial contact with you through letters and phone calls but may also send texts and emails informing you of your outstanding balance and how to arrange payment.

Responding to debt collectors as soon as possible can prevent further legal action being taken, such as a CCJ being recorded against you.

However, it’s important to note that because there is no formal process for debt collectors to follow, they can show up announced and, unlike bailiffs, don’t have to provide seven days’ notice before they appear at your door.

When they visit your home

Debt collectors are allowed to visit you at your property but they don’t have the right to enter your home unless you personally invite them in.

Before a debt collector does anything, they must present you with a valid ID and, if they refuse to do so, you are within your rights to ask them to leave.

When they’re at your address, they can’t demand payment of the debt or remove goods to sell to make up for the money owed.

Some debt collectors may resort to bullying or intimidation tactics to encourage you to pay, but this behaviour is unacceptable and should be reported to the relevant agency or organisation as soon as possible.

Will a debt collector add interest or charges to my debt?,

Usually, all interest and charges on a debt are frozen as soon as it has been passed on to a debt collection company.

However, while a rare few will continue to add fees after you have defaulted – especially if the debt has been sold to a debt purchaser – this can only be at the rate outlined in your original contract. The general rule is that any interest or charges added can’t be excessive compared to the costs they have incurred.

For debts that have been passed on to a debt collector and are still owed by the original creditor, it’s highly unlikely that additional interest or charges will be added.

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

Whether you’re scared to face your finances or refuse to accept that the debt is yours, it can be tempting to ignore debt collectors in the hope that they simply go away and don’t contact you again.

However, this is likely to have the opposite effect and, in most cases, will only encourage debt collectors to escalate their recovery tactics. This can result in them bringing legal action against you which will further damage to your finances in the long run.

When a debt collector contacts you, it can be useful to seek advice from a financial advisor or debt management company – especially if you don’t know how to respond. They can help you work out how much you can afford to pay towards the debt each month and negotiate with debt collectors to create a repayment plan that all parties can agree on.

Do I have to pay if I'm visited by a debt collector?,

When a debt collector or company visits you, they’ll usually ask you to repay your debt in full. They can be very persuasive and may even threaten you with court action, but it’s important to remember that debt collection agencies are not authorised to take legal action against you.

However, while debt collectors can be persistent, it’s not advisable to ignore them either. Most industry experts would recommend either setting up a regular repayment plan with the debt collector or paying your creditor directly if you can.

Some creditors also have their own methods of debt collection and these come with their own risks. For example, if you’ve defaulted on a credit agreement with a bank, it may be stated within their terms of service that they can take the funds directly from your bank account – often with no maximum limit on the amount allowed to be taken at any one time.

What happens if I've already paid a debt collector?,

The trouble with paying debt collectors is that they don’t tend to operate in the same way as creditors do. For example, some people find that once they start paying debt collection agencies, it doesn’t make them stay away and, instead, only encourages them to come back looking for more money.

When you do make a payment to a debt collector, it’s crucial that you ask for proof that the transaction occurred. They should be able to provide you with a receipt that proves you’ve repaid a chunk of the debt, which can be useful in the event of a dispute or disagreement down the line.

Similarly, if a debt collector is chasing you for a debt that you’ve already paid, is for the incorrect amount, or isn’t yours to pay, you must send a write to the debt collector with proof of payment, requesting further information, or disputing the debt.

How do I complain about a debt collector?,

Most debt collectors abide by the law when chasing you for an unpaid debt and don’t force entry into your home or pressure you into repaying your debt at a rate you can’t afford.

However, if you believe you have been harassed, bullied, or mistreated by a debt collector, you are within your right to complain by writing to the debt collection agency in question, expressing the nature of the complaint in as much detail as possible and providing proof where you can.

This usually results in the issue being resolved in a timely manner but if you’re not adequately satisfied with their response, you can escalate it to the Financial Ombudsman Service (FOS). They will lead to an investigation being launched, providing the debt collection agency is registered and authorised by the Financial Conduct Authority (FCA).

Where can I get debt collection help and advice? ,

If you’re in debt, you may have to deal with debt collectors calling you, posting letters through your door, and even visiting your home looking for payment. This can be extremely stressful and lead to you worrying about more than just your financial situation, such as the safety of your family and your mental health.

Thankfully, Carrington Dean can help. We’re Scotland’s largest debt management company and specialise in providing debt help and advice to those struggling with insurmountable money worries. The sooner you get help, the sooner you can enjoy a fresh financial start.

Whatever your circumstances, don’t hesitate to reach out for free debt advice. Whether you’re dealing with debt collectors or worried that your debt may be sold, we can assess your situation to ensure you have all the tools and information you need to navigate the debt collection process with ease.