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Debt collection agencies

Although they sound quite intimidating, debt collection agencies are a normal stage of the debt collection process, and chances are all your debts will end up with one at some point.

If you've been contacted by a debt collection agency we can give you free debt advice to help you get back in control of your situation. 

questionWhat is a debt collection agency?

A debt collection agency is a company that specialises in dealing with accounts that are in long term arrears (where payments haven’t been made or the person is making a reduced payment).

Debt collection agencies will work in one of two ways:

  1. The original company sells your debt to a collection agency because they don’t want to continue dealing with your account. They sell this debt for less than the amount you actually owe and then the debt collection agency will collect the full amount back from you. This is how they make their money. Or,
  2. Your debt is still owned by the original creditor but they get a debt collection agency to collect the money back from you and in return the collection agency keep a percentage of the money they collect.

You can usually tell which of these applies by checking where the letters tell you to send payments. If they ask you to pay the debt collection agency, the debt has been sold.  If they ask you to pay the original creditor, they still own the debt. 

An example debt collection agency letter

We've put together an example of a debt collection agency letter so you can see what information they'll normally contain.

As you can see, they sound quite intimidating and will always demand you make a payment. But if you contact them and let them know about your situation they'll usually be quite happy to come to an arrangement with you. 

Have you been contacted by a debt collection agency?

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exclamation mark 3 things you need to remember about a debt collection agency

  1. They are not a bailiff. They can’t take your belongings.
  2. When they send you letters they’ll threaten to send an agent round to your house. This is normally just used to get you to ring them and make extra payments. It’s very very unlikely that they’d actually send anyone to your house.
  3. They don’t have any extra powers when it comes to collecting the debt back. They can’t do anything different from the original company that you owed the money to. 

What should I do if my debt is passed to a debt collection agency?

Firstly, don’t panic. Even though the letters they send can sound quite threatening, the majority of debt collection agencies will be easier to deal with than the original creditor.

Letters from debt collection agencies often mention court action or bailiffs.  This is extremely unlikely to happen unless you bury your head in the sand and ignore the debts.  If you read the letters carefully, you’ll see they talk about what might happen if you don’t pay the debt, not what will happen. 

All you need to do is:

  • Contact the debt collection agency and explain your situation
  • Show them you’re paying as much as you can afford (you can do this by sending them a copy of your budget and a list of all the debts you have)
  • Make your payment to them every month

If you do this most debt collection agencies will accept your payment and freeze any interest or charges on your account.

If you’re on a DMP with us, you just need to log onto OnlineDMP and let us know about the change and we’ll contact the debt collection agency for you. 

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Foundation for Credit Counselling (trading at StepChange Debt Charity) is a company limited by guarantee registered in England and Wales (Company No: 2757055 ) and a charity registered in England and Wales (Registered Charity No: 1016630). Registered office: Wade House, Merrion Centre, Leeds, LS2 8NG. Consumer Credit Counselling Service (Scotland) trading as StepChange Debt Charity Scotland is a company limited by guarantee registered in Scotland (Company No: SC162719) and a charity registered in Scotland (Registered Charity No:SC024413). Registered office: 33 Bothwell Street, Glasgow G2 6NL. Authorised and regulated by the Financial Conduct Authority.

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