If your debts have been in arrears for a while or you’ve been sent default notices, you’ll almost certainly start to hear from debt collectors.
This sounds intimidating, but it’s a normal stage in the collection process for most debts. The most important thing to remember with debt collection agencies is that they're not bailiffs.
What is a debt collection agency?
Debt collection agencies are companies who specialise in collecting debts where the original creditor can’t get arrears repaid.
There are many debt collection agencies in the UK. Some are small and specialise in collecting only certain types of debt. Others are very large companies operating across several countries.
Debt collectors usually work in one of two ways:
- The original creditor sells or ‘assigns’ your debt to the collection agency because the amount you’re paying isn’t enough for them. The contract you signed with the original creditor allows them to do this after your account has defaulted. They sell the debt at a reduced amount so they get a quick lump sum of money. The collection agency becomes the legal owner of the debt and makes their profit by collecting the whole amount from you.
- The original creditor still owns the debt, but they use a collection agency to contact you. The collection agency will often be paid a percentage of the money they collect.
You can usually tell which of these applies by checking where letters from the collection agency ask you to send payment. If they ask you to continue paying the original creditor, the debt will still be owned by them.
What can a debt collector do?
Debt collection agencies don’t have any special legal powers. They can’t do anything different to the original creditor.
Collection agencies will use letters and phone calls to contact you. They may contact by other means too, such as text or email.
We've put together an example of a debt collection agency letter so you can see what information they'll normally contain.
Letters or calls from collection agencies can be worrying, and they may threaten to take court action or send someone to your home but they’re not allowed to lie or mislead you about their legal powers or make an excessive amount of phone calls.
They could take court action or make you bankrupt if you don’t pay. But this is rare, especially if the collection agency is aware that you’re seeking help with your debts from an organisation like us, and you’re willing to pay what you can manage.
What should I do if a debt collector contacts me?
Don’t ignore letters or calls from a debt collector. They won’t go away and they’re more likely to take further action if you don’t reply to them.
Some may ask you to pay back the debt in full or in large instalments. You should offer to pay them only what you can realistically afford.
If you’ve been contacted by a collection agency, you should get in touch with us for free and impartial debt help before your situation gets worse. We can help you put together a budget and work out how much you can afford to pay.
If you’re not happy with the amount of calls or the way a collection agency is speaking to you, make a complaint.