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Can a creditor sell my debts to a debt collector?

If you have a debt that has been in arrears, eventually you might find your creditor sells your debt to another company or debt collector.

This is common if your debt has been outstanding for a long time.

Why do creditors sell debts?

Most creditors specialise in lending money and collecting it. They don’t specialise in chasing debts which are in arrears, and trying to find people who are avoiding paying.

Instead, if a creditor is finding it difficult to collect a debt, they might pay a company which specialises in this to try and contact you, or they may sell your debt to another company.

The benefits of selling the debt to a debt collection agency are that the creditor usually has no more involvement in collecting it, and they get some money back straight away.

If your debt is regulated by the Consumer Credit Act, the creditor must have issued a default notice and waited at least 14 days before they can sell your debt. This applies to most common types of consumer debt such as a loan, overdrafts, credit and store cards, hire purchase and catalogues.

Who buys debts?

If a creditor sells your debt, it’ll be to a company known as a ‘debt purchaser’. This just means they’re a debt collection agency that buys up debts to collect rather than chasing debts owned by other companies. Some collection agencies may do both.

Creditors will usually sell or ‘assign’ a large amount of debts to a debt purchaser. The debts will be sold at less than their face value, but the debt collection agency is entitled to collect the full balance. This is where their profit comes from.

For example, if a debt of £100 is sold to a collection agency for £70, they’ll try to collect the whole amount and make £30 profit. The amount paid for debts when they’re sold is usually confidential between the creditor and collection agency and it’s unlikely they’ll tell you.

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Do my rights change if my debt is sold?

Once your debt has been sold to a debt collection agency you owe them money, not the original creditor.

The collection agency must follow the same rules as your original creditor when they collect the debt, and you keep all the same legal rights.

How will I know if my debt has been sold to a debt collection company?

Your original creditor should let you know when they sell your debt. You’ll also get a letter from the new collection agency explaining who they are and that you need to pay them now.

The collection agency’s letters should include the name and usually the account number of the original creditor, so you can tell which debt it relates to. If you’re not sure, contact them to ask.

You’ll probably get phone calls from the new debt collection agency too. Make sure you let them know about your situation and what you can afford to pay, and don’t let them pressure you into making payments you can’t afford.

If you’ve been contacted by a debt collection agency, or if your original creditor has told you they intend to sell your debt, this is sign that you need to get debt advice. We recommend you contact us for advice as soon as you can.