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Dealing with debts sold to collection agencies and other companies

If you have missed payments (arrears), your creditor may:

  • Use a debt collection agency to try to make you pay
  • Sell your debt to a debt purchaser

This is a normal part of the debt collection process.It applies to most common types of consumer debt including:

  • Loans
  • Overdrafts
  • Credit cards
  • Store cards
  • Hire purchase arrears
  • Catalogues

Why do creditors sell debts?

A creditors' business model is to lend money and collect it. Chasing debts, arrears, and people is not their business.

It is easier for them to give this work to debt collection agencies or sell the debt to a third party debt purchaser.

How does it work?

A 'debt collector' is in the business of collecting debts.

  • Some debt collectors are hired by creditors to chase debts for them
  • Other debt collectors buy debts to chase for their own profit
  • Some debt collectors do both

A ‘debt purchaser’ buys unpaid debts from creditors in bulk.

Let’s say you owe £100. A debt purchaser may buy that debt for £70.

They will then keep asking you for £100. If you give them £100, they have made a profit of £30.

For the creditor, selling the debt means they get back some money right away.

If you set up a payment plan or are made insolvent, they may have to wait a long time or get nothing at all.

If they sell the debt, they can stop chasing and focus instead on their business of lending and collecting.

What happens to me when the debt is sold?

Once your debt has been sold you owe the buyer money, not the original creditor.

The debt purchaser must follow the same rules as your original creditor.

You keep all the same legal rights.

They cannot add interest or charges unless they are in the terms of your original credit agreement.

Can you dispute a debt if it was sold to a collection agency?

Your rights are the same as if you were dealing with the original creditor.

If you do not believe you should pay the debt, for example, if a debt is stature barred or prescribed, then you can dispute the debt.

Find out more about disputing debts.

There is also a chance that the debt is 'unenforceable'. This means it does not comply with the Consumer Credit Act 1974 (CCA).

This could happen if the debt goes between multiple collection agencies making it harder for creditors to comply with information requests.

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Debt collectors acting on behalf of the creditor

If a creditor is finding it difficult to collect a debt, they might pay debt collection agencies or debt collectors to contact you instead.

If they do not tell you the debt has been sold, then they are working for the original creditor. This means the original creditor still owns the debt.

Learn more about what creditors can and cannot do.

What's the difference between bailiffs and debt collectors?

The most important thing to know is that a debt collector does not have any special legal powers to collect a debt. But a bailiff does.

Read our guide to bailiffs and debt collectors to find out more.

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

Your original creditors need to tell you when they sell your debt.

You will also get a letter from the new owner of your debt.

This letter should:

  • Explain who the new owners are
  • Include the name of the original creditor
  • Usually include the account number of original creditor
  • Explain where your payments should now go

If you are not sure which debt has been sold, contact the debt purchaser to ask.

If you are not if you this is a real letter, call your original creditor to check.

You will probably get phone calls from the debt purchaser too.

  • Make sure you tell them your situation and what you can afford to pay.
  • Do not let them pressure you into making payments you cannot afford.

If you are contacted by debt collectors or told your debt will be sold, you should get debt advice as soon as you can.

Take two minutes to answer a few simple questions, so we can understand the best way to help you. Or you can contact us here.

"Get in touch with StepChange, you'll wish you'd done it sooner" Rob, Wiltshire