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Dealing with debts sold to collection agencies and other companies

If you have a debt that's been in arrears, you might find your creditor uses a debt collection agency to chase you for payment, or that they sell your debt on to a debt purchaser.

Debts regulated by the Consumer Credit Act, can be sold on or placed with another company any time after you stop paying, this is a normal part of the debt collection process. This applies to most common types of consumer debt such as a loans, overdrafts, credit cards and store cards, hire purchase and catalogues.

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, or trying to find people who are not paying. Instead they usually employ the services of debt collection agencies or sell the debt on to debt purchasers.

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What happens when a debt is sold to a collection agency?

A ‘debt purchaser’ buys up debts to collect rather than chasing debts owned by other companies.

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

Who buys debts?

Some collection agencies may buy debts and also chase debts on a creditor’s behalf.

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 purchaser 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.

If a debt is sold to another company, do I have to pay?

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

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

For example, they can’t add on interest and charges to your debt unless they are permitted to do so 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 don’t believe you should pay the debt, for example, if a debt is statute barred or prescribed, then you can dispute the debt.

Find out more about disputing debts.

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Do my rights change if my debt is sold?

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

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

For example, they cannot add on interest and charges to your debt unless they are permitted to do so in the terms of your original credit agreement.

Debt collectors acting on behalf of the creditor

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. These are usually known as debt collection agencies or debt collectors.

Unless they tell you that the debt has been sold on, they are working on behalf of the creditor and the creditor still owns the debt.

Learn more about what creditors can and can’t do.

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

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

The letter 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 the debt purchaser to ask.

You’ll probably get phone calls from the debt purchaser 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 collector, 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 get 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, if you would rather, you can contact us.

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