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Debt collection: How companies collect debt

 

UK-Wide

What is debt collection?

You might have heard of this being called ‘debt recovery’. It is a process to recover the money you owe. Debt collection starts when you get reminders about missed payments and can carry on through to court action being taken against you.

At a glance

Some lenders pass debts on to debt collection agencies. If this happens you will be contacted by a different company to the one you owe money to.

This can cause a lot of worry. But there are ways to deal with the money you owe at all stages of the debt collection process. That could be by:

  • Finding a way to pay off or settle the debt
  • Getting a debt solution to manage or write off the debt
  • Offering a payment arrangement and keeping to it
  • Proving the debt is not yours (“disputing the debt”)

The sooner you respond to calls, emails and letters about the debt, the sooner you can find a way to stop further action.

Are debt collectors contacting you?

This is a sign you need help with debt. Let’s work out what to do together. Since 1993, we have helped millions of people deal with debt problems. And we can help you too with our free debt advice and support service.

We find out about your finances and anything else that is making it harder to manage your money. Then we suggest the best ways to get back on track, based on your situation.

Start debt advice online today

✓  You can start, pause and re-start at any time. And there is no impact on your credit file

Not sure if the debt is right or really yours?

Mistakes do happen. You need to:

  1. Ask the debt collector for details of the debt, such as dates, account number and original creditor name
  2. Look at the full balances, including fees and interest added
  3. Check your credit report for these details

Find out more about how to dispute a debt.

How the debt collection process works

Remember, you can avoid things getting more complicated at any time. We are here to help you.

You miss one or two payments

The people you owe will send you reminders. These may be text messages, emails or letters. Or you may see alerts in your banking app.

They will ask you to make up the missed payments. If you do, no further action should be taken.

The missed payments may not be recorded on your credit file if you catch up quickly.

Interest and charges will be added to what you owe, including any late payment charges

It depends on what you can afford to pay. But you should always get in touch to try to sort things out.

  • If you can pay in full without missing any other important payments: You should do this as soon as you can
  • If you are not sure you can pay in full, or you think that will not be possible: Explain you cannot pay at the moment and ask if you can pay in stages you can afford, or if they will offer you a payment holiday

You miss three or four payments

At this point, the people you owe may think it is less likely you are going to pay them. The debt will not go away and they will keep getting in touch to remind you to pay.

At this point, they are likely to tell you about other action that can be taken against you. And they will encourage you to get help from a debt advice organisation, like us.

Because you have missed so many payments:

  • The missed payments will be recorded on your credit file
  • The creditor will soon think about sending you a default notice if this is something like a credit card or buy now pay later – find out about dealing with debts covered by the Consumer Credit Act
  • The creditor will be considering other steps they can take to recover the debt

You can still avoid further action if you act now. Take them up on their suggestion to contact a company like us for free debt advice. You may be able to get a debt solution or Breathing Space while you deal with your money worries.

Get help now

You still do not make any payments to the debt

Once you have a default on your account and / or have missed several payments, your creditors can and will step up action against you.

It depends on how the company works and what the debt is, but these things can happen:

  • Debts sold on: The debt may be passed or sold onto a debt collection agency: Their job is to recover the debt and they will keep contacting you about it
  • Court action taken: Your creditor can apply for a court order that means you must pay what you owe. In England, Wales and Northern Ireland this would be a County Court judgment (CCJ) and in Scotland this would be a decree. It is very important not to ignore court letters, even if you are worried you cannot pay what is owed
  • Enforcement officers instructed: When there is a court order against you, court appointed enforcement officers (known as bailiffs or Sheriff officers) can contact you about the debt. They have more rights than normal debt collectors, including to take goods from you to repay the debt

There are still things you can do and reaching out for help and support is the first thing.

This is a sign you need help. If you come to us for advice, we will not just look at your finances and recommend a way forward, we will help you find a way to deal with the court action.

Get started today

Questions people ask us about debt collection

Can I ignore a debt collector?

You can, but it won’t make the problem go away. They will continue to take further action to collect the debt. It is very important to find a way to deal with the money you owe. We can help you with this. Hear what our clients say.

But there are rules they are meant to follow to treat you fairly. You don’t have to let them in if they visit you. And if they call you too often or early and late in the day, you should not feel pressured to speak to them.

If you feel more comfortable with them writing than calling, you can tell them that.

If you are not happy with how a debt collector treats you, you can make a complaint about them.

Can a debt collector refuse a payment plan?

Yes. But they really should consider any reasonable offer. In many cases they will be open to ways to pay back the debt, even if it is a bit slower than agreed before.

When you are asking a debt collector to agree to a payment plan it helps to:

  • Explain if there is something you are dealing with that is making it harder to manage your money. Such as illness, job loss or a mental health condition
  • Share your budget. This shows what you can and cannot afford to pay
  • Tell them if you have had debt advice and are working on a way to pay back your debts

We have been helping people for more than 30 years so many creditors and debt collection agencies know who we are and how we make a difference to people’s lives.

Start debt advice with us, build a budget you can share, and tell anyone chasing you for money you owe that StepChange are helping you.

Do you have to pay debt collectors?

You don’t have to, but if you are going to pay the debt, you will have to pay them, or the original creditor, at some point.

Paying them directly may not be the best way forward if you are planning on getting a debt solution, such as a debt management plan (DMP), to make payments to all your debts through a single monthly payment.

A DMP is just one type of debt solution, there are several. We can explain which might be an option for you when we help you through our free debt advice service. Find out more about debt solutions.

You should never feel under pressure to pay on the spot.

It is important that you weigh up the payment to this debt against other important things you need to pay for.

Do make a payment if you are sure you can cover it. But be careful with signing up for standing orders or Direct Debits to make regular payments.

If a debt collector has a form to complete in your own time, you can take it from them to review.

How do I respond to a debt collection letter?

The most important thing is to respond. We also think it is a good idea to keep a copy of what you sent and what they sent to you.

We have a range of template letters you can use to email or write to a collection agency.

They cover different reasons for replying, including:

  • I am disputing the debt
  • I would like a temporary arrangement to pay what I owe
  • I am a vulnerable person
  • I want to offer a settlement

Use our template letters

Can a collection agency come to your house?

Yes, they can.

Home visits are not as common as calling or writing to you though. If a debt collector is visiting you at home, it is often because they have tried other ways to get in touch with you.

Read more about dealing with home visits from debt collectors.

What can a debt collection agency do?

It might be scary or annoying when a debt collector contacts you. But their powers are no greater than the company you borrowed the money from in the first place.

They may do things to make you feel pressured to pay what you owe. But they cannot force you to do anything. They are not allowed to take goods or force their way into your home.

Read more about what creditors can do.

Can debt collection agencies take you to court?

Yes, if you do not pay what you owe, they can take you to court.

If that happened, you would:

  • Have to keep to the terms of the court order, or face more serious action
  • Pay court costs, if any are added

Are you worried about this happening? We can work this out together. Register online for our free debt advice and support service. Together we will work out how to deal with your debt.

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