What happens if your debt has been sold to a debt collection agency?

No one likes to have debts, but they are part and parcel of adult life.

Have you been struggling with paying an ongoing bill and fallen behind on your payments? If so, then your arrears could be ‘sold on’ to a debt collection agency.

Read on to learn more about what this means and what your rights are if debtors come knocking on your door.

I have received a letter saying my debt has been sold on. What does this mean?

First of all, do not panic. Simply put, you are not the only person in debt. Companies often have countless financial accounts outstanding. Because of this, they will outsource their work to debt companies who are better suited to chasing costs.

Many lenders or service providers are not experts at arranging repayment plans, but a debt collection agency is! So, the overdue cases are passed on to experts who have the resources to resolve them.

How do I know if my debt has been sold on?

You will usually be notified if your debt is sold on. This will generally be done in writing by both the original company and the debt collection agency.    

When you receive a letter from a debt collection agency, you should contact them as soon as possible. It is essential not to feel pressurised into making an arrangement you cannot sustain. Explain your financial situation and try to come to an agreeable deal.

Is it legal to sell the debt on? Can I dispute debt sold to a collection agency?

Most unsecured debts are regulated by the Consumer Credit Act. This means that it can be legally sold on if you stop paying at any point.

Even if you have already arranged an instalment plan with the lender, they can still sell your debt on to an agency. They can do this because when you initially signed your credit agreement or repayment plan, the contract will likely have included a paragraph stating that the debt recovery can be assigned to a third party.  

The one exception to this rule is if your lender subscribes to the Standards of Lending Practice. If they have previously been shown evidence that you have mental health issues, then your debt should not have been sold on. If you find yourself in this situation, then contact a legal expert immediately.  

Do I have to pay a debt that has been sold on to a collection agency?

Due to the above contract clauses, more often than not, the debt will have been sold on legally. Therefore it is unlikely that you can dispute the involvement of a debt collection agency.

You may be able to question any additional costs if you feel they are too excessive. To do this, request a breakdown from the debt agency of all payments, charges, costs, and administration fees.

The debt agency may be willing to negotiate on some of their charges, in exchange for a global or bulk payment.

I want to carry on dealing with the original company.

Unfortunately, you cannot. Once the debt has been sold, you do not owe the money to the original company or original lender anymore.

Can the debt collector take me to court? Can a bought debt be enforced?

Yes, a debt collector can still enforce a bought debt and take you to court. So, it would be best if you acted quickly.

When a debt agency buys debt from an original lender, they take over their rights to the money. This means that if you do not make payments or adhere to your instalment plan, the debt agency can take you to court and have a County Court Judgement (CCJ) registered in your name.

However, taking a debtor to court is often a very protracted process and the last resort. Frequently, debt agencies are very willing to cooperate and willing to negotiate a fair agreement.

I cannot pay my debt. Can I ignore the debt collectors?

Part of the reason your debt has been sold on is that debt collectors are experts in this field. Effectively, it is their job to recover losses, meaning that they will be patient, persistent and, sometimes, pushy!

If you have not heard from the debt agency for a lengthy amount of time, then the debt could be classed as ‘statute barred’. The limit on this is six years, and you must have had no contact with the lender during this timeframe. Statute barred means that the debt is no longer enforceable due to a breakdown of communication.  

What rights do debt collectors have?

Debt collectors have a bad reputation for breaking down front doors and taking belongings, but this is far from the truth! When a debt agency takes over debt from a company, they adopt the same rights. They have no special powers or additional permissions.

Therefore, they can call you, write or email. It will help if you communicate with them at the earliest possible opportunity as they can also add on administration fees and high levels of interest to your original debt.

The debt agency can also send agents to your front door. However, they are not the same as a bailiff, and they cannot take your possessions.  

What are my legal rights? 

As long as your debt has been sold on legally, then your options for disputing the involvement of a debt agency are minimal.

If you are unsure about their participation, it is best to speak to the original lender to confirm whether they have sold the debt on. The best advice is to be as cooperative as possible with any legitimate debt agency as the more amenable you are, the more flexible they will probably be.

I do not owe this money. Is this a scam?

It would help if you were always careful when receiving any communication. Scammers are continually devising new ways and methods of taking our hard-earned cash.

If you receive a vague letter, it could be a scam firm ‘fishing’ for details.

Companies sometimes do this as they often do not have enough authentic information to pursue a debt. They hope that someone will contact them, providing useful personal data. If in doubt, be extra vigilant and never offer details.

If you genuinely do not owe any money or you have already fully repaid a debt, then be careful. Remember, it is the debt collector’s job to show you owe the money. So, if you receive any correspondence, ask the sender to prove you are required to repay the debt and do not give them any information.

Key Takeaway

Debt, finances, and money worries can be a grave source of embarrassment, stress, and concern.

You are not alone if you find yourself amid financial problems. We all have them. The critical first step is to speak to debt & debt recovery solicitor who can point you in the right direction and get you on your way back into the green!