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Many creditors do not want to deal with defaulted accounts in long-term arrears and usually pass these to collection agencies to collect if their own efforts fail.
Collection agencies are companies that specialise in buying and collecting debts. They either buy debt from creditors or are paid a percentage of the amount they recover.
Check the small print if you receive letters from an unfamiliar company about unpaid debts, as sometimes creditors will send letters that seem to be from a debt collection agency, but are actually the same creditor using a different trading name.
Dealing with a collection agency
Once a debt has been passed to a collection agency, you will then be dealing with them directly. In most cases they can stop interest and charges, although there is no guarantee they will. You can still propose affordable monthly repayments at this stage, and should stick to any offer you make.
It is important to remember that agencies are not bailiffs and do not have legal powers extra to those of the original creditor. They can contact you by letter or telephone, and in rare cases, may make home visits, though these are more costly for the agency.
It is important to remember that debt collectors who call at your house are not bailiffs. Debt collectors cannot:
- Enter your house or take any goods – You do not have to open the door to them or speak to them if you don’t want to.
- Discuss your account with anyone else in your house and they must leave if you ask them.
- Act in a way that is threatening or intimidating and should always carry photographic identification.
- Watch our video: The truth about bailiffs
Rachel Robson explores one of the biggest debt myths around
Home visits are more likely from debt collectors who provide doorstep loans, or other forms of credit where you deal with an agent or local branch rather than a national collection department. You do not have to open the door to debt collectors if you prefer to pay another way.
Sometimes debt collection agencies try to find debtors using public records such as the electoral roll. If you have similar details, they may contact you about someone else’s debts. If this happens, write to explain they have mistaken you for someone else.
Solicitor involvement
Solicitors may become involved in debt collection for several reasons:
- The solicitor is acting as a collection agency – If the letters ask for payment to be made to the solicitor, you should treat them like a collection agency.
- The solicitor may be a part of the original creditor organisation – Check the small print to see if the solicitor is just a creditor trading name; they have no extra legal powers if they are.
- The creditor may be intending to start court action.
Letters and telephone calls from creditors will often mention solicitors and legal action as a way of pressuring you to pay. Letters sent from solicitors can be worrying and many people will assume this means court action is going to be taken.
Making a complaint
Collection agencies still have to follow Office of Fair Trading (OFT) guidelines on fair debt collection.
You should make complaint about a debt collection agency to them directly in the first place. You can also contact the original creditor.
Collection agencies must have a consumer credit licence to trade, so if your complaint is not resolved within eight weeks it can be referred to the Financial Ombudsman Service, who can investigate.
Many collection agencies are also members of the Credit Services Association who have their own complaints process.