Debt Collection Agencies
Once you fall into arrears, regardless of whether you are making a negotiated repayment plan or not, it is very likely that your debt will be passed on to a debt collection agency at some point. For most debts this is a normal process that is carried out. Some collection agencies are only small, specialising in specific debts only and others are large companies operating inside and outside of the UK.
The creditor you owe the debt to, will either:
- Instruct a collection agency to contact you, but remain the owner of the debt; or
- Assign the debt to a collection agency, by selling the debt to them for a reduced lump sum. The assigned agency will become the legal owner of the debt.
The collection agencies will contact you by telephone, letter and sometimes by text or email. They are likely to threaten court action and may say that they are sending someone to your home to discuss the debt. This can be very frightening, but the agencies don’t have any more power than the creditor in terms of what they can do.
Are their powers the same as a bailiff?
A collection agency may send someone, known as a ‘doorstep collector’ or ‘field agent’ to your home, but in practice this is rare. Telephone calls and letters are more common. If however you do receive a visit from a collection agency, it will be useful to know the following:
- A field agent (or doorstep collector) is not a bailiff (enforcement officer) and does not have their legal powers
- It is a criminal offence for a field agent (or doorstep collector) to pretend to be a bailiff
- The field agent (or doorstep collector) must show you proof of ID
- If you ask the field agent (or doorstep collector) to leave your home, they must oblige
- The field agent (or doorstep collector) cannot remove goods or take anything from your home
- You do not have to make cash payments to the field agent (or doorstep collector).
- You can always contact them later and set up a standing order allowing you enough time to work out what you can realistically afford or after seeking advice from a debt adviser/advice agency
- If you do decide to give payments to a field agent (or doorstep collector) who calls at your home, make sure you ask to see their ID and that they give you a receipt. Make sure you are not put under any pressure to pay more than you can afford.
If you already have a repayment plan set up with the original creditor, you should send a copy of your budget sheet to the collection agency asking them to continue to accept the payments you are making. If you don’t have a repayment plan in place it is important not to ignore the letters as they make take court action against you if you don’t respond. You should only offer payments that you can realistically afford.
If you need help in putting a budget plan together you should seek specialist help by contacting your local debt advice agency. You may have other debts and it is essential you receive advice about all of your debts and look at solutions and options to deal with everything.
Interest and charges
Normally when the original creditor assigns (sells on) their debt, interest and charges have stopped, and will have often stopped once the account has defaulted.
When the original creditor has appointed a collection agency but retains ownership of the debt, they may continue adding interest and charges while the collection agency is contacting you.
If your debt does continue to attract interest and charges you can only incur amounts which are allowed in the original agreement which you signed with the original creditor.
The FCA (in their handbook CONC) refer to dealing with their customers as ‘A firm must establish and implement clear and effective policies and procedures to identify particularly vulnerable customers and to deal with such customers appropriately’. ‘Most customers seeking advice on their debts under credit agreements or consumer hire agreements may be regarded as vulnerable to some degree by virtue of their financial circumstances. Of these customers some may be particularly vulnerable because they are less able to deal with lenders or debt collectors pursuing them for debts owed. Customers with mental health and mental capacity issues may fall into this category’.
There are many vulnerabilities you may be dealing with, including feeling anxious or worried about speaking over the phone, you may be living with a learning difficulty or have mental health issues.
It's important to let your creditors know if you're a vulnerable person or in a vulnerable situation, so they can offer extra support and communicate with you more appropriately.
Most debt collection agencies in the UK are regulated by the Financial Conduct Authority (FCA) and will hold a valid consumer credit licence. If you need to check that an agency who has contacted you is licensed you should contact the FCA for confirmation. In addition most agencies belong to trade bodies such as the Credit Services Association. The trade body logo should be on any letters they send, so you also have the option to contact them to confirm they’re a legitimate agency.
Debt collection agencies are not allowed to lie or mislead you about their legal powers or make an excessive amount of phone calls to you. If you feel that you have suffered harassment or been misled or have another complaint about how you have been treated or how the agency has behaved, you should make a complaint.
You should obtain a copy of the agencies complaint procedure in the first instance. Put your complaint in writing and address the complaint as ‘Formal Complaint’ and send it to the agency and a copy to the original creditor. If you have not received a satisfactory response within eight weeks you may be able to escalate your complaint to the Financial Ombudsman Service (FOS).