Debt collection process – All you need to know

Dealing with unpaid accounts can be a challenging task for lenders, prompting them to turn to debt collectors or collection agencies.

These specialist organisations are responsible for pursuing and collecting outstanding balances on behalf of the original creditor.

What is a debt collector?

It isn’t uncommon for lenders to pass your accounts to debt collectors or collection agencies.

This is because although companies are good at lending money and getting your payments each month, dealing with unpaid accounts is not their forte.

Your accounts are normally passed to debt collectors when you have been behind on payments for quite some time.

Put simply, their job is to take the pressure off the lender and attempt to collect the balance for them.

This can work in two ways, the collectors can act on the company’s behalf, or they can take over the debt completely.

However, once it has been passed, the original company won’t contact you for payment at all and you will deal only with the collection agency.

What’s the difference between a debt collector and a bailiff?

Understanding the distinction between debt collectors and bailiffs is important, as their roles and legal powers differ.

Debt collector

A debt collector is a professional or an agency responsible for collecting outstanding debts on behalf of the original creditor.

They do not have the authority to seize assets or enter your property without permission.

Bailiffs

Bailiffs, on the other hand, have stronger legal powers granted by the court. They can enforce court judgments and recover outstanding debts by seizing assets or taking control of belongings.

It’s important to note that debt collectors and bailiffs are not the same, and the actions they can take to recover debts vary significantly.

How does the debt recovery process work in the UK?

When it comes to pursuing payments, the debt recovery process in the UK typically involves the following steps:

Letter announcing the start of the debt collection process

When your account is handed over to a debt collector, you will receive a letter informing you about the transfer and providing details on how to contact the agency.

Potential phone calls or visits to recover payment

Debt collectors may attempt to contact you via phone or even make visits to your residence in an effort to recover the outstanding payment.

It’s important to note that debt collectors don’t have any special legal powers, and their actions must adhere to the same procedures as the original lender.

Beginning of legal proceedings

If all attempts to collect the debt prove unsuccessful, the debt collector may issue legal proceedings against you.

This involves issuing legal papers and pursuing a County Court Judgment (CCJ) to formalise the debt, but you will always be notified in advance of any legal proceedings.

County Court Judgment (CCJ)

A County Court Judgment (CCJ) is a court order available to creditors in England and Wales.

If the debt collector successfully obtains a CCJ, it means that the court has sided with your creditors, recognised your outstanding debt, and will specify a time by which you will have to repay the debt in full.

Enforcement action

In cases where the CCJ remains unpaid, the debt collector may proceed with enforcement action in order to guarantee successful debt recovery.

This may involve actions such as bailiff involvement, wage garnishment, or other legal measures.

Debt collection do’s and don’ts

What can debt collectors do?

Debt collectors in the UK do not possess any special legal powers beyond those of the original lender. Their actions typically involve phone calls and written correspondence to communicate with you regarding the outstanding debt.

While debt collectors may sometimes use threatening language or imply court action, they are not authorised to seize your belongings like bailiffs.

If the debt remains unpaid, they can apply for a County Court Judgment (CCJ) against you, which can have serious implications.

It’s essential to contact the debt collector and work together to find a suitable solution for repayment.

What can debt collectors not do?

Debt collectors have limitations on their actions as defined by law. Here are some things that debt collectors cannot do in the UK:

Enter your house without permission

Debt collectors can send agents to your residence, but they cannot enter your house without your consent.

Seize your belongings

Unlike bailiffs, debt collectors cannot take your possessions to settle the debt. They do not have the legal authority to seize assets.

Demand immediate payment at your doorstep

If a debt collector arrives at your door, they cannot demand immediate payment. You have the right to refuse and request proper communication channels.

Failure to provide identification

Debt collectors must provide proper identification when visiting your residence. If they fail to do so, you are not obligated to provide them with any information.

If you believe that a debt collector is not following the correct procedures or is harassing you, it is important to contact the agency they work for and file a complaint.

What rights do debtors have during the debt collection process?

Individuals who find themselves dealing with debt collection agencies have rights and protections.

Some common issues that debtors may encounter during the debt collection process include:

• Harassment or abusive behavior from debt collectors
• Unfair practices or misleading statements
• Violation of privacy or disclosure of debt to third parties

Debtors have the right to challenge these issues and seek resolution. In the UK, there are regulatory bodies such as the Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS) that oversee how debt collection agencies operate and handle complaints.

If you believe a debt collection agency is not operating within the guidelines or has violated your rights, you can lodge a complaint with these authorities.

What should I do if I’m contacted by a debt collection agency?

If you receive communication from a debt collection agency, it’s important to take the following steps:

Get in touch with the debt collection agency

Contact the agency promptly to acknowledge the debt and understand the details of the outstanding balance.

You should also request written confirmation of the principal debt and any payment arrangements made.

Repay the debt owed immediately

If you have the means to repay the debt in full, consider doing so to avoid any further complications.

In general, the quicker the debtor pays, the more likely they are to prevent additional interest or charges from accruing.

Set up a payment plan for the debts owed

If repaying the debt in full isn’t feasible, you can work with the debt collection agency to establish a payment plan based on what you can afford.

Most collection agencies are willing to negotiate and find a mutually agreeable solution so long as they will eventually recover their money.

Consider using a formal debt solution

If you’re unable to repay the debt yourself, you may want to explore formal debt solutions such as an Individual Voluntary Arrangement (IVA).

Consult with a financial adviser or seek professional debt advice to determine the most suitable option for your circumstances.

What happens if I ignore debt collection agencies?

Ignoring debt collection agencies can have serious consequences. Here are some potential outcomes of ignoring debt collection efforts:

Increased debt

Ignoring the debt will not make it disappear. Interest, fees, and penalties may continue to accumulate, making the overall debt amount higher.

Legal action

Debt collection agencies can initiate legal proceedings against you, which may result in a County Court Judgment (CCJ) if successful.

A CCJ can have a negative impact on your credit rating and financial standing.

Enforcement action

If you fail to comply with the terms of a CCJ or make suitable payment arrangements, the debt collector may escalate the situation by taking enforcement action.

This can involve further legal measures, including the involvement of bailiffs or seizing assets to satisfy the debt.

It’s important to address any outstanding debts and engage with debt collection agencies to find a resolution that works for both parties.

Ignoring the situation will only make the problem worse and potentially lead to further financial difficulties.

Where can I get support to deal with my outstanding debt?

Confronting debt issues can leave you feeling swamped and unsure of the way forward. Thankfully, there are debt management strategies available to guide you towards a debt-free life.

At Talk About Debt, we equip you with insights you need to handle unmanageable debts, including exploring avenues like a Debt Management Plan (DMP) or an Individual Voluntary Arrangement (IVA).

We’ve helped thousands of people beyond oppressive debt, and we can help you too. Reach out to us today and embark on your journey towards financial freedom.