Debt collection. The words are enough to make you shudder. If you’ve fallen behind with your loan or credit card repayments, there’s a high chance that your debt has been passed to a debt collection agency. But, the important thing to remember is that debt collection agencies are not bailiffs and they have no additional legal power. They may be collecting a debt on behalf of a bank or loan company, or they may have purchased the debt from the original lender. They’re not as scary as you might think – here’s all you need to know.
When does a debt get passed to a debt collection agency?
A debt will be passed or sold to a debt collection agency when you continuously fail to meet the original contractual repayment that was first agreed when you took out the debt. The original lender will inform you in writing that the debt is going to be passed out or sold, and they’ll usually give you one last opportunity to prevent this, but you would have to make up any arrears that have accumulated due to past missed payments.
Fundamentally, the only way to avoid your debt(s) being passed to a debt collection agency is by maintaining at least the minimum payments to your loans or credit cards. If you cannot afford to maintain your payments temporarily, we’d recommend contacting the original lender and requesting a payment holiday, but there is no guarantee that it will be honoured.
What can the debt collection agencies do?
Not much more than the original creditor, but you should communicate with them as soon as you receive any contact. The longer you leave it, the more letters and calls you will receive, and the more likely it is that they will pursue further collection action. We would encourage you to contact them, explain your situation, and agree an affordable and realistic amount for you to pay to them each month.
If you’re unsure of the legitimacy of the debt collection agency, check the internet. Most debt collection agencies are regulated by the Financial Conduct Authority (FCA), so type their name into Google to confirm their credibility.
I didn’t borrow from the debt collection agency, do I still have to pay them?
Although they are not the original creditor i.e., the company that you borrowed from, you will still be liable for the debt and you will have to make arrangements to pay the balance. Most unsecured debts – like loans and credit cards – are regulated by the Consumer Credit Act, which gives permission to providers to legally sell the debt on to a debt collection agency. Failure to pay them can result in further collection action being taken against you such as a County Court Judgement or a Charging Order being placed on your home.
Ultimately, your debts will not go away if you leave them and they can have a huge impact on your life if you feel that your debts are getting out of control. The best thing to do for your mental well-being is to tackle your debts head on; you can do this yourself or you can ask a debt solution provider like Angel Advance to do this for you. Whilst Angel Advance cannot stop your debts being passed to a debt collection agency, we can be the ‘middle-man’ between you and your lenders.
We can provide free debt advice and help. All you need to do is call us on 01925 599400 or check what financial solution would be most suitable for you by using our free Online Debt Advice Tool.