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Tackling your debts

How debts are sold on – who do you really owe the money to?

Posted 30 October 2015 by Shelley Bowers

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If you have problem debt, it may have been sold on, so who owns it now?

So, you have some problem debt and you’ve started to receive letters from debt collection agencies (DCA) that you’ve never heard of. Can your original lender just sell or pass on your debt to someone else without even telling you? Or is there some kind of process they have to go through first?

Check if the debt has really been sold on or if your lender is just using the DCA to collect the debt 

The first thing you should check is whether your debt has actually been sold on or if your original lender has just decided to employ a DCA to try to collect it on their behalf. This does happen quite often and if it does, you do still owe the money to your original lender.

If your debt is being sold on you will receive a letter from your original lender confirming this. Then a letter from the debt collection agency should follow shortly after.

Can they really just sell on my debt? 

Simple answer – yes! You’ll find that your original credit agreement will have a clause in it that says your original lender can assign the debt to a third party. This third party is usually a DCA or what is known as a “debt purchaser”.

This is transaction is called a sale because there will be some money changing hands. What that amount is will depend on a number of things, but it usually goes like this: if you have been a regular payer and have not defaulted, meaning you’ve never missed a payment, the debt will be sold close to the original amount still owing. However, if you have defaulted a number of times, by missing payments, sending part payments or paying late, your debt will have been sold on for less than  you owe.

This is because of the amount of work that the firm that buys the debts will need to be do in order to try to recover the debts. If you are a regular payer and your debt has been sold, the DCA will assume that you will continue to pay. However, if you are behind with your repayments, the DCA will assume that you will be the same with them, so they will need to chase you much more, spending more time on your account.   

However, it’s important to point out that it’s not always bad debts that get sold on. You may have never missed a payment, but the company who originally lent you the money is leaving the market, or needs to raise funding, so it has sold their book of clients on.

It sometimes even happens if you are already on a debt management plan, and the payments you have been making have been accepted by your original lender and you’ve been making payments towards the debt.

So, does the DCA have all the same rights as the original lender?

Yes, when the debts have been assigned, or sold on, by your original lender, the new owner has all the same rights as the old owner, your original lender. And all the terms and conditions you agreed to remain the same too.

However, in most cases the DCA will not add any further interest or charges to your account. So, if it was the case that you original lender was still applying interest to your account, the sale to the DCA could work in your favour.

Do I have any say in the debt being sold on?

No, you don’t. And, not only do you not have any say in whether the debt is sold on you also cannot object to it either. However, there is one instance where your lenders should not be selling on your debt, no matter how many payments you’ve missed – if they are aware that you are experiencing or have  experienced mental health issues in the past. If your lender has signed up to the Lending Code, they should not be selling your debt on in these circumstances.

Can I go back to the original lender and pay them instead?

No, if your debt has been sold on, you will no longer owe your original lender, you now owe the new owner of the debt, the DCA. In effect what’s happened is that the original lender has sold the debt to the DCA and now considers your debt to them to be paid. The new owner of the debt – the DCA – has paid for the rights that are associated with the debt, which means you now owe them. Nothing else about your debt has changed, only who owns it.

This also means that the DCA can take you to court, like the original lender could, and apply for a County Court Judgement (CCJ) against you  

Is it possible for a DCA to take me to court? 

Yes, it is. When the DCA bought your debt, they also bought all the same right as your original lender, which means they can take you to court and ask for a County Court Judgement, more commonly known as a CCJ, against you. You can see how to deal with a CCJ in our blog – How to deal with a CCJ (County Court Judgement) and what to do is you already have one.            

What should I do if my debt has been sold on?

If you already have a debt management plan (DMP), your original lender will tell the DCA that there’s a DMP in place and advise them who it's with. If you’ve organised your own DMP directly with your lenders, you should cancel any payments you have going to the old lender and ask for the payments details of the DCA so you can arrange for them to be paid instead.   If you’ve got a DMP via a provider such as Debt Advisory Centre they will usually deal with this for you.

We hope that this has helped you feel a little more informed about what happens to your debts once they are sold on to a DCA. If you feel you need some more advice, or you’d like to explore the possibility of entering into a debt solution to get your unmanageable debt under control, use one of the ‘contact us’ options on the left of the page.  

 

by Shelley Bowers

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.