New rules on credit card debt: what do they mean for me?
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Who really owns your debt?
It can be worrying to get a letter telling you that your creditor has sold your debt to another company. You might worry about what this means for you, what could happen next and – most importantly – whether you still have to pay the debt.
Don’t worry if your creditor has passed your debt to a debt collection agency. This either means you now owe the money to them instead of your original creditor or they’re collecting money on behalf of your creditor. Either way, you definitely still have to repay what you owe.
Let’s take a look what can happen when a debt is sold on.
Debt collection agencies
A debt collection agency is a company whose job is to get back debt if a borrower isn’t paying a creditor. As we explained, there are two reasons you could hear from a debt collection agency. The first is if your creditor has employed the debt collection agency to reclaim your debt. In this situation, you still owe the money to your original creditor – the debt collection agency is just acting on their behalf to get it back.
The second reason a debt collection agency could get in touch with you is if your creditor has sold the debt on to them. This means you no longer have an agreement with your original creditor – your credit agreement is now with the debt collection agency. So instead of owing money to the company you took the money out from, you now owe it to someone else.
If you get a letter from a debt collection agency, find out whether your creditor has sold your debt or just passed it to the agency. There might not be a lot of difference for you with these two scenarios – in either case, you’ll now deal with the debt collection agency rather than your original creditor. But if your creditor has actually sold the debt to a debt collection agency, they might be less likely to add further interest or charges to your debts than your creditor would.
Debt collectors aren’t bailiffs
Debt collection agencies don’t have any special legal powers to force you to repay what you owe. In fact, they can’t actually do any more than your creditor can if you’re not keeping up with your debt repayments. Instead, debt collection agencies are just experts in reclaiming debts. Your creditor might employ a separate company to get the money back, or the debt collector might be a separate department within the same company.
It’s important to remember that debt collection agencies are not the same as bailiffs. While bailiffs do have legal powers – they can come into your home and take your belongings to sell – debt collectors can’t do this. What’s more, they certainly can’t harass you if you don’t pay. Debt collection agencies must be regulated by the Financial Conduct Authority (FCA). If a debt collector does try to threaten you or claims they can come into your home, you should file a complaint to the company. And if you’re not happy with their response, you can go to the Financial Ombudsman Service (FOS).
What debt collectors can do is send you letters and call you to get you to pay your debt. If you ignore this contact, the debt collection agency can take court action against you. This means asking the court to issue you with a County Court Judgement (CCJ) and if you don’t pay this, it will appear on your credit history for at least six years.
If you apply for credit at any point within the six years, the creditor will run a credit check on you and they’ll be able to see the CCJ on your credit history. They could be more likely to turn you down as you’ve had problems with borrowing in the past or – if they do accept you – this might be at a higher rate of interest. A CCJ could cause problems for you even if you’re not applying for credit, as other companies can credit check you too – if you’re taking out a rental agreement or applying for certain jobs, for example.
What you should do
Don’t panic if you hear from a debt collection agency. The most important thing is that you shouldn’t just ignore the calls or letters they send you. Get in touch with them to set up a payment plan, as this will make it less likely that they’ll pursue any court action.
If you don’t want to deal with the debt collectors or any of your creditors yourself, you might want to consider if a debt solution might be a way to deal with your debts. For example, if you start a Debt Management Plan (DMP) with a solutions provider, they’ll take care of any contact with debt collection agencies or your other creditors.
You can find out about the different debt solutions available by getting in touch with us using any of the options at the bottom of the page. A debt advisor will talk to you about your situation and let you know the best way for you to get out of debt. Whatever happens, you should never feel like you have to deal with your problems alone and that there’s no way forward – there’s always a solution.
by Emily BancroftBack to blog home