Debt Collectors: Essential Guide

It’s understandable that many people will worry or panic when they’re contacted by a debt collector. Just the thought of letters, calls and potential doorstep visits from a debt collection agency can lead you into rushing to try and rectify your financial problems without taking a moment to consider what the best options might actually be. Especially when TV and media coverage focuses on the UK’s scariest debt collectors, and often confuses debt collection agencies and bailiffs in their programmes.

Sometimes this can actually make your situation worse if you’re pressured into payments or a settlement that you can’t afford. That’s why our essential guide to debt collectors lays out the facts to help you pause and find the most affordable way to deal with problem debts. And it explains how to deal with debt collectors to set up repayments that remove the need for them to constantly chase you (and what to do if you believe they’re harassing you).

DebtBuffer will help you take the first practical steps. Our letter writing templates enable you to easily contact debt collection agencies from the moment they first start chasing you. This means you can get more time to speak to specialist debt advisers and charities for advice, declare yourself vulnerable to ensure more considerate communication, and also tackle harassment.

What is a debt collector?

Debt collectors pursue money owed to a lender if the original creditor can’t get the arrears repaid. They may work individually, or as part of a debt collection agency, and will start contacting you if you have been missing payments or sent a default notice.

Debt collectors usually become involved in one of two ways:

  • The original creditor uses a collection agency to recover the debt, offering them a percentage of what they recover.
  • The original creditor assigns or sells the debt to a collection agency, who then becomes the legal owner and makes their profit by collecting from you.

A debt collector or agency does not have any special legal powers. They are only entitled to take the same actions as the original creditor. This means debt collectors and debt collection agencies often rely on increasing the amount of contact and threats of further action to encourage you to repay them.

What’s the difference between Debt Collectors and Bailiffs?

Debt collectors have no legal authority. They’re not entitled to enter your home or take anything from your house for repayment. They’re also not allowed to lie or imply they have any special legal powers, and if a debt collector pretends to be a bailiff (or sheriff officer in Scotland), this can be a criminal offence.

Bailiffs (officially called enforcement agents in England and Wales) will only become involved after court action. They’re allowed to visit any property where you live or run a business and are usually required to enter peacefully. The type of debts they collect won’t include consumer credit like payday loans, credit cards or overdrafts unless payments for a Country Court Judgement have been missed.

So, you’ll want to respond differently whether it’s a debt collector or bailiff you’re dealing with.

Can you ignore debt collectors?

The worst thing you can do is to ignore letters or calls from debt collectors. It’s understandable to be worried or anxious, especially if you’re not able to make full repayments. But if you don’t respond, then your problems will escalate, especially if they take court action.

The longer you ignore your debt problems, the bigger impact they’ll have on your life. And creditors or debt collectors will be less sympathetic to your situation the longer you try to avoid dealing with it.

Rather than ignoring debt collectors, there are simple steps to reduce the amount of contact and give yourself more time to find a sustainable solution. You can use DebtBuffer letter templates to request more time while you put a plan into action.

How to deal with Debt Collectors

The best way to deal with debt collectors is by regaining control of the situation. One of the main things debt collection agencies will do is to make you feel helpless and obligated to meet their demands, even if it puts you in more financial difficulty.

Your first step should be to contact them, using a DebtBuffer letter template for example, to let them know you’re seeking help to set up a solution for your repayments, and to ensure you have the correct details of the amount owed in case of any mistakes or disputes.

This will give you time and space to get expert advice from debt charities or advisors, and allow you to work out affordable repayments. Many of these services will offer free or impartial advice and help.

There are a range of options including Debt Management Plans (DMPs) or Individual Voluntary Arrangements (IVAs) which are voluntary or legally binding, and can mean debt collectors will be required to deal with someone managing your account rather than contacting you directly.

Giving yourself extra breathing room will also allow you to understand if you should be declared as a vulnerable person, which means debt collectors need to take extra care. Examples include if you have mental health problems, a learning disability or brain injury, a long-term or terminal illness, or have suffered a recent bereavement or relationship breakdown.

Is it better to settle or pay in full?

If you come into some unexpected money or have financial support offered by friends and family, it offers the choice of making a settlement rather than paying off your debts over time.

Paying the full amount of the debt in a settlement will be marked on your credit record as “Settled” if you haven’t defaulted or had a CCJ issued for the debt. Once that’s happened, if you pay the full money owed it will be marked as “Satisfied”.

Offering a partial amount can be worthwhile, particularly if you don’t think you’ll be able to make regular payments without your sudden windfall. Or if your situation is likely to get worse in the future. The benefit is that it will stop you from making further repayments for the full amount owed. But although the debt will be marked as “partially settled” on your credit report, this can have a negative effect on your credit score. A record will be removed either six years after the account was paid, or six years after the date you first defaulted if this was earlier.

So the decision is really whether you want or need a better credit score by paying the debt in full over a longer period of time. Or if you’re in a position where it makes more sense to offer what you can, and then avoid making any further repayments.

You’ll need to work out how much you can offer, and if you need to share it equally amongst multiple creditors or debt collectors to make a “full and final settlement offer”. It will need to be accepted in writing, and you may find the proposal gets declined by one or more of your creditors.

Always make sure you have written confirmation that a full and final settlement has been accepted before making any payments.

Other options to have debts written off rather than paying the full amount include applying for a Individual Voluntary Arrangement (IVA), Debt Relief Order (DRO), or Bankruptcy. You may not need to repay anything, or it can require you to make some level of repayments, with any remaining balance written off at the end of a set period, which can be as little as 12 months for a DRO.

Can a debt collector refuse a payment plan or token payments?

If you can’t settle the full amount of your debts, or the standard payments are too high, then you have the option to enter a payment plan or offer token payments. And if debt collectors are involved, then this is likely to be the case.

As with any creditor, a debt collector or debt collection agency can choose whether or not they’ll enter into any voluntary arrangement. And if this will also include freezing interest and charges.

Voluntary payment plans include DMPs, which are often handled by a third party debt organisation or charity. This allows you to make one monthly repayment which will be passed onto one or more of the lenders or debt collectors you owe. You may find that it’s easier for a creditor to accept a repayment plan if it’s organised on your behalf, but the other advantage is that it tends to limit the amount of communication you’ll receive from them going forwards.

Token payments are if you can’t afford to pay very much at all, and you’re expecting your situation will improve at some point. These are only an option for non-priority debts such as credit cards, unsecured bank loans or catalogue debts. You may find that debt collectors will agree to take a token payment of as little as £1 per month, and can potentially freeze interest and charges, if this allows you to clear outstanding priority debts first, and then pay off the non-priorities much more quickly.

If you apply for an IVA, this becomes legally binding once it’s accepted by creditors. And the same is true of a CCJ. If debt collectors still don’t agree with what is being offered, it will then be decided by a court officer or District Judge.

Ultimately debt collectors and debt collection agencies want to recoup as much money from you as they can, because that is how they profit. So the more you can demonstrate that it’s beneficial for them to accept token payments or a payment plan, the higher the chances of them accepting it.

How to check if a debt collector is legitimate?

It’s always worth quickly checking the details of debt collectors to ensure they’re legitimate. Most collection agencies in the UK will hold a valid consumer credit licence and are regulated by the Financial Conduct Authority (FCA). You can check the FCA Register, or contact the FCA directly to check.

Many will also be members of trade organisations, such as the Credit Services Association. So, you should be able to check if any trade bodies are listed on their website or letters to you. Debt charities also deal with the major UK debt collection agencies, so they can also help you check you’re dealing with a real company.

Some debt collection agencies may use more than one trading name, which can appear that you’re being chased by multiple companies for the same debt.  You should contact the original creditor to find who is now dealing with your debt and stop the other company contacting you. If the addresses on letters from each company match or are very similar, it’s likely that they’re the same company, and you could ask them to contact you using one trading name to avoid further confusion.

Debt collectors contacting the wrong person

Sometimes you may receive debt collection letters or phone calls even when you’re not in financial difficulty. This can often happen if you rent a property, and debt collectors are chasing a previous tenant. Whether you rent or have purchased a home, you are not liable for debts owed by someone who previously lived there.

Normally it’s because the previous occupant either hasn’t updated their creditors when they left, or there’s been a delay while records are updated.

If you’re receiving debt collection letters addressed to someone else at your property, you can write ‘not at this address’ on the envelope and post it without needing a stamp. The Post Office should then return the letter to the sender. This may stop things, but you can also contact the debt collectors directly, and send a written complaint if contact doesn’t stop after a reasonable amount of time.

You’re not legally obliged to provide proof that you’re the current resident. But responding to the letters will avoid any further complication.

If you’re receiving phone calls for someone else’s debts, you should make them aware and ask them to stop immediately. And if they continue, you can make a complaint in writing.

And if debt collectors visit in person regarding debts owed by someone else, it’s recommended you don’t let them in. It’s best to either communicate with them via your letterbox or ask them to go to the end of your driveway so you can talk a safe distance from your door. You can explain that the person owing money no longer lives at the address, and even show a council tax bill against a window for them to see.

What counts as debt collection harassment?

As debt collectors and agencies don’t have any special legal powers, they rely on the fact that dealing with a specialist seems more serious than the company you originally secured credit from. In some cases this can go from reasonable steps to ask you for payment, to harassment and improper action.

If you believe a creditor, debt collector or agency is acting in an unfair way or harassing you, then you can check what would be considered as debt collection harassment by checking the Financial Conduct Authority handbook which has a section on Contact with Customers outlining what is expected. Examples include:

  • Contacting you several times a day, especially at unreasonable hours of the morning and night.
  • Or contacting you at unreasonable locations, such as your workplace.
  • Pressuring you to take out more debt or sell property and assets.
  • Sharing details of your debts with friends or family, or publicly, including via social networking websites.
  • Falsely claiming to be working for a court or bailiff, or implying that legal action can or has been taken against you when that’s not the case.
  • Making threatening gestures or statements.
  • Implying that failure to pay is a criminal offence, when it isn’t for most debts, especially consumer credit.
  • Trying to enforce the debt if you are in a payment scheme such as a Debt relief Order or Individual Voluntary Arrangement.
  • Refusing to deal with an adviser acting on your behalf.
  • Ignoring disputes, failing to investigate or refusing to freeze action.
  • Unfairly pursuing someone too vulnerable to deal with your debts at the time, such as mental health problems.
  • Attempting to obtain payment for debts which are Statute barred under the Limitation Act 1980, which means the lender can’t use certain types of action to ask you to repay the debt.

How to complain about Debt Collection Harassment

In the same way as you should take control of your financial situation, it’s important to regain command of the situation if you believe a debt collector or agency has been treating you unfairly.

The first step is to contact the individual or company. This may seem scary, but DebtBuffer can help with templates and information to help you craft a letter which could help you end any harassment causing you undue stress and worry.

You can inform your creditor about your preferred contact methods and ask them to confirm their agreement. And also let them know you are aware of both the Consumer Protection from Unfair Trading Regulations 2008 and the FCA Consumer Credit sourcebook, and that you are considering making a complaint about their behaviour..

It’s also worth keeping a diary of events such as records of phone calls, letters and visits. And it can be helpful if you can get confirmation of details from a third party, for instance, if a debt collector has visited your home.

There are a few different organisations which can help you with a complaint.

You can report the problem to Trading Standards by contacting the Citizens Advice consumer service, who share the information reported to them. Their advisers can give you advice, tell you about the law which applies to your situation, and pass on the relevant details to Trading Standards (which you can’t do yourself). If Trading Standards investigate and find an offence is suitable for prosecution, the penalty for the debt collector is a fine of up to £5,000 in a magistrate’s court, and is also likely to end their authorisation by the FCA

The Financial Ombudsman Service (FOS) is a free and impartial service which settles complaints between consumers and financial service businesses. You’ll need to have contacted the company first, so if you’re not happy with the response, or they’ve ignored you, it’s then time to consider contacting the FOS. They’ll get information from you and the debt collector, review everything and share their decision. The FOS can order the company to put things right, or even require them to pay you compensation.

Finally, although the Financial Conduct Authority doesn’t take up individual complaints, it will collect information that may be used to take action against creditors. Their powers include withdrawing FCA authorisation, financial penalties, suspending a firm for up to 12 months, or stopping an individual working in financial services.

Can a debt collector enter my house?

It’s typically rare that debt collectors will turn up at your home in person for two reasons. The first is that a visit to your house costs them time and money. And the second is that a debt collector has no legal right to be able to come into the place you live.

The only way a debt collector can come into your home is if you specifically invite them. That’s why it’s best to communicate either through the letterbox, or at a safe distance from your door (at the end of the driveway, for example). This prevents any confusion or misunderstanding.

A debt collector also has no legal right to list assets with your home. Or take any items in lieu of payments. Even bailiffs are limited in when and how they can access your home, and what debts allow them to potentially force access.

What can debt collectors do if you don’t pay?

Debt collectors and agencies have to follow the same rules as your original lenders. They have no special legal powers or extra rights to reclaim money you owe.

If you fail to make payments or set-up a repayment solution, the debt collector will need to send you a default notice for debts regulated by the Consumer Credit Act. These are recorded on your credit file and give you time to respond as soon as possible.

The next stage will be taking you to court for a County Court Judgment (CCJ). This will set out legally-required repayments, and failing to pay these means collection may be escalated to bailiffs, who have significantly more power than debt collectors. You can see more details on the process, and what options you will still have, in our guide to defaults and CCJs.

When shouldn’t you pay a debt collector?

You should never ignore communication from a debt collector or agency. But there are some circumstances where it’s best not to make a payment despite their demands.

The first situation is if the debt isn’t applicable to you, or you are disputing it. As outlined above, there are steps to take if you receive letters for a previous tenant or householder at your address. But you might also be mistakenly seen as jointly liable for the debt of a friend or family, so it’s important to check the reality before sending any money.

You should also check that the debt collector or debt collection agency is legitimate, and that your debt has been passed onto them by the original creditor. It can be confusing to see a new company suddenly chasing you for a debt, and you don’t want to end up paying the wrong company.

It’s rare to be visited at home by a debt collector, but it can happen. If they’re turning up on your doorstep demanding cash for a large or full payment, you may want to refuse to be pressured into giving them more than you can afford. In this case, you can ask them to leave and arrange reasonable repayments by alternative methods (online, over the phone or by post). This gives you the time and space to ensure you’re taking an affordable route to sorting your financial situation.

And if it’s an old debt, you might not even need to pay. Sometimes referred to as zombie debts, there are rules about how long creditors and debt collectors have legal powers to require you to repay money owed. In most of the UK, this is referred to as Statute Barred (or Extinguished in Scotland) and depends on the nature of the debt, so we explain it in more detail below.

How long will debt collectors try to pursue old debts?

There are specific rules about what happens to old debts, to limit what creditors can do after a reasonable period of time. The exact details will depend on the type of debt, and require specific action to quality.

In the UK, a dormant debt will be Statute Barred, which means it still exists, but a creditor or debt collector will no longer have access to any legal requirement for you to pay or court action. The exception is in Scotland, where once a debt becomes extinguished, it ceases to exist.

You should check with a specialist debt adviser regarding your individual circumstances, but as a guide to the limitation period for debts by type:

  • Unsecured debts (credit cards, store cards, personal loans, utility bills, overdrafts, and rent arrears, for example) have a limitation of six years (or five in Scotland).
  • Secured loans (e.g. mortgages) have a limitation period of 12 years.
  • There is no limitation period for income tax, VAT or capital gains tax owed to HM Revenue & Customs, or benefit overpayments for the Department for Work and Pensions.

For a debt to become Statute Barred, you must have made it through the limitation period without:

  • Acknowledging the debt in writing (or emails)
  • Made any payments to the debt
  • Had any legal actions begun by having a CCJ issued against you.

When you’ve passed through the limitation period and you’re certain the debt is statute barred or extinguished, then you can forget about it.

If you’re not sure whether your debt is statute barred or not, you’re allowed to contact the debt collector to provide proof that the debt is accountable for according to the Limitation Act. By using a carefully worded letter , it’s possible to denounce liability for the debt due to the limitation period, and ask for either evidence if this isn’t the case, or confirmation that you won’t be pursued for it any longer.

Any requests for payment once a debt has been statute barred are not enforceable by law. This means that any communication should stop as regulated by the Financial Conduct Authority. Any further chasing for payments can entitle you to receive help from the Financial Ombudsman.

How do debt collectors find you?

Have you ever stopped to think about how much personal data you share when you’re taking out credit, applying for a bank account, or just relaxing by sharing your thoughts on social media?

Debt collectors will have access to the forms you originally completed, which include personal information and possibly details of family or friends (especially if one of them has been a guarantor). Although data protection rules should prevent them from speaking to any third parties without your permission.

When you take out finance, you will have agreed to allow the lender to check information from your credit report. And that consent passes onto a debt collection agency along with your debt. So not only will they be able to see your past information, but debt collectors can check your credit report if you take out any financial services in the future.

Your credit report also includes information whether you’re registered to vote at your current address. Although you can opt out of the open register (edited register in Northern Ireland) which is available for anyone to buy, you’re not able to opt out of the full version of the electoral register. The only people who aren’t included are those who have applied to vote anonymously due to a threat to their safety, or the safety of someone in their household, which needs to be supported by court documentation or an application signed by an authorised person.

Debt collectors don’t have access to your bank accounts, or any power to freeze them. You will need to provide budget and financial information to people arranging a debt management plan, or the administrator of an Individual Voluntary Arrangement. But creditors can only get direct access to your financial statements by applying through a court order, called an order to obtain information.

Another route for personal information is for debt collection agencies to access marketing databases. We all supply a huge amount of data about ourselves if we shop online, sign up for social media services, or even just visit websites. Much of that information is likely to be sold to multiple companies for advertising or marketing purposes, but debt collection agencies are also able to buy it.

Some companies also provide specialist “skip tracing” services to locate debtors either as part of their debt collection business, or as a third-party provider of services and software. This includes checking email addresses, linking associated co-occupants and neighbours,  telephone number searching and validation and more.

Can debt collectors repossess a car on finance?

Debt collectors or agencies do not have the same legal powers as a bailiff, and cannot take your possessions. The most they can do is to ask you for a payment arrangement on your debt.

It’s worth remembering that in these finance agreements, legal ownership stays with the manufacturer or finance company until you have completed all payments.

If you currently have a hire purchase or PCP agreement on a car, and you can’t afford the current repayments, it’s possible to ask for a payment holiday or end the agreement early. With both, you’ll need to have paid 50% of the total finance amount or be able to pay off the difference, allowing you to voluntarily terminate your agreement and return the car. This may appear on your credit file, but it’s unlikely to affect your credit score or ability to get future finance.

If you’re not able to make your payments, or return the car with an early settlement, things are likely to escalate. Debt collectors aren’t able to take a car on finance. But the manufacturer or finance company will probably take court action to involve bailiffs, who do have legal powers to seize assets.

DVLA Fines, Parking Fines and Debt Collectors

The Driver and Vehicle Licensing Agency may pass your details to a debt collection agency if you fail to pay a fine for not insuring your vehicle. Or if you fail to tax your vehicle, the amount you owe for being untaxed, or failing to declare that it’s not being used on the road.

Debt collectors are also used by private parking companies. But as with all other cases, debt collectors do not have any legal powers to take any assets.

HMRC And Debt Collectors

As with the DVLA, HM Revenue and Customs may also use private debt collection agencies to collect money owed to them for unpaid taxes. Again, these are not bailiffs or HMRC officers, and they do not have any legal power to take assets or secure funds from your bank or building society account.

If you’re contacted by a debt collector on behalf of HMRC, you can check the company name against this list of debt collection agencies used by HMRC.

A HMRC employee should have a photo ID, and the number can be checked by calling HMRC on 0300 200 3862. The phone line is open Monday to Friday from 8am until 4pm.

Can a debt collector come to your workplace or contact you at work?

As mentioned under the section on debt collection harassment, the FCA Handbook states in Conc 7.9.7,  When contacting a customer:

  1. a firm must ensure that it does not act in a way likely to be publicly embarrassing to the customer; and
  2. a firm must take reasonable steps to ensure that third parties do not become aware that the customer is being pursued in respect of a debt

This means a debt collector shouldn’t be phoning you at work and leaving messages that indicate you have money problems. Which might be evident from the name of the debt collection agency alone.

And they certainly shouldn’t be turning up at your workplace to enquire about repayments.

If debt collectors are contacting you in any way via your work, it’s important to contact them to explain how you would prefer to communicate with them, and if you are disputing or planning to repay the debt.

You should then keep a record of any further contact at work, and send a written complaint. And then proceed to the steps for dealing with harassment if it continues. This can result in punishment for the debt collectors, and could even see you awarded compensation.

Conclusion: Your next steps to dealing with debt collectors

The first thing to do when you’re contacted by a debt collector is to stay as calm as possible. You should remind yourself that debt collection agencies have no special legal powers or rights, so they’re essentially just another creditor.

It’s important to understand what they are able to do, and ensure debt collectors don’t go beyond their limits by mistake, or even intentionally. For example, when an agency buys your debt, the original default date mark on your credit score should only change by the name of the company. But sometimes you can find the date becomes more recent, meaning it will take longer to clear. Or an additional default gets added instead. You can get these corrected by contacting the main UK credit reference agencies. And we explain the process for fixing default mistakes on your credit record in our guide to defaults and CCJs

You can start to resolve your problem debts by using the DebtBuffer letter service to contact the collector or agency requesting time to put a solution in place. If you’re vulnerable due to mental health, a recent bereavement or relationship breakup, or another suitable reason outlined above, then you should also inform them from the start to be treated with more consideration.

Take a little time to research your options and speak to specialist debt organisations and advisers. You can decide whether you want to deal with debt collectors directly, or organise a repayment plan which is handled by a third party, including a voluntary Debt Management Plan (DMP), or a legally binding Individual Voluntary Agreement (IVA). Or if you’re able to clear your debts earlier by offering a partial settlement, or taking another route such as a Debt Relief Order (DRO) or Bankruptcy which have specific implications for your finances and credit rating, but can last as little as 12 months from being approved.

The only difference between debt collectors and other creditors is how they’re generally perceived. People assume that a debt collection agency has more power, which isn’t correct. They’re just typically more active in chasing you because recouping money is how they earn a living.

Ultimately, you should be focused on taking back control of your financial situation, and not allow the involvement of debt collectors to influence you into making bad decisions under pressure. Even if you’re facing potential court action, such as a County Court Judgement (CCJ) there are still options available, and you’ll still be able to fix things eventually.

Debt Collection Agencies Can:
Be assigned a debt working on behalf of your creditor, including HMRC and the DVLA
Buy a debt from your creditor
Chase you to pay off debts
Visit you in person
Use public data and the permission granted to your creditors to trace your details
Add interest and charges
Decline a payment plan or settlement offer
Issue a default notice
Apply for a County Court Judgement
Issue a statutory demand (Only for debts over £5,000 and rarely used)
Debt Collection Agencies Can’t
Harass you
Break data protection laws
Pretend they have legal powers that they don’t
Artificially inflate charges or interest
Threaten you
Enter your home without permission
Take any assets, even those with outstanding finance
Take legal action on Statute Barred debts
Publicly embarrass you – e.g. contacting you at work, or chasing you on social media

This article was written by: