What can I do if my debt is sold to a collection agency?

Creditors don’t always want to spend too much time and resources chasing debts.

So in that case, it can be easier for them to sell the debt to a third party, so they can pursue the money that’s owed instead.

Sometimes a debt is sold outright to a collection agency, and sometimes the agency is just collecting the debt on behalf of the original creditor.

Either way, their rights are the same and they should always be told who they need to pay.

A debt can still be sold to a debt collection agency even if there’s an arrangement in place to pay arrears with the original creditor.

Even if a lender sells a debt to a new company, you’ll still be expected to pay the debt and you’ll owe the same amount.

You’ll just be making payments to them rather than the original lender.

If a new company takes over responsibility for collecting the money, they must write to you explaining the situation and how payments should be made.

You can challenge a debt if you think it’s unfair, wrong or shouldn’t be in your name.

Ask the collection agency to give you proof that you owe money, such as a copy of the original agreement.

If they can’t, you might not need to pay the debt.

If there’s been no contact between you and the lender for six years and you haven’t made a payment during this time, the debt might be statute barred.

Can I negotiate with a debt collection agency?

Yes, you can negotiate with a debt collection agency.

If you’re struggling to repay, they might be willing to: 

• set up a more affordable repayment plan
• freeze interest or charges
• accept a reduced lump sum to clear the debt

No.

A collection agency can’t add their own interest and charges.

But you could still have to pay interest and charges if they’re part of your original credit agreement.

Yes, you could be taken to court if you don’t pay what you owe.

But they have to send you a formal warning before taking any legal action.

If you do end up going to court, you may get a county court judgment (CCJ), which could affect your credit score.

Yes, but only in certain circumstances.

Ordinarily, a debt collection agency cannot take money directly from your wages or benefits.

But they can if a court order is in place.

The creditor can apply for an attachment of earnings order, which means that a sum calculated by the court will be taken from your pay packet every time you get paid.

No, but you can choose how you want to be contacted.

So if you ask a collection agency to just contact you in writing, they must respect that request.

They also aren’t allowed to harass you with excessive or threatening communications.

If you do feel that you’re being harassed, you can complain to the financial ombudsman.

There’s no limit to how many times a debt can be sold.

So if a collection agency can’t recover the money, they might choose to sell on your debt to another agency.

But if this happens, the new agency must write to you to let you know.

And your rights are unchanged every time your debt is sold.

We can advise you on different debt solutions that could let you reduce your monthly repayments and maybe even write off some of your debt, including:

• a debt management plan (DMP)
• an individual voluntary arrangement (IVA)
• a debt relief order (DRO)
• bankruptcy

Another option is arranging breathing space, so debt collection agencies and other lenders can’t contact you for 60 days, and you can use this time to find a longer-term solution.

We’ll also explore options including: 

• helping you set a household budget
• checking you’re getting all the benefits you’re entitled to

We can help you decide which options are right for you.