What to do if your debt is passed to a collection agency

Debt collection agencies tend to operate in one of two ways. They might:

1. Buy your debt from the original lender

If your lender isn’t happy with the amount you’re repaying, they may sell your debt to a collection agency at a reduced price. They do this:

• to get a lump sum of money
• so they don't have to chase you for payment anymore

The debt collection agency then legally owns the debt and makes a profit by collecting the full amount from you.

2. Take over responsibility for collecting the amount owed

In this situation, the original lender still owns the debt. The collection agency is usually paid a percentage of any money they collect.

It’s not a good idea to ignore calls or letters from a debt collection agency. If you don’t respond, the chances are they’ll take further action.

They may ask you to pay back the amount you owe in full or in large instalments. Only agree to pay what you can afford.

If you’re not sure how much you can afford to pay each month, check out our guide on how to create a budget or get in touch with a debt adviser if you’d like us to talk you through it.

You may be contacted by different debt collection agencies if they’re each dealing with a different debt. Just treat them as you would treat separate lenders.

If different agencies are contacting you about the same debt, get in touch with the original lender and tell them what’s going on. They’ll tell you which agency is dealing with your debt and should stop the other agency contacting you.

Some agencies operate under multiple trading names. So, it may look like you’re being contacted by different companies but it’s really the same company using different names. You can usually tell by checking their addresses on any letters they send. If the addresses are the same or very similar, it’s probably just one company.

We can certainly help you with debt collection agencies. The help that we offer will depend on your situation. But the kind of help we provide includes

• help coming up with a budget and an offer of payment for a debt collection agency
• checking you’re claiming all the benefits available to you
• arranging breathing space to give you a break from debt collection agencies and other lenders contacting you. You can use this time to find a long-term solution to your money issues
• advice on debt solutions* that could allow you to reduce your monthly debt repayments and even write off some of your debt so that you don’t have to pay it back

*We’ll need to check which, if any, debt solutions are suitable for you. Some debt solutions are free, others come with a fee. A debt solution is likely to affect your credit rating.