If you get a letter saying that a debt has been sold to a debt collector you may be very worried.
This article answers common questions about what has happened and how it will affect you:
- will the debt collection agency (DCA) be horrible to deal with?
- is it legal to do this?
- do you still have to pay the money?
- what about your credit record?
- what if you don’t owe the money?
I don’t think this is my debt
The letter doesn’t say what the debt is!
If you get a letter that might be about a debt but it doesn’t give any details at all, it is just asking you to call them, then this is a “fishing expedition”. They don’t really know who the debt belongs to and they are hoping someone will give them their details (date of birth, previous addresses) that will match.
You can usually ignore these vague letters – see Prime Location Services – do I have to call them? for an example.
But I don’t owe this money
When the letter mentions a debt that you don’t think you owe, do not ignore it.
If you have already repaid the debt, tell the debt collector this. Ask them for a Statement of Account for the debt if they say you do still owe money.
If you have never borrowed from that lender, or never used that electricity supplier, reply telling the debt collector to Prove It!
It is the debt collector’s job to show you are the borrower. You don’t have to prove you aren’t. But unfortunately you may need to be persistent about this.
Has the debt really been sold?
A lender will often appoint a debt collector to try to collect the money for them. This isn’t a “sale” – you still owe the money to the original lender. None of the rest of this article is relevant.
If you aren’t sure what has happened, the best thing is to contact the original creditor and ask them if your debt has been sold or not. If you are worried and don’t want to talk to the creditor, phone National Debtline for advice about the letter.
Is the sale fair?
Is this even legal? Why wasn’t I asked?
When a sale happens, everything about your debt remains the same, except that you now owe the money to the debt collector who has bought the debt. The T&Cs of the debt haven’t changed – just who the creditor is.
You won’t be asked to agree to the sale. AndYou can’t object to or stop the sale.
You agree to the original terms when you borrowed the money or opened the account. In the small print, there will have been a clause that said that the lender can “assign his rights” to a third-party. This is the legal term for a “sale”.
Your debt can be sold if you are in debt management or you have an arrangement to pay. It may not feel fair if the lender accepted your monthly offer and you are making the payments as agreed, but legally the lender can still sell the debt.
There is one exception here. If your lender subscribes to the Standards of Lending Practice and if they had previously been shown evidence that you have mental health problems or critical illness, your debt should not have been sold. Most banks and many major credit cards are subscribers. Go to your local Citizens Advice if you would like help with this situation.
How much was my debt sold for?
That will depend on the state of your account. A debt where you have paid token payments or nothing for a long while may have been sold for very little, just a penny or two in the pound. If you are making regular payments then it will have been sold for more.
You won’t be told what your account was sold for. The sale is a commercial agreement between the seller and the buyer.
This may seem annoying or unfair, but the debt collector and the original lender are not doing anything wrong by not telling you the sale price.
The price the debt collector paid for your debt is irrelevant to you. It doesn’t affect the amount that you now owe. You still owe the full amount but now to the debt collector.
If the lender has been paid, why do I owe anything?
The original lender has had the debt settled by the DCA. But you now owe the money to the DCA instead.
Think of this example. You borrow £200 from your sister for some car repairs, agreeing to pay her back £50 a month. But she suddenly needs all the money immediately, so your dad gives your sister the £200 and you repay your dad instead. Same debt, same repayments. You borrowed from your sister but now you don’t owe her anything but you do need to repay your dad.
This is pretty much what has happened with your debt being sold. Your debt stays exactly the same, you just owe it to a different person.
NB This example isn’t an attempt to explain the legal contractual obligations – it is an analogy illustrating why you now have to repay someone else.
I want to carry on paying the original lender
You can’t do this. You don’t owe any money to the original lender anymore.
Has this reset the 6 year period for becoming statute-barred?
No, this hasn’t changed anything about statute barring:
- if the debt isn’t yet statute-barred, the 6 year period carries on, it doesn’t start again after the sale. But if you were hoping the debt would soon become statute barred, the debt collector may push you to make a payment or go to court for a CCJ if you won’t. See “My debt has been sold, just when I thought I was out of the woods” for your options.
- where you have been making payments, this debt will never become statute-barred.
- a debt that is already statute-barred will continue to be so after the sale.
Read Statute Barred Debt – Common Questions because statute barring is complicated.
My debt has now been sold to another debt collector!
This happens. Sometimes several times. There is nothing you can do about it.
Sometimes the debt collector is going out of business. In 2022-3 there was a very big transfer of debts from Hoist to Lowell for this reason.
If you have been paying the previous debt collector, just start paying the new one.
What will the debt collector do?
Will the debt collector be difficult?
You may find that debt collectors are as easy to deal with as the original lender. Indeed they may be more likely to freeze interest or accept a full and final settlement offer!
If you had a payment arrangement with the original lender, for example in a debt management plan, you just need to offer the same amount to the debt collector.
There are regulations to make sure that consumer credit debt collectors behave fairly. All debt collectors handling credit card, overdraft and loan debts have to be regulated by the Financial Conduct Authority and if you have problems with one, the Financial Ombudsman will look at your complaint.
Unless you ignore the debt collector, it’s unlikely that you will get phone calls at work.
Will they come to my house? send bailiffs?
Bailiffs can’t be sent until the debt collector has got a CCJ (see below) and you are not making the CCJ monthly payments. this is very unlikely unless you ignore the debt collector.
In theory, a debt collector can send someone to your house. They have no more right to enter your house and take your things than the postman has. You don’t have to open the door to them.
As a result, this is pretty rare. It isn’t going to happen unless you ignore the debt collector, and even then it’s pretty unusual.
Can the debt collector take me to court?
Legally, yes. The debt collector now has all the rights that the original lender had and this includes applying for a County Court Judgment (CCJ).
You don’t have to worry that this is going to happen straight away. The debt collector would rather reach an agreement with you for monthly payments and not have the cost and bother of going to court.
But in 2022, there were nearly 900,000 CCJs. Many of these CCJs are for quite small amounts – much less than a £1,000.
Very few original lenders go to court for a CCJ – they usually sell the debt and let the debt collector take you to court. You may have been ignoring the original creditor and all that has happened has been a few emails and letters. But if you ignore a debt collector they are much more likely to take you to court.
How much can you pay to this debt?
I already have a payment arrangement in place for the debt
If you have a debt management plan, tell the DMP company. They will switch your monthly payment to go to the debt collector.
Where you have set up the payment arrangement, you need to ask the debt collector for their bank account details so you can start paying them.
I can’t afford to pay anything as I have arrears on important bills
Explain this to the debt collector. Most of them will let you have a break from paying if you have priority debts.
DO NOT PANIC and offer too much
You should only offer what you can afford for regular monthly payments. Not the maximum you think you can stretch to next month.
Never borrow money to try to pay a debt collector. This is an already defaulted debt where interest should be frozen. You will make your situation worse by borrowing more money to clear this and paying interest on it.
If you have been ignoring this debt, this is a good point to review your whole situation and your possible debt solutions.
If you aren’t sure what to offer, or feel a debt collector is trying to push you to pay too much contact your local Citizens Advice. Or phone National Debtline on 0808 808 4000,
But I now have two defaults on my credit file!
Debts are usually already defaulted before they are sold. When it is sold the original creditor will mark the debt as settled with a zero balance owing and the debt collector will add the debt with the same default date that the original creditor used.
So now there are now two debts with defaults on your credit record. You may be alarmed because that looks bad.
But the debt isn’t being double counted because one of the debt entries says that there is zero owing.
And when your credit rating is calculated, only one of the two debts is counted. So your credit score will not get worse because you now seem to have two defaults.