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

If you’ve been behind with your payments for a while, your lender may contact you to let you know your debt has been passed to a collection agency.

Although this can sound scary, it’s standard procedure for many lenders looking to collect money owed to them.

This guide explains what a debt collection agency is, what they’re allowed to do and how to deal with them.

What is a debt collection agency?

Debt collection agencies collect debts that the original lender is struggling to recover.

There are a range of different debt collection agencies in the UK – from small ones specialising in certain types of debt to large ones with operations across the world.

What does a debt collection agency do?

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.

Debt agency worries? Get free debt advice today

Or learn how Money Wellness can help with free debt advice.

All our debt advice is free. Some solutions are free. For others, there’s a fee.

Get started

Is a debt collection agency the same as a bailiff?

A debt collection agency is not the same as a bailiff/enforcement agent. They have no extra legal powers. This means they can’t do anything different to the original lender.

Can I ignore debt collection agencies?

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.

What laws do collection agencies have to follow?

Debt collection agencies must follow the same laws as your original lender. They can visit your home but must follow strict rules if they do:

They must show you ID.
You don’t have to open the door or let them in.
They can’t take anything from your home.
They must leave if you ask them to.

If they claim to be a bailiff/enforcement agent, they could be breaking the law.

Debt collection agencies will probably try to contact you by letter and phone. They could also use text and email. They’re not allowed to call too often. They’re also not allowed to exaggerate their legal powers.

If you don’t pay, a debt collection agency could take court action. They’re less likely to do this if they know you’re getting help with your debts and making an effort to repay what you can afford.

Being contacted by multiple debt recovery agencies?

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.

What if the debt I’m being chased for isn’t mine?

If you get calls or letters about a debt you don’t recognise, the first thing you should do is check it definitely isn’t yours. It’s easy to forget about joint credit agreements or that you’ve guaranteed a loan for someone else. In these cases, you could be responsible for the debt.

If the debt definitely doesn’t have anything to do with you, let the debt collection agency know. The chances are they’ve just mixed you up with someone with a similar name.

Most of the time, they will be very understanding and will stop contacting you once they’ve established you’re not responsible for the debt.

Can Money Wellness help with debt collection agencies?

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.