Even the term debt collector sends a shiver down the spine of many people. While it is fair to say that the introduction of a debt collecting agency to the mix is serious, it is very important that you know your rights. It would be fair to suggest that the debt collecting industry does not have a good reputation although in reality things have changed dramatically in recent years.
There is now more regulation, consumers are more aware of their rights and the courts have acted to introduce protection for consumers. However, there are still numerous elements of misinformation and misunderstandings with regards to debt collectors and what they can and cannot do.
Bailiffs and Debt Collectors
It is very common for people to become slightly confused with regards to the role played by bailiffs and the role played by debt collectors in pursuing outstanding debts. The first thing to mention is that a bailiff is what is known as an “enforcement agent” which effectively acts on instruction from the courts. One such power allows bailiffs to enter a property by “peaceful means” if they are not invited in. When in the property they can remove goods to cover specific debts although receipts and paperwork would be required. The situation with regards to debt collectors is very different.
In the past, there have been many instances of debt collectors attempting to muddy the water with regards to their “legal powers” and those of enforcement agents in the shape of bailiffs. The basic fact is that debt collectors have no special legal rights and are not allowed to enter your property without first being invited in.
Employing the Services of a Debt Collector
It is fair to say that the majority of creditors pushed towards employing the services of a debt collector/debt collecting agency would see this as a last resort.
They will have tried on numerous occasions to arrange a payment plan, try to understand the debtor’s situation and hopefully try to meet the debtor halfway.
There are two basic means of employing the services of a debt collector which are: –
Paying commission on debts recovered
This tends to be the more traditional method whereby a creditor will approach a debt collecting agency. The agency will review the debt in question and quote a commission/recovery fee. While there can be some variation, this tends to be around 10% of all funds recovered although they will also charge administration fees and additional costs where applicable.
Selling a debt to a debt collector
It is perfectly feasible for a creditor to sell a debt to a debt collector although they would likely receive less than half of the face value – the exact level would depend on individual circumstances. This fee will be paid for by the debt collector at which point the debt transfers over to their ownership. The original creditor now has no role to play in the debt repayment and it is all down to the debt collector.
Thankfully, in recent years we have seen the introduction of various rules and regulations regarding debt collection and debt collectors. Slowly but surely the general public are now more aware of their rights. Many of the misunderstandings between the role of a bailiff and the role of a debt collector have been addressed.
Can Debt Collectors Get Into My House?
While bailiffs have the legal right to enter your property by peaceful means, or by invitation, debt collectors will need to be invited into your property to gain entry. Even when they have gained entry, and there must be no intimidation or abuse involved, if you feel uncomfortable you are perfectly within your rights to ask them to leave.
There are a number of issues to clarify with regards to debt collectors and home visits:-
They Are Allowed to Knock on Your Door Uninvited
Even though some people may find it intimidating, debt collectors are allowed to knock on your door although whether you answer or not is down to you.
Making an Appointment
There is nothing to stop a debt collector calling you in “social hours” and arranging an appointment to discuss your outstanding debts. Again, whether you participate fully is down to you as you are not obliged to.
You Don’t Need to Open the Door
Whether a debt collector has called previously to say they will be around at a certain time to discuss your debts or they have turned up unannounced, you are under no legal obligation to open the door or talk to them.
Can Debt Collectors Take Goods From My Home?
Unfortunately, there is yet more confusion with regards to the role of bailiffs and debt collectors. Some people may be under the impression that debt collectors, invited into your property, can then freely take goods to the value of the outstanding debt.
This is simply not the case.
They have no legal powers to remove goods without your permission and even then they will need to provide receipts and other paperwork.
There have been instances of some debt collectors being rather “persuasive” once they have gained entry into a property and are looking to remove goods. It is very important that you stand your ground unless you are willing to give up goods in exchange for writing off/reducing your debt and make the debt collectors aware that you know your rights.
While some of the more dubious activities of debt collecting agencies in years gone by have been tackled, unfortunately, there are still some who use “more forceful” tactics.
Therefore, if you do decide to let a debt collector into your property it is probably best to have somebody with you to witness any unwanted activity.
Will They Accept Payment Plans?
Whether a debt collector has bought your debt or they are working on a commission basis they will look to extract as much money as possible from their visit. They may be open to the idea of a down payment and additional payments further down the line.
Alternatively, if you were in a position to pay off your debt in full then they will obviously prefer this. In some circumstances, it may make sense for them to accept a full and final offer in settlement even if it was not the whole amount.
While the vast majority of debt collectors will carry around various electronic payment systems many people will prefer to deal directly with the debtor’s head office or the original creditor, where the debt has not been sold on. This is a perfectly legitimate request and one which the debt collectors are obliged to honour.
In order to introduce a degree of balance, if you enter into a repayment plan then it is advisable to stick to that plan. Ignore the temptation to commit yourself to significant payments you know deep down you can’t afford. Discuss your finances with the debt collector if you so wish and explain your budget, living expenses and employment situation.
It is safe to say that the majority of debt collectors deliberately avoid any form of abuse or threatening behaviour. At the end of the day, if a creditor is linked with a debt collection agency is known for “dubious tactics” this does not reflect well on the company’s reputation.
The table below illustrates the recent trend in household unsecured debt in the UK:-
|Date||Unsecured borrowing UK households||Debt per household|
|2000 Q3||£158 Billion||£6498|
|2002 Q3||£200 Billion||£8121|
|2004 Q3||£230 Billion||£9235|
|2006 Q3||£258 Billion||£10,207|
|2008 Q3||£286 Billion||£11,141|
|2010 Q3||£280 Billion||£10,742|
|2012 Q3||£271 Billion||£10,206|
|2014 Q3||£281 Billion||£10,425|
|2016 Q3||£331 Billion||£12,065|
|2018 Q3||£392 Billion||£14,107|
Threats, Abuse and Unreasonable Behaviour
As we touched on above, whether a bailiff or a debt collector, they have no legal right to threaten, abuse or acting in an unreasonable manner when looking to secure repayment of a debt.
Under the Financial Conduct Authority Consumer Credit Sourcebook the following actions are illegal:-
Contacting a Debtor at Unreasonable Hours
Before 8am and after 9am are traditionally seen as unreasonable hours unless there are mitigating circumstances or the debtor has agreed to a call outside of these times.
It is also worth noting that debt collectors cannot call you at unreasonable intervals even during these hours. This is classed as harassment.
Causing Embarrassment or Distress
In the past we have seen debt collectors approaching individuals in the street or even waiting for them at their place of work. There have even been reports of debt collectors discussing private financial affairs with a debtor’s neighbours and other unconnected parties.
Whether acting deliberately or negligently in a manner which causes public embarrassment, debtors have the right to take legal action against debt collectors.
Collecting debt from somebody who has serious financial worries can lead to very highly charged discussions that can sometimes spiral out of control. During heated debates it has been known for debt collectors to insinuate they have the right to take goods from your property, as they are backed by the courts, thereby placing the debtor under undue pressure. This is illegal, pure and simple.
As we mentioned above, the days of violence, intimidation and downright aggressive attitudes are now in many ways a distant past for the debt collecting industry. The fact is that any agency/collector found guilty of illegal activity such as intimidation and abuse would never work again. Customers would move quickly to avoid any secondary reputational damage as a consequence of using such agencies.
This is an industry where money literally talks and therefore a loss of reputation, and a loss of business would have serious consequences.
Excessive Interest and/or Charges
Whether a collecting agency is working on behalf of the creditor or they have indeed bought your debt at less than face value, you need to be informed in writing as to what is happening.
The vast majority of financial/credit contracts today will have a small print which will either allow businesses to commission debt collecting agencies to recover outstanding monies or else sell your debt onto a third party.
Unfortunately, the vast majority of us fail to read the small print when looking at contracts. Ignorance is not an excuse further down the line if you attempt to challenge the way in which your debts are being addressed.
On the flipside of the coin, the days of huge collection fees and sky-high interest rates have been assigned to the bin. Yes, debt collecting agencies can charge fees for administration and additional expenses but these cannot be excessive. The definition of excessive is something which would likely be decided by the courts in the event of a dispute.
In reality, as a collecting agency would either work on commission or acquire debt in a full, they would prefer to receive payment as soon as possible.
Therefore adding huge interest charges and administration fees on top of the original debt, which the individual was obviously struggling to repay, would make little sense.
Unless some kind of arrangement could be made with the creditor those struggling may eventually pursue alternative debt management arrangements such as bankruptcy or an IVA. At this point the debt in question would likely be reduced or possibly written off – no matter the level of abuse, intimidation or misleading information emerging from the debt collector.
While there are circumstances in which a debt collecting agency can arrest wages, in reality this is highly unlikely. Therefore, if a debt collector turned up at your doorstep to “negotiate” repayment of your debt they cannot use the threat of arresting wages to mislead you.
Arresting wages means the debt collection company can receive payment directly from your wages/pay packet.
In extreme circumstances, when all other avenues have been attempted, your original creditor or a debt management agency could go before the courts to seek an arrestment of wages order – but this takes time and money.
In reality, the court would only grant such an order if it was proven that all other avenues had been explored and unfortunately proved fruitless. It is also worth noting that the arrestment would likely be direct from your employer.
Indirectly, this can create an embarrassing situation which can often prompt debtors to at least discuss potential repayments going forward. It is also worth noting that some institutions would not look favourably on such developments and it could in certain circumstances impact an individual’s employment.
Even in the event of a court order which will allow the arrestment of wages, there are regulations with regards to minimum levels of exemption.
As of 6 April 2019, the following levels of income were exempt from wage arrestment’s:-
- £529.90 per month
- £122.28 per week
- £489.12 per four weeks
- £17.42 per day
Obviously, from time to time the UK government will amend these figures – more likely up than down. This ensures that individuals at least have a bare minimum to live off in the event of a wage arrestment.
Can I Go to Jail?
As a rule of thumb, debt collection is a civil activity and therefore a civil offence if prosecutions are taken out via the courts. As a consequence, you could not be jailed for non-payment of a debt in normal circumstances. However, if the debt in question was found to have been obtained fraudulently, this would be a very different scenario.
Fraud is a criminal offence and therefore those who have partaken in such activity to secure finance could in theory face jail time. The chances of being jailed would depend upon the individual circumstances and the level of funds involved.
For example, there have been instances where benefit fraud has seen individuals sentenced to jail time.
These scenarios tend to involve benefit fraud in the tens of thousands of pounds with the situation compounded if the defendant is unable or unwilling to repay any of the funds fraudulently received.
Misrepresentation of Their Power
While we have discussed misrepresentation of a debt collector’s power, this is an important issue and one which we have detailed below.
Some of the more common examples of misrepresentation include:-
- Forced entry into a property
- Threats to forcibly remove goods
- The threat of criminal legal action
- The threat of significant financial penalties
It is advisable to have a third party in attendance when you are visited by a debt collector – if at all possible.
They can act as a witness if a debt collector has been abusive or made false claims regarding their powers/rights.
They are not bailiffs, they are not officers of the court and they don’t have any special legal powers even if they might suggest otherwise!
Cease and Desist Letter
Where a creditor employs the services of a debt collecting agency on a commission only basis you, as the debtor, have a right to issue what are known as cease and desist letters.
This is confirmation to the original creditor that you are unwilling to deal directly with a debt collector – with negotiations reverting back to the creditor. While some may see this as a type of delaying tactic this is by no means the case.
You may choose this option for a number of reasons including:-
- Alleged harassment and intimidation by the debt collector
- You have a viable repayment plan to discuss
- Uncertainty regarding paperwork, receipts and evidence of payment on the doorstep
- You have received additional funds which can be used to repay the debt
It is worth repeating, this should not be seen as a delaying tactic. Ultimately your creditors will take additional action if they feel their time is being wasted and you have no intention of discussing a viable repayment plan.
Taking Action if My Rights Are Violated
Instances of threatening behaviour, abuse and intimidation not to mention specific threats regarding criminal action are a violation of an individual’s rights. If you are able to obtain evidence of such activity then there is every chance you would be able to pursue criminal charges.
While the repayment of outstanding debts is a civil matter, using threatening behaviour, abuse and intimidation is a criminal offence. If you win your case there may be an opportunity to sue for damages which may well go a long way towards paying off your outstanding debts.
Statute Barred Debt
One issue which is often overlooked regarding outstanding debts is the fact that after six years they are statute barred. This does not mean that the debt has been removed or repaid it just means that a creditor failed to act in the six year window of opportunity.
As a consequence, they can’t take legal action to retrieve the debt. In reality, this type of debt would still impact your credit rating because it would still be deemed live even if no legal action could be taken to retrieve it.
This is not a get out a free jail card but more an opportunity to arrange a mutually beneficial repayment plan.
Knowing Your Rights
As we have touched on above, there are numerous differences between bailiffs and debt collectors although some might have you believe otherwise. There are certain activities they are allowed to do while others will constitute criminal action.
It is therefore very important that you are fully aware of your rights if expecting a visit from a debt collecting agency. While the vast majority of debt collectors are flexible and understanding to a certain extent, if you promise to make repayments it is vital that you stick to the timetable.
The idea of a debt collector visiting your home is the nightmare of many people although unfortunately with debt collectors said to retrieve upwards of £5 billion a year in debts, this is a growing business. While the industry is to a certain extent still tainted by historic “dubious” activity by some debt collectors, there is now more regulation, more consumer protection and more transparency.
It is also worth remembering that these companies are businesses, run to maximise income and minimise expenses. They may be flexible with regard to one-off settlements, extended repayment plans and even the liquidation of certain assets.
They would much prefer one visitor or one phone call led to an amicable arrangement rather than continuous expensive visits, court action and never-ending paperwork.
As the majority of debts pursued by debt collectors are unsecured you may be able to include these in some kind of debt management plan if there really is no hope for your finances. In some circumstances, they may be written off under an agreement with your creditors.
This perfectly illustrates why those debt collectors who are more flexible and willing to negotiate may ultimately reap the greatest long-term rewards.
How Can Love Debt Free Help?
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They have already helped thousands of people reduce and manage their debts, and they can do the same for you.
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