Repayment
Debt collectors, debt purchasers and who owns your debt now
A letter from a company you have never dealt with usually means one of two very different things, and the difference decides what you ask for.
Everything below about debt collection and sale comes from what actually happens rather than from what is supposed to.
What holds up in practice
- A collection agent acts for the original creditor; a purchaser has bought the debt outright.
- Purchasers often buy at a large discount, which affects what settlements they will accept.
- You can require the collector to demonstrate the debt is yours, subject to local rules.
Two different arrangements
A debt collection agency may be instructed by the original creditor on a commission basis, in which case the creditor still owns the debt. A debt purchaser buys the debt and becomes the creditor, usually notifying you of the assignment. The letters look similar and the legal position is not the same.
Asking which arrangement applies, in writing, is a reasonable first question and often clarifies a great deal.
What purchasers paid
Portfolios of defaulted debt are generally sold at a substantial discount to face value, which is why purchasers can accept reduced settlements. That does not mean any particular offer will be accepted, and it explains why negotiation is possible at all. Any reduced settlement should be agreed in writing, including how it will be reported to credit reference agencies.
Put simply, never pay a reduced settlement on a verbal assurance.
Asking for proof
Many jurisdictions allow you to require documentation demonstrating the agreement and the assignment before the debt is enforceable. Old debts, particularly after several sales, frequently lack complete paperwork.
In practice, this is a legitimate request rather than an evasion, and it is best made in writing and kept on file. The rules on what must be produced and what happens if it cannot be are strictly national, so check yours.
Conduct rules exist
Regulators in many countries set standards on contact frequency, hours, workplace contact, disclosure to third parties and pressure tactics. Threatening action that cannot lawfully be taken is generally prohibited. Keep a dated log of every contact, because complaints are decided on records.
Where conduct breaches the rules, complain to the firm and then to the regulator or ombudsman.
Duplicate entries after a sale
A sold debt should show as closed or transferred by the original creditor and open by the purchaser, not as two live debts. Two active entries for one debt inflate your apparent indebtedness and are a common and correctable file error.
A reset default date on the new entry is the other frequent error and is more damaging. Both are worth disputing with evidence of the original agreement and default date.
What to do before agreeing anything
Do not agree a payment amount on a first phone call, however reasonable the caller sounds. Work out what you can genuinely afford across all debts first, using an income and expenditure statement. Free debt advice services will do this and deal with collectors on your behalf without charge.
An affordable payment maintained is worth more than a generous one abandoned after two months.
The takeaway
Ask in writing who owns the debt and for evidence of it, then negotiate from a figure you calculated, not one they suggested.
The version you keep doing is the version that works.
Questions readers ask
Do I have to deal with a company I never borrowed from?
If the debt was validly assigned to them, yes. You are generally entitled to see evidence of the debt and the assignment first, subject to local rules.
Can a collector add its own charges?
Only where the original agreement and local regulation allow it. Unexplained charges are worth challenging in writing.
