How is debt sold?

If you have been contacted by a debt collector, these TRDG guides can help you understand what to do next:

• Should you call or write to a debt collector?
• Can’t afford the payment they are asking for? Learn about How to Deal with Debt Collectors in the UK: Your Rights & FCA Rules.
• Start with the debt help hub if this is part of a bigger money problem.
  

Creditors sell debts because they may decide it is better to recover some money now rather than continue chasing the full balance for months or years.

For example, if someone can only pay a small amount each month, the original creditor may decide that selling the debt is more efficient than keeping it on its own books.

Debt purchasers usually buy debts in large portfolios. They are not normally buying one person’s account on its own. They buy a batch of accounts and then try to collect enough money across the whole portfolio to make a profit.

That does not mean the debt disappears. It means the company contacting you may now be the legal owner of the account, or they may be collecting on behalf of the current owner.

Usually, no. Debt purchasers often buy unpaid debts for less than their face value. The exact amount depends on the type of debt, the age of the account, payment history, the likelihood of recovery, and the wider portfolio being sold.

This is why some debt collectors may later offer a reduced settlement. If they bought the debt for less than the balance, they may still make a profit even if they accept less than the full amount from you.

But be careful. A reduced settlement is not automatically the right move. You should understand whether the debt is yours, whether it is enforceable, what you can afford, how it will be recorded, and whether paying one debt could leave you short on priority bills.

For many regulated credit agreements, a creditor normally has to send a default notice before taking certain steps, such as terminating the agreement or demanding early payment.

Under the Consumer Credit Act 1974, a default notice must explain the breach, what needs to be done to fix it if it can be fixed, and give the borrower at least 14 days after service of the notice before certain enforcement steps can be taken.

A default notice is not the same as a debt being sold. But defaults, arrears and debt sales often appear in the same journey, so it is worth understanding what each letter actually says.

Debt collectors should not pressure you into paying more than you can reasonably afford.

FCA rules require firms to take reasonable steps to ensure that repayment arrangements are sustainable. A repayment arrangement is unlikely to be sustainable if it means you cannot meet priority debts and essential living expenses such as mortgage, rent, council tax, food or utility bills.

The FCA also says firms must not pressure customers to pay a debt in one single payment, very few repayments, unreasonably large amounts, or within an unreasonably short period of time if doing so would harm the customer’s financial circumstances.

So if a debt collector is pushing for a payment that would leave you short on rent, food, council tax, or bills, stop and review your full budget before agreeing.

If you are in financial difficulty, you may be able to offer reduced payments or token payments for a period of time.

FCA guidance provides examples of forbearance, including accepting no payments, reduced payments, or token payments for a reasonable period, where a customer shows that paying existing debts would mean they cannot meet priority debts or essential living expenses.

That does not mean every situation is simple or automatic. You still need to communicate clearly, show what you can afford, and keep records of what has been agreed.

If you want to understand token payments in more detail, read the TRDG token payments guide.

If the debt is old, do not rush into admitting it or making a payment before checking the dates.

Some debts can become statute barred. In England, Wales and Northern Ireland, the limitation period is generally six years for many debts. In Scotland, the prescriptive period is generally five years.

The rules can be complicated because the time period can be affected by payments, written acknowledgements, court action and the type of debt. If a CCJ already exists, the position is different.

The key point is simple: if an old debt collector letter arrives out of nowhere, pause and check the timeline before you respond in a way that could cause problems.

If you think a debt collector is treating you unfairly, start by keeping evidence. Save letters, emails, text messages, call logs and screenshots.

The Financial Ombudsman can look at complaints about debt collection in relation to most types of credit. It gives examples such as being chased for a debt you do not owe, being asked for the wrong amount, repeated contact, poor treatment when you are in financial difficulty, or a dispute about whether the debt is enforceable.

You usually need to complain to the business first and give it the chance to put things right. For most complaints, the business has up to eight weeks to send its final response. If you are unhappy with the response, or it does not respond, you may be able to take the complaint to the Financial Ombudsman.

Can a debt collector buy my debt without my permission?

In many cases, yes. Your original credit agreement may allow the creditor to assign or sell the debt to another company. You should still receive information showing who now owns the debt or who is collecting it.

Does a sold debt mean I have to pay immediately?

No. A sold debt does not mean you should panic or agree to unaffordable payments. Check the details, ask for information in writing if needed, and work out what you can realistically afford.

Can a debt collector add interest and charges?

It depends on the agreement, the type of debt and what has happened to the account. If extra interest or charges have been added, ask for a breakdown and check whether they are allowed.

Can a debt collector take me to court?

In some circumstances, court action may be possible. But the collector still has to follow the correct process, and you should not ignore court papers. If you receive a claim form, act quickly.

Can I offer less than the full balance?

You can make an offer, but whether it is accepted depends on the company and your circumstances. Make sure any settlement is confirmed in writing before paying.

Should I speak to a debt collector on the phone?

You can, but writing gives you a clearer record. If the situation is stressful or confusing, it may be better to communicate in writing so you have evidence of what was said and agreed.

Can a debt collector contact me again and again?

They can contact you about a debt, but contact should not be unfair, misleading or oppressive. If you feel the contact is unreasonable, keep records and consider making a complaint.

What should I do first if a debt collector contacts me?

Do not panic. Check who they are, what debt they are talking about, whether the balance is right, when you last paid, and whether you can afford any payment being requested.

About The Real Debt Guy

The Real Debt Guy has completed the DipFA Level 4 qualification and shares general debt and money education for UK consumers.

This article is for general information and education only. It is not personal financial advice or regulated debt advice.

The Real Debt Guy is not FCA regulated. If you need advice about your specific circumstances, speak to a qualified debt adviser or an FCA-authorised organisation.