If you owe money to an individual or business in the UK, then they may choose to engage a debt collection agency. The agency will do all it can to recover the money owed, so it is important to take steps to deal with the issue.
The debt collection agency should work with you to work out how the debt can be repaid, but if you do not respond or make any attempt to repay what you owe, you are likely to face court proceedings.
What Is A Debt Collection Agency?
Definitions:
The Creditor is the lender, the individual or business that is owed money.
The Debtor is the borrower, the individual or business that owes money.
A Debt Collector or collection agency is a separate company that collects the debt on the creditor’s behalf.
A bailiff is an enforcement agent that may visit your home to recover debts on a court order.
A debt collection agency specialises in recovering debts. Individuals and businesses that are owed money may find it easier and less time-consuming to outsource debt recovery, and it is common practice for agencies to be used.
If a creditor passes the task of collecting a debt you owe to an agency, you will be contacted to advise you that this has happened. You should receive a letter both from the original creditor and from the collection agency. The agency may threaten court action, but provided you engage with them and arrange to make the payments that you can afford, you will probably not be taken to court.
💡 Debt collectors are not bailiffs — they cannot enter your home or seize goods.
How Do Debt Collection Agencies Get Involved?
There are two ways for a debt collection agency to be involved. They may be acting to collect the debt on behalf of the creditor, or the creditor could sell the debt to them.
If your debt is sold, the original person or business you owed money to will be paid a lower sum than you owe. The agency will then collect the full amount from you, meaning that they have made some profit from their work in collecting the debt, while the creditor has cut their losses and moved on
If a debt is sold, the original terms and conditions still apply. This means that a debt collection agency can only add interest and charges to the amount owed if you agreed with the original creditor that they could do this.
When a debt is sold, under the Consumer Credit Act 1974, a “notice of assignment” must be sent to you to confirm the transfer.
When Can A Debt Collection Agency Take You To Court?
If you do not pay the debt, and you do not try to agree on a repayment schedule with the debt collection agency, they are likely to take you to court. They can only do this if the debt is valid and not statute-barred (Limitation Act 1980).
Debt collectors must go through a strict protocol before a court judgement can be made. This makes sure you have plenty of notice of any court proceedings.
| Stage | What Happens | Your Options | Time before Next Stage |
|---|---|---|---|
| Default Notice | A warning of arrears | Pay or agree repayment schedule | Minimum 2 weeks |
| Letter of Claim | Debt collector threatens court | Respond | 30 days |
| County Court Claim | N1 form sent | Admit, dispute or request time | 14 days |
| County Court Judgement | CCJ issued if unpaid | Pay as ordered, or apply to change or set aside the judgement | n/a |
Under the Pre-Action Protocol for Debt Claims, you will receive notification from them that they intend to do this, usually by way of a default notice under section 87(1) Consumer Credit Act 1974. This default notice will set out what you owe and how long you have in which to pay.
A default notice will give you at least 2 weeks to pay the debt.
If you still do not pay after 2 weeks, then the agency can file a claim with the local county court. You will receive a letter of claim and have the opportunity to respond to it within 30 days.
After this, you’ll be sent a county court claim form pack. This includes all the forms you need to respond, but you must respond within 2 weeks.
You can agree that you owe the money and state that you need more time. If you are unable to clear the debt, you have the opportunity to offer to make several payments in a repayment schedule.
You can also dispute the debt, for example if it is not your debt to pay, you haven’t been asked to repay in many years, or the amount looks wrong.
If you need advice before you respond to the claim, you can notify the creditor that you will be asking for this and that you need more time.
It is important to respond to a county court claim, or you may lose some of the options that are open to you, such as agreeing to pay by instalments or raising a challenge.
What Can You Do If You Are Served With A CCJ?
If the court agrees with the claim, then it will issue a County Court Judgement, or CCJ, requiring you to repay the debt. The CCJ could include payment terms, allowing you to repay the amount owed in instalments.
Once you’ve received a CCJ, you need to take action quickly. The appropriate action depends on your circumstances.
- If you cannot afford the payment terms, then you can apply to have these changed.
- If you do not agree that the CCJ should have been made because you dispute that you owed the money, you can apply to have the CCJ set aside.
Applying to the court for either of these actions comes with a fee. If you are unable to pay the fee, you can apply to the government for support.
If you do neither of these and still do not pay after a CCJ has been made against you, the creditor can take court action to recover the debt. This could be by instructing bailiffs to remove goods from your property, asking the court for an attachment of earnings order so that money can be taken directly from your pay or by securing a charging order over your property, meaning you will have to pay the debt before you can remortgage or sell your home.
CCJs and Credit Scores
In many cases, receiving a CCJ is reflected on your credit report for the next six years, making you less likely to be allowed to borrow money in the future. If you repay the full amount within 1 month of a CCJ, it won’t affect your credit.
For more information, see County Court Judgement (CCJ): All You Need To Know and CCJ Removal.
Seeking Legal Help
It is recommended that you speak to a legal expert if you wish to challenge a CCJ and you believe this should not have been made.
If you ask us to help, we can advise you of your options and represent you to ensure that your rights are properly observed.
Contact Our Civil Litigation Solicitors For Advice On Debt Collection
If you have been notified that legal proceedings are being commenced against you, and you would like to speak to a litigation expert about the best course of action, we will be happy to help.
Call one of our team on 0330 912 8302, email us at info@witansolicitors.co.uk, or fill in our contact form. We will be happy to help you. We have offices in Birmingham and Northampton.
