Debt Collection Processes and Your Rights.

Although the majority of people have some form of debt, some people find that their finances become too difficult to manage when their debts outweigh their income. Whether it be an unforeseen event such as a job loss, an unavoidable expense or that you have not made repayments on time and charges and fees have spiraled out of control; debt worries can become severe.

Debt collection processes vary depending upon your lender and there are several ways in which a creditor may try to collect what is owed. They may act quickly, escalating debt collection processes without delay or they may offer you repayment options and take a more patient approach.

The following guide explains debt collection processes and what rights you have when repaying what you owe, including what to do if debt collectors become unavoidable.

How is a creditor likely to collect what I owe?

As previously mentioned, each creditor will adopt their own debt collection processes and this means that you might not know when or how the collector will attempt to recover the debt. Below is an example of a normal debt collection process as used by many regulated lenders.

Once a payment is missed, the lender will make a record on your credit file and send a reminder to you to request the payment. Usually, a late payment fine will be applied which will mean the amount that you need to pay will immediately increase. In most cases, your creditor will also ask you to contact them to discuss any problems that you are having making your repayments. It is wise to use this opportunity to talk to the lender about any financial difficulties that you are having as they are likely to be more sympathetic in their approach to recovering the debt.

If you miss three or more payments, you are likely to find that your lender becomes more impatient and they will start putting more pressure on you to make payments to bring your account up to date. The lender is likely to begin warning you that your account will be referred to a debt collection agency and will highlight the impact that missed payments will have on your potential to secure credit in the future. It is imperative that you don’t ignore these communications and that you contact the lender to discuss your circumstances or obtain independent advice from a debt advice service. For credit accounts that are regulated by the Consumer Credit Act, it is likely that your account will default and you will receive a default notice. Defaults will have a significant impact on your credit file and you may also find that your account is closed with the lender. At this stage, a debt collection agency is likely to be employed by the lender in order to try to recover what you owe.

Missing more than 5 payments will result in your receiving several communications from the lender, including letters and phone calls. You are likely to have heard from a debt collector too. If you don’t rectify the debt at this stage or at least contact the lender to discuss your circumstances, you can expect further action to be taken soon. Some creditors may apply to the County Court for a Judgement to be made against you and your credit file will be seriously affected by the failure to repay.

What rights do you have with your creditors?

It can be extremely stressful to be in debt, particularly if you are unable to make repayments. Understanding what rights you have and understanding the rights of your creditors can go some way to helping you feel more in control. Getting rid of some of the uncertainty relating to your debt can help you feel like things are more manageable.

Your creditor has the right to contact you to chase up missed and late payments and they also have the right to escalate debt collection if they are not able to obtain what they owe directly.
Some lenders may send a debt collector to your home to collect what is owed if they have been unsuccessful in prior attempts. It is likely that a lender will only employ this method of collection for debts that are significant enough to warrant the cost of hiring a debt collector. A debt collector has no special legal rights, unlike a bailiff of an enforcement agent. The debt collector has the following rights:

• The debt collector can visit your home
• They can speak to you to arrange a repayment plan
• They can request that you make a payment to them.

A debt collector does not have the right to:

• Visit you at work,
• Act in an intimidating or aggressive way
• Force entry into your home
• Pretend to be a bailiff or law enforcement officer
• Speak to anyone else about your debt.

You have the right to refuse to answer the door to a debt collector and you are not legally obliged to talk to them.

What is a bailiff and what are their rights?

Bailiffs are officially referred to as enforcement agents and they hold different legal rights than a debt collector.

A bailiff can work for a private company or for the local authority or court. They collect a range of debts such as County Court Judgements, missed council tax payments, child maintenance arrears or parking fines. They have a range of legal rights including:

• To visit your home
• To remove your possessions and to sell them to recover what you owe
• To take a payment from you to cover what you owe.

In the majority of cases, a bailiff will only come to your home after a court case has occurred, depending on the debt in question. An exception to this is for debts owed to HM Revenue & Customs, who are entitled to send a bailiff for recovery without needing to take you to court first.