How to deal with debt collectors in the UK
Understanding how to deal with debt collectors in the UK can help you manage the situation, so you don't feel intimidated, misled or become so stressed it affects your mental health.
Although most debt collectors will abide by the regulations, some don't always maintain these standards. This guide will help you identify if a debt collector has been dishonest or illegal and how to deal with them.
What to do if a debt collector contacts you?
Debt Collection Agencies do not have any special legal powers and can't do anything different from the original creditor. They will contact you by:
They may refer to court action and can often sound intimidating. However, they are not allowed to mislead you. They have to operate within the rules set by the Financial Conduct Authority (FCA), which regulate their activities.
Do not ignore letters or calls from Debt Collection Agencies. They are likely to be persistent and engage in repeated phone calls which can cause you more stress. Some may ask you to pay back the debt in full or in instalments. It would be best if you only offered to pay them what you can realistically afford.
If a Debt Collection Agency has contacted you, you should contact a free impartial Debt Advice Service. They will help you prepare a budget, explain your options and work out how much you can realistically afford to pay.
Inform your creditors of your mental health condition
Debt Collection Agencies are regulated by the Financial Conduct Authority (FCA). The FCA sets out rules and guidance regarding how Debt Collection Agencies should operate and state that policies must be put in place for vulnerable customers. This includes customers who are living with a mental health condition.
Once you inform the Debt Collection Agency of your mental health, they are obliged to refer your case to a specialist team within the organisation who will decide how best to deal with your issue considering your mental health. Options include the following;
- They may contact you at a set agreed time, e.g. in the afternoon.
- They may agree to contact you in specific ways, e.g. by letter rather than phone.
- They may agree to place further activity on hold to allow you time to speak to a specialist debt adviser.
The Good Practice Awareness Guidelines aim to help consumers living with a mental health condition and in debt. They have been produced by the Money Advice liaison group (MALG). It sets out guidelines for how debt collection agencies must treat customers living with a mental health condition.
The Debt Collection Agency may be asked to write off the debt where there are no assets or available income to pay the debt and where your situation is unlikely to improve. If you contact a specialist debt adviser, they will explain the options and guidelines set out in MALG.
Understand your debt
It is essential that you understand your debt. To do this, you should start by getting free impartial debt advice. A free specialist debt advice service will help you:
Create a budget ensuring that you have sufficient funds to pay for your essentials.
Explain your options and help you decide which are most suitable for you to help you manage and clear your debts.
What to do if you can afford to pay the debt?
It is essential when drawing up a budget that you leave enough money to pay for your essentials.
Make sure that you pay priority creditors first, i.e. those debts where the consequences of not paying are more serious.
Once you know what you can afford, you can talk to the creditors and agree on a payment arrangement, usually by instalments over a set time. Ensure that you follow up any phone call in writing and keep a record of the payments.
What to do if you can't afford to pay the debt?
When a debt management company contacts you, ask them to place a hold on the account to allow you some time to seek advice from a free specialist debt adviser. The creditor will usually grant 28 days, during which time they will not contact you.
At this time, you should contact a free specialist debt advice service. They will help you produce a budget that will show what money is available for your creditors and the options for repaying the debt.
These options can range from informal debt solutions such as negotiating reduced payments with your creditors to more formal insolvency options such as Bankruptcy and Debt Relief Orders. The adviser will explain the advantages and disadvantages of each of the options available to you.
The adviser will also explain to you the difference between priority and non-priority debts. The priority debts are those that you need to deal with first because of the consequences of non-payment.
Other debts are classed as a non-priority and include credit cards, bank loans, overdrafts, payday loans etc.
Understand your rights with debt collectors
Most personal debt, such as credit cards and loans, are regulated by the Financial Conduct Authority (FCA). The FCA monitors financial organisations, including Debt Collection Agencies, and sets out rules and guidance on treating their customers. The FCA's Consumer Credit sourcebook (CONC) explains that a Debt Collection Agency must have clear policies for customers in arrears and particularly vulnerable customers.
This includes customers who have 'mental health difficulties'. It tells you what kind of behaviour is not acceptable and how to know if a Debt Collection Agency is harassing you, and what to do. Harassment is defined as any action that makes you feel distressed, humiliated or threatened.
If you owe money on a credit card, overdraft or unsecured loan, your lender may have agreed to follow the principles shown in The Standards of Lending Practice: Personal Customers. These standards guide how firms should deal with clients who are identified as being in a vulnerable situation.
If the Debt Collection Agency is found to be in breach of the FCA guidelines, then the FCA has the power to impose sanctions, both civil and criminal. These could include suspending or withdrawing their licence to operate and/or setting a fine.
The Debt Collection Agency may belong to a trade association or professional body with a code of practice that sets out how they are supposed to behave towards you.
What to do if a debt collector has violated your rights
You can complain to the Financial Ombudsman Service (FOS) about how a creditor or Debt Collection Agency has behaved when dealing with your account.
What powers do debt collection agencies have?
Debt collection agencies are not bailiffs; They have no extra-legal authority. Debt collectors are either acting on behalf of your creditor or working for a company that has taken on the debt.
They don't have any special legal powers and can't do anything different than the original creditor.
What can debt collectors not do?
Here is a list of what debt collectors can not do:
- Speak to other people about your debt without your permission or threaten to do so. This would include your family, friends and employer.
- Add interest or charges to the debt that are excessive compared to the costs they have incurred.
- Threaten or abuse you.
- Pretend they have legal powers that they do not have, e.g. threatening to send bailiffs or making their letters sound like coming from a Court or Solicitor.
- Harass you - this can include ringing you excessively or contacting you at unreasonable times. You can request that all contact is in writing.
- Mislead you - e.g. by causing you to believe that you have to cover the recovery costs if this was not in the contract.
- Trick you into contacting them, e.g. by leaving a calling card at your address that looks like you have missed a delivery.
- What is breathing space?
- What is a mental health breathing space?
- Priority and non-priority debts
- Bank accounts and debt
- Drawing up a budget sheet
- Negotiating reduced payments
- Free Debt Management Plans
- Administration Order
- Debt Relief Order
- Individual Voluntary Arrangement
- Will I be 'blacklisted'?
- Write Offs
- What can creditors do if I don't pay?
- How to deal with debt collectors in the UK
- Should I tell creditors about my mental health?
- Getting help from a specialist adviser