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Debt Purchase Companies – Who are they and what do they do??
We answer many repeat questions about the mysterious process called Assignment,so we decided to write this summary of the process of debts being lawfully sold to new owners called ‘Debt Purchasers’ to clear up some of the uncertainty.
Every year a proportion of all consumer credit accounts with lenders like banks and credit card provider are defaulted. Accounts go unpaid for many different reasons: change of circumstances, loss of income, identity fraud and just plain old overspending.
The banks are not the UK’s most popular institutions, especially since the credit crisis, they have had a reputation for reckless lending and poor communication, with many consumers unable to resolve complaints and falling into debt. Each year around £7.7B of these consumer accounts are defaulted and sold on to debt purchase companies. Debt purchase companies are regulated by the Financial Conduct Authority and in recent years they have made serious improvements in their standards and rules around vulnerability and hardship, as well as being easier to talk to and able to set up realistic repayment plans.
Previously, this relationship between banks and debt purchase companies was not well understood and led to suspicion and concern that banks could simply assign away your accounts. People think their debts will always belong to Lloyds, Barclays, Capital One and Virgin etc, but in reality within a few months of default, it is very likely that your account will be ‘written off’ by the bank and lawfully sold on under The Law of Property Act 1925. ‘Written off’ does not mean lost, forgotten, doesn’t need repaying: unless you resolve your dispute with your original lender these accounts will not just go away. They often go quiet for a bit and then re-emerge with a new owner who has the responsibility to enforce your original debt in full. The good news is that they cannot add any further interest, but they can add charges for court claims and enforcement. It is not sensible to think of them as merely debt collectors for the banks, they have paid an up-front percentage of the debt to own your new account and have every legal right to pursue customers for repayment.
You may read articles online about ‘Deeds of Assignment’ and how these documents are often absent when you request to see all your paperwork. This is unhelpful to consumers trying to understand their responsibilities and the history of the account. An absent assignment notice can be remedied later down the legal line if required, so it is among the weaker things to rely on if you have concerns about your account being sold on or are considering disputing the accounts enforceability. An Assignment Notice is two letters (usually sent together by the new creditor) the first letter is the ‘goodbye’ from your bank/lender, the second is the ‘hello’ from your new creditor.
S189 Consumer Credit Act 1974: “creditor” means the person providing credit under a consumer credit agreement or the person to whom his rights and duties under the agreement have passed by assignment.
Assignment should be viewed as a normal stage of debt recovery; you may have anger at your original creditor for a dispute or debt but this MUST be resolved with them promptly, if necessary via the Financial Ombudsman, but if left unresolved, the process of debt sale is the absolute norm for millions of accounts every year.
Moving house and not updating your address details could result in court documents being sent to old addresses which could result in you receiving a County Court Judgment (CCJ) without being aware until you receive an alert from a credit reference agency or you try to apply for credit and are declined. Don’t put your head in the sand and assume these accounts will disappear, in our experience, tackling such debts bravely and pragmatically will improve your sense of control over your life and finances.
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