Understanding the Debt Collection Laws UK is crucial for anyone who resides in the UK as this can help you know almost every situation you may face in terms of debt collection.
It will also save you from potential problems and help you turn them around to your benefit. In this article, I will walk you through almost all the debt collection laws applicable in the UK market.
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Understanding the Debt Collection Laws in the UK
You must understand the Debt Collection Laws UK, as this can help you identify whether you are experiencing a fair debt collection process or not. In a case where you are unaware of the law, you will be vulnerable to harassment and mistreatments from debt collection companies. Knowing the law will help you to take necessary action if you face any issues.
Beating Debt Collectors According to Debt Collection Laws UK
You have the opportunity to reduce a portion of your debts by writing off some of them. When it comes to managing debts in the UK, there are approaches that you can explore. It’s crucial for you to make a decision on the course of action as this can help protect you from potential complications.
Six Common Debt Collection Laws UK
When it comes to Debt Collections Laws UK, there are tons of laws that debt collectors must follow. The best part of these laws is that they provide debtors and creditors with fair policies, which include the following:
According to the Debt Collection Laws UK, Debt collectors cannot legally pressurise you to make you repay the debt. Although, this law is commonly not adhered to, as almost all the debt collectors in the UK do pressurise debtors to make them pay as soon as possible, still, based upon the laws, it is illegal.
Debt collectors must provide a proper solution by understanding your financial circumstances. If they don’t, it is a form of harassment, and you can make a complaint to the Financial Ombudsman Service.
It’s quite common for many individuals to prefer keeping their struggles private from their family members. They may feel embarrassed or concerned, about issues arising within the family if their debt situation is revealed.
To address this the UK has implemented a debt collection law that strictly prohibits debt collectors from revealing your information without your consent. It is considered an offence if they choose to disregard this regulation and disclose your details anyway.
In the world of finance there are terms that are often used in everyday industry activities. These terms can be challenging for consumers without prior financial education to comprehend.
This is why the Financial Conduct Authority (FCA) wants to keep the debt collection process as transparent as possible. It means that debt collectors cannot use technical jargon when trying to reach out to you to collect their debts by confusing you. If they decide to use jargon, they are legally entitled to explain any terms you may find confusing.
You must stay aware that the term debt collector means two different types of entities within the debt collection industry:
You must understand that debt collection agencies cannot claim that they have powers similar to bailiffs. This includes an agent from a debt collection agency entering your home by force and taking away your personal belongings. You must complain against the particular debt collection agency if this ever happens to you.
Based on debt collection laws UK, you carry legal power to contact the debt collection agency to prove that you owe the debt. To do this, you have the right to send them a “Prove the Debt” letter. If they fail to confirm that you owe them, then this can result in you not being required to repay the debt even if you know that you have to repay it.
Debt collector harassment is a prominent concern among debtors and is illegal. Debt collectors might make continuous phone calls, send messages, and even visit your home to discuss the debt issue. If such actions persist in an unreasonable manner, it is harassment.
To overcome this violation, you should specify your preferred contact times and methods for how they can reach out to you. Doing so will prevent them from contacting you anytime they want. But if they continue to do so, you can make a complaint to the Financial Ombudsman Service (FOS) or the Financial Conduct Authority (FCA).
What Does the FCA Do Based on Debt Collection Laws UK?
Creditors and debt collectors must follow the rules and regulations set by the Financial Conduct Authority (FCA). If they violate these laws the company can receive warnings or even face financial penalties.
The FCA has the authority to warn, suspend or revoke the licence of a debt collector or creditor who has treated you unfairly to provide any owed compensation or refunds that you may be eligible to receive. Remember that the FCA does not look into specific complaints. You must contact the Financial Ombudsman Service (FOS) if you need to file a complaint about a business.
What If Debt Collectors Break the Debt Collection Laws UK?
If you ever find yourself in a situation where a debt collector keeps breaking these laws, don’t forget that the legal system is there to support you. You can choose to contact the debt collection agency and possibly file a complaint about their behaviour.
If you’re unable to resolve your concerns another option is to seek help from the Financial Ombudsman. They have the power to fully investigate your case and offer guidance on how to find a resolution.
What Do I Do if I Don’t Owe the Debt Based on Debt Collection Laws UK?
If you feel that a particular debt collection agency is coming behind you, but you do not owe them any debts, you can simply reach out to them and inform them that you don’t owe them any debt.
To do this, you can send them a letter asking them to prove the debt. This would apply the same to anyone who is getting chased for old debts. You can simply contact the debt collectors to verify the debt.
It is worth noting that your debt is statute-barred if it has been six or five years in Scotland since your last payment towards it, and you have yet to write to your creditor during that time. This indicates that debt recollection is impossible. Although there is no legal method to have you pay the debt or enforce it, it still theoretically exists, and you still owe the money.
Do not forget that not all debts are forever forbidden! Any HMRC debts, for instance, will continue to be collectable for years. Any obligation subject to a County Court Judgement (CCJ) during the 5- or 6-year period will continue to be enforceable during the CCJ’s term.
What Happens if I Ignore Debt Collectors Based on Debt Collection Laws UK?
You must become aware that leaving debt problems unattended can worsen them. This implies that a wide range of events may occur due to this problem.
When you choose to disregard the debt collectors you may encounter a couple of challenges. Firstly, your overall debt amount may increase as these agents might add charges, like payment fees, for their services.
Furthermore, they may endeavour to contact you via email, telephone calls or, in person visits, to your home. If you persist in disregarding their attempts they could escalate the situation by initiating proceedings and obtaining a County Court Judgement (CCJ) against you.
A CCJ is a court order that the judge provides after they agree with the debt collector that you owe them debts. To set up a CCJ, the judge may consider some of the following concerns:
- Who should you pay
- Your Due Amount
- Your last due date
- Method of payment
It is worth noting that if the County Court Judgment (CCJ) is not settled within one month of its issuance, it will be logged in the Register of Judgements, Orders, and Fines for six years.
If you repay the unpaid debt within these six years, you can request to change the judgement’s status to be altered to ‘satisfied’ on the register. To get this done, you must inform the court by providing them with sufficient proof claiming that you have repaid the debt in full.
You will not face any issues if you can make the full payment within the initial month following the CCJ’s issuance, as it will not be recorded in the register. To get this done, you must inform the court by providing them with sufficient proof claiming that you have repaid the debt in full.
Typically a CCJ will be listed under your credit history as a red flag for up to six years, which means creditors may refuse to offer you debt or may charge a very high rate of interest as they may classify you as a risky client.
However, once the six-year time period passes, the CCJ will be removed from your credit history. After which you may find it easy to borrow money as before.
Should You Check For Other Debt Collectors?
Absolutely. It is a viable option that you also check for other debt collectors. It is because you may owe on different other debt collectors as well.
By checking your bank records and other communications, you must check for potential debts from collection agencies like Cabot Financial, Lowell Financial, or PRA Group.
To effectively do this, you can do things such as:
- Contacting the creditors to check the exact amount you may owe them.
- Regularly checking the credit report.
- Waiting for them to contact you
- Checking your voicemail and text messages
What if I Can’t Afford to Pay the Debt Collectors Based on Debt Collection Laws UK?
Typically when a debt collector approaches you to recollect their unpaid debts, you will be offered multiple ways to repay them.
Suppose you still feel that you may not be able to repay them. In that case, it is ideal that you contact a debt charity like step change, whose advisors may offer you professional help by providing options to help you get rid of debts or effectively manage them.
DMP is an effective debt management solution. Although informal, it is where you can combine all your debt repayments into one single monthly payment.
An Individual Voluntary Arrangement (IVA) is an agreement made between you and your creditor. It involves agreeing to repay your debts through instalment payments that are evenly distributed among all the debts you may owe.
The great thing about an IVA is that it typically lasts for a period of five to six years and any remaining debts are then written off. However in order to be eligible, for an IVA you must owe an amount of money to creditors.
Since Individual Voluntary Arrangements (IVAs) are not applicable in Scotland, you must consider choosing a Trust Deed.
Trust Deeds work similarly to an IVA. It is where you make regular monthly payments divided among all your debts. During the period of a trust deed, debt collectors are prohibited from getting in touch with you. Once the Trust deed ends, all your unpaid debts will be written off.
A debt Relief Order (DRO) is another great option if you face a financial burden and lack assets.
It is an agreement upon which debt collectors will not contact you for one year, during which your remaining debts will be frozen.
DRO is a great option as your remaining debts will get written off after one year if your financial situation does not improve by then.
If you are able to identify your situation to be never improving, then filing for Bankruptcy can be a great choice. However, you must make sure to use this as your last option, as by doing so, you will agree that you will restart your financial life fresh.
In Scotland, sequestration is the equivalent of bankruptcy. You will be eligible to file for a minimal asset process bankruptcy (MAP) if you earn little money and don’t have any valuable assets. A MAP is a better alternative to sequestration since it is simpler, quicker, and less expensive.
How do I Complain About Debt Collectors?
If you ever feel that a debt collector or a debt collection agency is treating you unfairly by breaking the collection laws in the UK, it is a good idea to make a complaint against them.
Firstly, complain to the debt collection agency directly. Doing so will force them to change their behaviour or activities and operate more ethically or fairly.
Suppose they decide to ignore your complaint and continue their unfair operations. It’s best to complain against them to the Financial Ombudsman Service (FOS), who may further investigate the issue, and fine the Debt Collectors or warn them if they’re found guilty. This will enable you to receive fair compensation for treating you unfairly.
Where Can I Get Free Professional Advice?
If you feel like you’re stuck in debt and are experiencing issues with debt collection agencies, the best option is to speak to a debt charity in the UK. Many charities and institutions in the UK provide free debt and financial counselling. Consulting them lets you identify the options that will solve your debt problems.
Some of the debt charities in the UK include:
- Step change
- Citizens Advice
- Debt Advice Foundation
- National Debtline
- “Debt collection laws UK” protect debtors’ rights, helping to navigate the debt collection process more confidently.
- There exist opportunities for people in the UK to legally write off parts of their debt.
- Debt collectors, under UK debt collection laws, cannot discuss your debts with third parties or pressure you into making quick decisions.
- Debt collectors are obliged to clarify confusing jargon and respect your contact preferences.
- Debt collection agencies must not impersonate or claim to possess legal powers akin to bailiffs, and they must provide evidence that you owe the debt.
- In case of violations of these rules by debt collectors, debtors can file an official complaint, explore alternative debt solutions, and seek free debt advice from UK charities.
- The amount of personal debt in the UK is on the rise; hence, it’s essential to keep debts under control, check for correspondence from debt collectors, and seek professional assistance if needed.
- UK charities offer free debt advice to help debtors find the best course of action to eliminate their personal debt.
No, under UK debt collection laws, debt collectors are not allowed to discuss your debt situation with third parties. This includes your colleagues, family, or employers.
No, under UK debt collection laws, a debt collector cannot pressure you into making a decision or using aggressive tactics to force a quick repayment. You have the right to time and choice in deciding your debt repayment.
Yes, debt collectors are legally obliged not to use complex jargon with the intention to confuse you. If you do not understand any terms they use, you have the right to ask them to explain in simpler terms.
No, debt collectors must respect your contact preferences. If you specify a preferred time and method of contact, they must adhere to it. Persistent unsolicited contact is a type of harassment and it breaches the law.
No, it is illegal for a debt collector to claim or imply that they have the same legal powers as bailiffs. Debt collectors cannot forcibly enter your home or seize your possessions under UK debt collection laws.
If a debt collector breaks these laws, you can file an official complaint with the debt collection company. If the issue is not resolved, you can escalate the complaint to the Financial Ombudsman.