Debt collection agency – the words guaranteed to strike fear into a debtor’s heart. These companies will buy your debt from your bank or credit card lender, and relentlessly pursue you for the money owed. Approximately £6.5 billion in unpaid debts were sold to collection agencies in the UK during 2007, and it’s estimated that this figure will increase to £8 billion in 2008.
While banks and card issuers are seen as a ‘soft touch’, the collection agencies who buy the debts are often much more ruthless in hunting people down, and seldom listen to reason or pleas of financial difficulty.
When your debt goes to a collection agency, it means that effectively your original creditors have washed their hands of you, and have sold your debt to the agency as a way of recouping some of their losses. It is then up to the agency to pursue you for the full amount to get back the money they spent buying your debt.
These agencies can be aggressive in their tactics; constant phone calls and threatening letters are just two of the methods often used in pursuit of a debt. Some agencies will allow you to set up a payment agreement with them – offer to pay what you can afford per month until the debt is cleared.
But what if the debt is not yours It has been known for a debt collection agency to be acting on the wrong information and in fact be chasing the wrong person. Sometimes the actual debtor is a previous tenant of your property; other times they may simply have a similar name to yours.
If this happens, the first thing to do is to contact the company. Try to avoid opening the person’s mail if your name is not on it as this is actually illegal – the company name is usually on the back of the envelope. Explain to the company that you are not liable for the debt; give the minimum personal information you can, and pass on new address details for previous tenants if known.
If the agency still persists in chasing you, you may need to contact the Financial Ombudsman. You might also want to check your credit rating and file a notice of correction if you think your credit file may be affected.
If you do find yourself in debt, try to resolve it as quickly as possible with the original creditor – they are more likely to be flexible in allowing repayment of your debt. If your debts are too much for you to handle, consider seeking advice from a debt management company.