Creditors and Debt Collection Agencies

"Will my creditors call in a debt collection agency?"
"When – and why – would they do this?"

These are extremely important questions if you’re in debt, especially if you’re struggling to make your payments. Unfortunately, there are no ‘standard’ answers, as it depends on which company you owe money to.

Still, most creditors will pass a debt to debt collectors if:

• you refuse to respond to letters / calls,
• you repeatedly miss payments,
• you can’t make the minimum payments (and they don’t think your reduced payments are enough),
• they feel that trying to collect what you owe is taking up too much of their time, and / or
• repaying your debt at an affordable rate would take much longer than originally expected, in which case they may transfer your debt to a company that specialises in longer-term repayment plans.

Who will contact me?
Some companies have their own internal debt collection company / department; others will use an external agency.

If your creditor sells the debt to an external debt collection agency, you’ll legally owe the money to the agency – the original company will no longer be actively involved.

If your creditor has a particularly large internal debt collection department, it may be more cost-effective for them to pursue the debt themselves.

What about my credit rating?
When a debt is transferred to a debt collection agency, people may worry that this will have an impact on their credit rating.

However, creditors won’t normally call in a debt collection agency unless the account is already in default. In other words, the credit reference agencies will already have been notified about any arrears – so their credit rating will already have been affected.

Aren’t debt collectors the same as bailiffs?
No. For a look at the difference between debt collectors and bailiffs, check out:
Bailiffs & Debt Collectors - what’s the difference?