Do You Know Who You’re Really Dealing With?

If you’ve received a letter or phone call about an outstanding debt, you may wonder whether the person contacting you is a debt buyer or a debt collector. While these two terms might sound similar, they refer to very different roles in the debt collection process. Understanding the distinction can make a big difference in how you handle the situation and protect your financial rights.

What Is a Debt Buyer?

A debt buyer is a company that purchases overdue debts from lenders, banks, or credit card companies. Once a purchase of debt has been completed, the original creditor is no longer involved, and the new owner— the debt buyer— has full control over how they attempt to collect it.

Why Do Lenders Sell Debt?

Lenders often sell delinquent debts for a fraction of their value because it allows them to cut losses and focus on other financial operations. Instead of chasing overdue payments, they offload these debts to companies that specialise in collection activity.

Debt buyers may pay as little as 10-30% of the original balance, meaning they have room to negotiate settlements while still making a profit. However, this does not erase the unpaid debt— if your account has been sold, you will need to deal with the new owner.

What Happens When Your Debt Is Sold?

If your debt is sold to a debt collection company, you should receive a Notice of Assignment informing you of the change. This letter confirms that the new legal owner now owns the debt and will handle any debt collection activity. The debt buyer may:

• Contact you directly to arrange repayment.
• Offer a discount for settling the balance in one payment.
• Take legal action if the debt remains unpaid and enforceable.

Are Debt Buyers Regulated?

Yes, debt buyers in the UK must comply with regulations set by the Financial Conduct Authority (FCA). They must treat customers fairly, provide clear information, and follow legal processes when attempting to collect a debt.

What Is a Debt Collector?

A debt collector is different because they do not own the debt— they simply act on behalf of the creditor or debt buyer to recover money. Debt collectors are hired by lenders or third-party companies to pursue payment through letters, phone calls, and other methods.

Unlike bailiffs, debt collectors do not have legal enforcement powers, meaning they cannot:

• Seize belongings.
• Enter your home without permission.
• Force you to make a payment on the spot.

Debt collectors must follow strict rules under the FCA regulations. If you feel you are being harassed or unfairly pressured, you have the right to make a complaint.

Key Differences Between Debt Buyers and Debt Collectors

What Should You Do If You’re Contacted About a Debt?

If you receive a letter or phone call from either a debt buyer or a debt collector, it’s important to take the right steps:

1. Verify the Debt

• Request debt in writing for confirmation of the original debt.
• Ask who currently owns the debt.
• Check if the debt is statute-barred (expired and unenforceable in court under the statute of limitations).

2. Know Your Rights

• Debt collectors cannot enter your home or take assets.
• Debt buyers must provide evidence if you request proof of the original credit agreement.
• If a debt collector contacts you aggressively, you can report them to the FCA or the Financial Ombudsman Service.

3. Negotiate a Repayment Plan

• If you can’t pay the full amount, you may be able to arrange debt repayments in instalments.
• Debt buyers may offer a full and final settlement at a discount, but always get this in writing.
• Free financial advisors, such as StepChange, can help you find an affordable solution.

Understanding Full and Final Settlements

One advantage of dealing with a debt buyer is that they may accept a reduced settlement offer. This means you pay a lower amount to clear the debt entirely. However, it’s vital to ensure:

• The agreement is confirmed in writing.
• The balance is marked as settled on your credit file.
• No further collection process will be taken.

Simply marking a payment as “full and final” when transferring money is not legally binding— always get confirmation before making a payment.

How Debt Sales Affect Your Credit Score

When a debt portfolio is sold, it is often marked as a default notice on your credit file. This stays on file for six years, impacting your ability to get loans, credit cards, and mortgages. However, paying off a defaulted debt can still improve your credit scores in the long run.

What Happens If a Debt Buyer Takes Legal Action?

If a debt buyer believes a debt is enforceable and remains unpaid, they may apply for a County Court Judgment (CCJ). A CCJ can:

• Legally confirm that you owe the money.
• Affect your credit scores for six years.
• Lead to further enforcement actions, such as bailiff visits or wage deductions.

If you receive a Claim Form for a CCJ, do not ignore it— respond within 14 days to avoid further legal avenues.

Seeking Free Debt Advice

If you’re unsure about your rights or struggling with bad debts, professional support is available.

Free Debt Advice Services in the UK

• StepChange Debt Charity – Offers confidential guidance and repayment plans.
  • Call 0800 138 1111 or visit www.stepchange.org.
• National Debtline – Provides free legal advice on consumer debt.
  • Call 0808 808 4000 or visit www.nationaldebtline.org.
• Citizens Advice – Helps with legal rights and financial hardship.
  • Visit www.citizensadvice.org.uk for local support.

Final Thoughts: Stay Informed and Take Control

Whether you’re dealing with a debt buyer or a debt collector, knowing your rights and options can help you stay in control. Debt buyers own the debt and may be willing to negotiate settlements, while debt collectors act on behalf of creditors and cannot take legal action.

If you receive a notice about an outstanding debt, don’t panic— verify the details, seek professional advice, and explore your repayment options. Understanding these differences ensures you make informed financial decisions and protect yourself from unfair practices.