Last updated: 20th February 2015
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There can be lots of misconceptions about what creditors (your lenders) can and cannot do. We hear from clients that are scared stiff of bailiffs (enforcement agents) or being sent to prison when they’ve only missed one or two payments or just received a default notice or a CCJ (County Court Judgment) through the post.
A lot of action by creditors will be tactics to encourage you to make extra payments, so it’s useful to know what your rights are to help to put your mind at ease.
Knowing what creditors can and cannot do and understanding the debt collection process can help to remove a lot of worry and uncertainty around unsecured debts.
What can creditors do?
- They can chase you for the debt by phone or letters; see our article about what to do if creditors keep phoning you.
- They can send doorstep collectors; it’s really important to realise that these are not bailiffs and have no more power than someone ringing you. It’s unusual for a high street lender to use doorstep collectors as it’s cheaper and more effective for them to call you.
- They can continue to add interest and charges to your account in line with the original agreement.
- They can take money from connected accounts. For example if you have a credit card and a current account with the same bank they can dip into the current account and take what is owed on the credit card; they don’t need permission from you. This is called the right of offset.
- They can issue a default notice, usually sent after 3-6 missed payments. This is something your creditors are legally required to send once you’ve defaulted on the original agreement.
- They can pass the debt on to an internal or external debt collection agency. These don’t have any more legal powers than the creditor.
- They can apply for a County Court Judgment (CCJ). If you receive one of these you must fill in the paperwork and make an offer of repayment for the court to consider. The court will set a repayment and it’s important that you stick to this.
- Some collection agencies issue a statutory demand, a way of enforcing bankruptcy. However in most cases these are used as scare tactics and it’s very unusual for creditors to actually enforce these.
What can’t creditors do?
- They cannot harass you; you have a duty to keep your creditors informed of your situation but that doesn’t mean they can ring you every hour, day after day. Request that they only contact you in writing and make sure you open your mail. You can read more about debt collection guidelines on the Financial Conduct Authority website.
- They cannot break data protection laws, so they cannot speak to your family, friends, neighbours or an employer.
- They cannot stalk you on social media – see our blogpost 10 ways to stop debt collectors finding you on social media.
- They may threaten bailiffs but unless you have defaulted on a CCJ then what they actually mean is a doorstep collection agent. This is often used as a scare tactic and anyone who calls at your property has no more power than someone calling you on the phone. You don’t need to talk to them if you’d prefer to talk over the phone or by letter (unless they are from the courts or the debt is for Council Tax).
- If you do get County Court paperwork through the post and you make an offer to the courts that the judge accepts, the creditors have to abide by it as well.
What experiences do you have with creditors? Post a comment and let us know. And if you’re going through the mill with your creditors at the moment, get free debt advice from StepChange Debt Charity.