You’re in debt but what can your creditors actually do?

posted by in Living with debt

Last updated: 5th September 2016

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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 debts.

Please note: the advice below talks about what creditors can do with unsecured debts. There’s more on our website about priority debts and arrears.

What can creditors do?

  1. They can chase you for the debt by phone or letters; see our article about what to do if creditors keep phoning you.
  2. 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.
  3. They can continue to add interest and charges to your account in line with the original agreement.
  4. 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’s owed on the credit card. They don’t need permission from you, but they do need to warn you in advance. This is called the bank’s right of offset.
  5. They can issue a default notice. These are usually sent after 3-6 missed payments, and serve as a warning that your account is about to default. The default is usually granted if you don’t bring it up to date within two weeks. It’ll appear on your credit file for six years and will make it harder to get credit for that time.
  6. They can pass the debt on to a debt collection agency. These don’t have any more legal powers than the creditor, but they may be more persistent in contacting you.
  7. They can apply for a County Court judgment(CCJ). If you receive any court forms you must fill them in and make an offer of repayment. The court will set a repayment and it’s important that you stick to this, or the creditor can take further action
  8. They could issue a statutory demand. This is the first step they can take towards applying to make you bankrupt. This is only possible with debts over £5,000 and fortunately isn’t very common.

What can’t creditors do?

  1. 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. If you want, you can request that they only contact you in writing, but make sure you open your mail if you do this. You can read more about debt collection guidelines on the Financial Conduct Authority website (although this information is a bit dry). We also have more about your rights when dealing with creditors on our website.
  2. They cannot break data protection laws, so they cannot speak to your family, friends, neighbours or an employer without your permission.
  3. They cannot pretend to possess legal powers they don’t have, for example by making their letters look like court documents or claiming they can send bailiffs to your property without a court order.
  4. They cannot add excessive amounts of interest or charges. They can’t increase the rate of interest because you’ve missed payments. And they can’t add collection charges which are more than the costs to them, so for example a creditor couldn’t add £100 for sending a letter to you which will have cost them much less than this.
  5. They cannot stalk you on social media – see our blogpost 10 ways to stop debt collectors finding you on social media.
  6. Sometimes creditors may not be nice to speak to, but they can’t be threatening or abusive to you, and they can’t lie to you.

In practice, you’ll find many creditors are more reasonable than you might expect, especially if you explain your situation and let them know you’re getting help to try and sort it out.Save

Pavan Gata-Aura is a qualified debt advisor with 6 years of experience. She enjoys spending time with her two children, fundraising for charities, has spent time volunteering in Africa and takes part in organised races.

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Tags Living with debt
  • Dave

    Hi
    Can anyone advise me please I had bailiffs at my house today while I was at work and gained entry to my house as he moved my partner out of the way and after scaring her with saying he will take everything she said she would try and get the money even tho the debt has nothing to do with her .as the bailff asked her for a house let if she went out but she refused and he said do you have any passports the only ones she could find was my 7 year old twin girls passport then he left with them after all this had gone on I returned home from work and he came back but we never answered the door so he posted the passports back to me this doesn’t sound right that they can do that so ant advice would be greatfully received thanks

    • moneyaware

      Hello Dave

      I’m really sorry to hear that you’re experiencing this.

      Having a visit from a bailiff usually means that you are in need of debt advice, so we’d strongly recommend that you give us a call. Gather together details of your income, monthly outgoings and debts and call us on:

      0800 138 1111 (Mon-Fri 8am-8pm, Sat 8am-4pm)

      We have lots of information on our main website about how to deal with bailiffs and what rights they and you have, but the main thing is – don’t ignore the situation:

      https://www.stepchange.org/debt-info/debt-collection/bailiff-help-and-advice.aspx

      Some general rules are:

      Bailiffs must send a letter before they visit.

      This means as long as your creditor has your current address, you’ll get warning before the first visit from a bailiff.

      There is a set process that bailiffs have to follow:

      Your creditor will send instructions to a bailiff. This is called a warrant of control

      The bailiff will send you a letter called a notice of enforcement. This gives you seven working days’ warning before they visit your home

      If you don’t pay the debt, a bailiff will visit you. They’ll usually try to come into your house and make a list of your goods

      It’s rare for them to take goods away on their first visit. Instead they’ll usually leave your goods with you, as long as you make payments towards the debt. This is called a ‘controlled goods agreement’

      If you ignore the bailiff, or if you don’t make the payments you’ve agreed, they’ll return and take away your goods to be sold

      If you believe that a bailiff has acted unfairly, or not followed procedure you may be able to make a complaint about them.

      I hope that this information helps,

      Thanks
      Becca

  • James

    Hi
    Can someone please offer me some advice? Last year I moved back to the Uk after having lived in Luxembourg for a number of years. When I moved back I must have had a small outstanding debt with my Luxembourg mobile phone contract – a maximum of €50! Ive now received, one year later, a letter from a company called Creditreform UK who inform me I owe them €344!! Do I have to pay this? Can I not just pay back the original €50 debt? What will happen if i irgnored this letter??
    Thanks

    • moneyaware

      Hi James

      Thanks for your message.

      We would not advise that you ignore letters about an outstanding debt, this is because you could miss things like default notices, notices of court action or a statutory demand.

      Your debt has been passed to a debt collection agency; you can read more about them here: https://www.stepchange.org/debt-info/debt-collection/debt-passed-to-a-collection-agency.aspx

      Debt collection agencies are companies who specialise in collecting debts where the original creditor can’t get arrears repaid. Debt collection agencies don’t have any special legal powers. They can’t do anything different to the original creditor.

      Letters or phone calls from collection agencies can be worrying. They may refer to court action or that they’re sending someone to your home. However, they’re not allowed to lie or mislead you about their legal powers or make an excessive amount of phone calls.

      They could take court action if you don’t pay. But this is less likely to happen if the collection agency is aware that you’re seeking help with your debts or if you agree to a payment arrangement.

      In order to deal with the debt, you should offer to pay them only what you can realistically afford.
      Usually, if a debt has been sold to a collection agency interest and charges will usually stop. The original creditor may already have stopped these after the account defaulted.

      However, in some cases a debt collection agency may continue adding interest and charges. But they can only add amounts which are allowed in the contract you signed with the original creditor.

      If the debt is still owned by the original creditor they may continue adding interest and charges while the collection agency is contacting you.
      I hope this helps, if you’re struggling financially you should consider getting debt advice, you can do this online at: https://www.stepchange.org/DebtRemedy.aspx

      Thanks,
      Becca

  • Mel

    I fell into arrears with my water rates last year and came to an arrangement. Which I cleared in April. The debt collection company said even though the balance was cleared I had to stay on the same weekly payment terms with them. This means I have now paid my water rates in full up to April 2018. Even though it would have suited me financially to spread the payments over 12 months – Were they allowed to keep me on this payment process with them even though I was no longer in arrears?

  • Iris

    Hi there,
    Can someone please offer me some advice?
    I was joining a gym but they never charge me the correct amount in my correct account. They charged always to my friend’s account. We tried to solve this problem and sending emails to fix it. After 2 months my friend and me moved to another country and we sent an email with the flight proof. We called them and they told us that everything was right and that we didn’t need any email confirmation. Now C.A.R.S a Debt Collection Agency is calling us asking for 600£. We are not agree with this, what can we do and what can the collection agency do against us?

    • moneyaware

      Hi Iris,

      Apologies for the delay in replying.

      I would recommend contacting the gym and explaining what’s happened. If they told you they wouldn’t charge you for the gym membership they shouldn’t have passed your debt to a debt collection agency. It sounds like there has been a mistake and the gym have passed this debt on. It will help you if you have details of your phone conversation, to prove they told you the debt wouldn’t be collected – things like the date and time of the call and the name of the person you spoke to.

      There’s some information on our website about the powers companies have to collect UK debts if you live abroad: https://www.stepchange.org/debt-info/dealing-with-uk-debts-abroad.aspx. This would only apply if you actually owe the money though, so the first thing to do is dispute this debt with the gym.

      Kind regards

      James

  • Paul Silvester

    I entered into an agreement with a credit card company in 2000 and defaulted in 2004 due to il health. The debt was ‘allegedly’ sold to a collection company in 2004. I have been making payment each month since then. In 2009 I asked for a copy of my agreement etc and they sent me a document claiming it to be the terms and conditions from 2000. It didn’t seem correct so I repeated my request and in 2010 they sent more paperwork saying these were the terms and conditions. However they are different. I also asked for a copy of the original notice of assignment and this was never sent.
    However, as I do owe the money I have carried on paying, in 2018 it will have been 14 years. Recently they have started harassing me to increase the payments even though I have a letter from them dated 2010 accepting my monthly payment offer and without stipulating that this can be reviewed. Were do I stand on this. Is there a custom and practice angle here? Should I press for the correct terms and conditions?