Debt Collection Agencies (DCAs)
Debt collection agencies (DCAs) are hired by their clients to collect a debt that’s still owned by the lender or creditor. They are contracted for a period of time and if they fail to collect the amount or get a repayment arrangement set up, they will return the account to the creditor. Debt collection businesses must be authorised by the Financial Conduct Authority (FCA).
Banks and other finance companies start by trying to collect the outstanding amounts themselves. Once the account is officially defaulted (after a Default Notice has been issued), the usually pass it on to their own collections department. Most banks have their own in-house collections departments, often named in such a way as to suggest they are separate entities; some may use than one name. A Google search for the name on your correspondence will shed some light on the subject and tell you whether you are dealing with an in-house collections department or an external agency.
Many companies start by using their own in-house collectors, once they’ve exhausted this avenue, they will pass on the account to an external DCA to collect the balance. This has the effect of putting some distance between the bank and the collection process.
Businesses such as utility companies and telecoms operators tend not to have their own collections department and they will use a debt collector agent for their delinquent accounts. The government (DWP and HMRC) often use the services of debt collectors rather than attempting to collect themselves.
DCAs are well known for bullying, threats and abuse, some are worse than others. Section 7.3 of the FCA Consumer Credit Sourcebook sets out the procedures to be followed by DCAs.
DCAs use different methods to collect debts, some of them may be against the rules. DCAs rely on debtors being not being aware of their rights. Common collection methods include:
See harassment for more information.
Creditors often sell their defaulted accounts to specialist companies called debt purchasers. Debts are sold for a fraction of their value and the rest is written off as a loss for tax purposes. Unlike debt collectors, debt purchasers own the accounts and once the accounts are sold, all rights and duties are transferred to the debt purchaser who becomes the creditor.
Debts are sold in bulk, debt purchasers don’t get much detail about the accounts they buy or any paperwork. It’s up to the debtor to inform them of any ongoing dispute regarding the account. The debt purchaser will often have to go back to the original creditor to obtain information, this usually results in a lengthy process, however, the debt purchaser should put the account on hold while they contact the original creditor.
Debts can be sold on an unlimited number of times regardless of whether they are disputed, unenforceable or even statue barred. It is a common misconception that disputed debts cannot/should not be sold.
Companies involved in debt purchase and collection
A full list of companies involved in debt purchase and collection is available on the CSA website.
The site details the activities each company is involved in. Some companies are both debt collectors and debt purchasers. A few such as Rossendales, also offer enforcement services (bailiffs). This can lead to confusion with people assuming they are being threatened with bailiff action when they are just acting as debt collectors.