Debt collection agencies UK

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Helene Mueller
eCollect support team

Debt collection agencies UK are institutions, which are licensed to collect past-due debts and outstanding receivables on the territory of Great Britain. They can, however, operate also on a nationwide level, providing international debt collection services for their UK clients. Most creditors have preferences for debt recovery agencies UK, as using internal subdivisions for debt recovery can be quite costly for the original creditor. The process can worth time and a lot of resources spent for contacting the debtor, in-house visits, hiring legal attorneys and bailiffs, etc. Therefore first parties (creditors) usually prefer to use professional services of debt recovery agents and focus on other aspects of their business, rather than dealing internally with the collection process. The second reason why creditors prefer debt collection agencies is because every default account transferred to a DCA (Debt Collection Agency) is a potential source of income for the creditor because it has already been marked as a written-off debt, i.e. a loss.


Categories of debt collection agencies in the UK

Debt collection agencies located in UK can be either first-party, third-party DCAs or debt buyers. A first-party DCA operates within creditor’s organisation and is part of the same institution’s subdivision. Third-party collection agencies are the licensed and registered ones. They act on behalf of the original creditor and require a payment to be made (their interest rate for services provided) either by the creditor or the debtor. Their commission fee is also regulated by UK’s laws. Debt buyers purchase default profile portfolios from the original creditor for a fraction of the total debt amount. In this way they become the new debtors and by UK’s laws and regulations and obtain the legal right to recover these amounts on their own.

Debt collection agencies UK are also divided into local and international DCAs. The local operate within the boundaries if Great Britain and serve clients located only in UK. Nationwide DCAs spread their activities on a worldwide level. Their activities comply with the specific laws if each country. As they have their representatives in each location of operation, they are familiar with different regulations and national acts.


Common strategies of UK debt collection agencies

In order to successfully collect the debt amount from the debtor on behalf of the original creditor, debt recovery agencies UK use complicated strategies in order to recover the amount due. They typically collect bad debts from a consumer owed to a company (consumer debt collection) or from a business owed to another business (commercial, or “business to business” debt collection). Their methods are legal and ethical in order to preserve the business relationship between the first party (creditor) and the second party (debtor). The main debt recovery tools and strategies are non-harassing communications (phone calls, voicemails, etc.), official letters and court actions. The activities and rights of DCAs, operating in UK, are regulated by national laws and acts, such as: Office of Fair Trading, the Consumer Credit Act 1974 , for commercial debts- the Late Payment of Commercial Debts Act, and others.

The multi-channel communications is the first approach to the debtor. By using an appropriate, polite tone, debt collection agencies UK aim to recover the full debt amount without the need of any legal and court actions. According to UK laws and regulations, debt recovery agents are allowed to contact the debtor as many times as needed, within the accepted time-frame for UK: from 9am to 8pm, Monday to Friday; without weekends and holidays.

Debt collection letters are also known as “letters of demand”. Such are sent as reminders to the subject of debt. They can be either friendly reminders or harsh informative letters. The first aim to remind the debtor to settle the delinquent amount, as the second type are notifying the subject of debt that legal actions will take place or have already started. The tone of the letters is polite but demanding, with official structure. The debt collection reminder letters are as following: friendly reminder (can vary between 1 and 3), formal collection reminder, harsh collection reminder and final informative letter for court actions (also known as letter before action, or letter of final demand). The typical period between the letters is usually seven working days, but the deadlines can vary according to debt collection agencies UK policy.

In-house visits are another aspect of the collection process. Depending on the purpose of visit, they can be performed by standard debt collectors, enforcement agents or bailiffs. Usually collection agents suggest a payment plan convenient for the subject of debt. Bailiffs have the legal right to seize debtor’s personal belongings and sell them in order to settle the debt, but they rarely do that, as a convenient payment plan can be a better option.


Used literature & external links

http://www.compactlaw.co.uk/free-legal-information/consumer-law/consumer-credit-act-1974.html 

http://www.findlaw.co.uk/law/bankruptcy/debt_collection/500427.htm 

http://www.legislation.gov.uk/ukpga/1974/39/contents 

http://webarchive.nationalarchives.gov.uk/20140402142426/http://oft.gov.uk/about-the-oft/legal-powers/legal/cca/