If a bill goes unpaid for a long period, the debt falls into arrears. A creditor typically does not wish to deal with the defaulted account so it passes the debt to a collection agency, which is a company that specializes in purchasing and collecting debts.
The agency purchases the debt from the creditor or the creditor pays the agency a percentage of the amount collected. Once a debt has passed to a collection agency, the debtor pays the firm directly.
In many cases, a collection agency will stop interest and other charges from accumulating on the defaulted accounts that it handles. However, this is not always the case so the debtor should contact the collection firm to inquire about this.
After determining an affordable repayment based on the household budget, the debtor should contact the agency to arrange repayment. It may be possible to repay a reduced amount but this may require some negotiation.
Confused about agencies and bailiffs?
A debt collection agency is not a bailiff and it does not have any more legal authority than the original creditor. The agency must adhere to the Office of Fair Trading (OFT) guidelines regarding fair debt collection. Typical methods of contact include telephone and letter, though home visits are also permitted. Once an individual is notified that a debt has been turned over to a collection agency, the person should correspond with that firm directly.
A collector usually tries to recoup as much money as possible but the debtor should not be discouraged. By presenting an affordable repayment figure, a debtor shows intent to make good on the debt. Offering to pay on a weekly or monthly basis illustrates continued commitment.
A collector is usually quick to take a debtor up on an offer for a regular repayment, even if the amount is small. Getting the acceptance and repayment terms in writing provides added protection.
If the collector refuses to accept the offer, document this in writing and send it to the collection agency to indicate that the offer was rejected, obtaining a delivery receipt. Someone at the firm may review the correspondence and come back with a different answer. If not, the documentation illustrates to the creditor that repayment was attempted. Contact the creditor and request that a note is placed on the credit file indicating this.
The sooner the debt is repaid, the sooner the credit rating will begin to improve
If the collector agrees to settle the debt for a reduced amount but refuses to update the credit file to paid in full, request that it mark the account as “Paid Settled.” Though this will not improve the credit rating as much, it will reflect that the account is now current.
Agencies like Citizens Advice Bureau provide consumers with information about dealing with debt collection agencies. They advise consumers not to let debt collectors pressure them into unaffordable repayment arrangements. A debt collector should be treated in the same manner as another creditor and if the firm does not adhere to the OFT guidelines, the debtor should take action.