Debt collectors UK

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Helene Mueller
eCollect support team

Debt collectors the UK are legal and licensed organisations, which collect past-due debts and delinquent amounts from subjects of debt on behalf of the original creditor. They recover commercial debts from other businesses and consumer debts from individuals. Such collection agencies operate in compliance with UK’s laws and acts; the same national laws strictly regulate their actions and collection methods. Debt recovery agents in the UK can offer debt recovery service within the UK or on an international level. When DCAs (Debt Collection Agencies) operate worldwide, they have to conduct their actions in compliance with different national laws as well. According to UK national laws, debt collectors are not considered as such, when they are part of creditor’s company and recover debts under the same company’s trading name. They still have the right to pursue debt settlement but are forbidden to charge debtors a commission fee, as they are not legally licensed as a private debt collection agency.


Laws and regulations for debt collectors the UK

Consumer debt collectors UK comply with UK’s laws and regulations and are licensed under the CCA 1974 (Consumer Credit Act 1974)-
http://www.compactlaw.co.uk/free-legal-information/consumer-law/consumer-credit-act-1974.html
, and until April 2014- under the Office of Fair Trading (OFT) as well. Although the OFT is not an active organisation anymore, it has passed its responsibilities and rights to various organisations, on which collection agencies and debtors can rely. Such organisations include the Financial Conduct Authority (FCA)-
http://www.fca.org.uk/
, the CMA (Competition and Markets Authority)-
https://www.gov.uk/government/organisations/competition-and-markets-authority
, and others.

Commercial debt recovery agents, which collect debt amounts from other businesses, comply with the Late Payment of Commercial Debts (Interest) Act-
http://www.legislation.gov.uk/ukpga/1998/20
. Such debt collection is also known as “business-to-business” debt recovery, where the creditor and the debtor are both business organisations.

Debt recovery agencies’ commission fees are also controlled and determined by law in the UK. Such payment percentage is to be paid either by the creditor (also called “first-party”) or by the debtor (“second party”), depending on the agency’s policy and terms & conditions. According to UK’s legislation, debt collectors can require an interest to be paid by the debtor, only if there is such clause in the contract signed between creditor and debtor, obliging the subject of debt to pay the DCA a commission fee.

Statute of limitations for debt collectors the UK

A debt limitation period, also known as a statute of limitation, refers to a concrete time-frame and represents the maximum period, in which the creditor (or debt collectors the UK acting on his behalf) has the legal right to pursue payment of a bad debt and to implement court actions. After this period, the law restricts such collection process, no matter if it includes civil proceedings or legal actions. This attributes not only to first parties but also to debt collectors the UK, who claim such payment on behalf of the original creditor. Even if the creditor no longer has the right to pursue the debt amount, the unpaid balance report still affects debtor’s credit score and will remain as part of his credit history in the UK credit bureau for six years.

The limitation period in the UK is determined by the Limitation Act 1980 (
http://www.legislation.gov.uk/ukpga/1980/58
) and is exactly 6 years. According to the Act, if the creditor hasn’t required a debt settlement within these 6 years, and hasn’t contacted the debtor in any way, the debt is considered as invalid and the case is ceased. After these six years, the creditor cannot start legal proceedings; the debt is named as “time-barred”; and the late period falls under the legal term “laches”, which refers to an inconsistent delay in pursuing the right to claim settlement of a debt amount. Such late attempts occur mostly when the default amount has been sold to a debt buyer or from one debt collection agency to another.

The Limitation Act also consists of a part, where personal injuries, defective products, or life-fatal accidents, etc. are considered as exceptions and may not comply with the Act. Such cases can be prolonged up to 3 more years on top of the original 6-years limitation period.

According to the Limitation Act 1980, there are some debts, which have no valid statute of limitation and cannot be collected by debt recovery agents. Such are the debts, deriving from unpaid taxes, healthcare and medical bills, student loans, unpaid child support taxes, etc., as all fall under the term government debts. They are reported straight to the UK credit bureau and are not collected by DCAs (Debt Collection Agencies), but by the government. Usually, the collection methods for such default amounts are either tax refund interception or wage garnishment (according to UK law, it cannot exceed 25% of debtor’s net monthly wage; but it can depend on the area of living and amount of monthly wage).


Used literature & xternal links

http://en.wikipedia.org/wiki/Limitation_Periods_in_the_UK
 

http://en.wikipedia.org/wiki/Statute_of_limitations
 

http://en.wikipedia.org/wiki/Laches_(equity)
 

http://www.legislation.gov.uk/ukpga/1998/20