Debt recovery UK

Helene Mueller
eCollect support team

Agencies operating on local UK level collect delinquent payments from the subject of debt and require a commission fee to be paid either by the lender or by the consumer (debtor). Debt collection UK can be completely free for the creditor (when the agency collects its interest from the subject of debt), partially paid for the lender (usually the court actions require payment) or paid in full. In the last case, the DCA (Debt Collection Agency) can demand payment prior to the collection process or after the debt recovery has been completed. Debt collections UK services can also be taxed a flat rate of hourly/daily/weekly or monthly disbursement.

Debt recovery in the UK: general classification

Typically, debt collection in the UK can be provided by debt collection agencies and debt buyers. According to UK laws, both types are considered as legitimate recovery agencies, and their actions and rights are strictly balanced by special UK laws and acts. Such regulations are the UK’s Financial Conduct Authority, Late Payment of Commercial Debts Act, the Consumer Credit Act (1974), the Competition and Markets Authority, and until April 2014- the Office of Fair Trading.

Standard UK debt recovery consists of the classical debt collection agencies. They collect delinquent funds for a commission fee percentage on the side of creditors. They use special API software to exchange data with the creditor. This grants full access to debtors’ profiles and accelerates the collection process. Such mechanism turns the procedure into a transparent one and allows the lender to monitor the whole debt recovery course.

Debt purchasers buy debts for a fraction of the total amount of the bad overdue payment. They can be part of a DCA, where the agency practise purchasing debts as well, or can be part of a private organisation, which only buys debts, but is not registered as a collection agency. In the second case, the debt buyer will usually hire a third-party DCA to recover the amounts due, or will re-sell the default profiles to another debt buyer or debt recovery agency. Purchase debt recovery UK can be a convenient option for creditors. As they have written-off the bad debts, selling the past-due amounts will lead to profit.

Standard debt collection UK agencies have the same authorities as the debt buyers. Both have the right to collect outstanding amounts from the debtor and request their interest rate as well. There is one difference between a standard debt collection UK agency and a debt purchaser. According to UK laws and legislation, if a debt buyer tries to collect the bad debt on behalf of his own company, under the same trading name, he is not allowed to collect a commission fee from the debtor as a DCA. Debt purchasers are authorised to recover the delinquent amount from the subject of debt, without charging him an interest rate as a DCA. However, in accordance with UK laws, a creditor has the legal right to request payment from the consumer as an extra fee charge, if the consumer has late payments or bad debts.

First-party and third-party debt recovery the UK

Generally speaking, a UK collection agency can act either on behalf of the original creditor or be part of lender’s internal department. In the first case it is called a third-party DCA, and in the second- first-party collection agency.

A first-party debt collection in the UK is named so because it is a subdivision of creditor’s company, who is the first-party in the contract between lender and debtor. Some lenders prefer such debt recovery because the collection process starts earlier and the creditor has full control over the debt collection recovery. It costs less for the creditor, as he doesn’t spend money on hiring a third-party recovery agency.

On another hand, sometimes third-party debt collection UK can be more cost-effective than the first option. The reason is that such DCA is not always costly. It can offer collection services for free and request payment from the debtor. Using a third-party debt recovery UK can save the creditor valuable time, effort and funds. Its name derives from the fact that third-party DCAs are not part of the contract between lender and debtor. They are usually private companies, licensed to recover delinquent payments on behalf of the original creditor.

Both types of debt recovery UK agencies use the same pre-legal and legal collection methods and tools. They include phone calls, emails and official letters of demand addressed to the debtor. Both are authorised to hire bailiffs and collection solicitors and can also proceed with legal court actions, if necessary.

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