What Happens When a Debt Is Sold to a Debt Collector?
Creditors can sell debts to third-party debt collection agencies. Your rights remain the same and the rules about what collectors can and cannot do are strictly regulated.
Quick Answer
When a debt is sold to a debt collection agency, the agency becomes the new legal owner of the debt and has the same rights to collect it as the original creditor. However, they cannot demand more than was originally owed, cannot use harassment or deceptive practices, and must comply with the FCA's rules on debt collection. You should ask the new collector to verify the debt before making any payments.
Full Explanation
Creditors routinely sell unpaid debts โ often in bulk โ to debt purchase companies. When a debt is 'assigned' to a new owner, legal ownership of the debt transfers to the buyer. Under the Law of Property Act 1925 (section 136), a valid legal assignment must be in writing and notice of the assignment must be given to the debtor. Once validly assigned, the debt collector is the legal creditor and can bring court proceedings in their own name.
The amount of the debt does not change on assignment โ the collector cannot charge interest beyond what the original agreement permitted, cannot add penalties not agreed in the original contract, and cannot claim amounts that were not owed to the original creditor. If a debt is statute-barred (more than six years since the last payment or written acknowledgment), it is unenforceable in court regardless of who owns it.
Debt collectors are regulated by the Financial Conduct Authority (FCA) under the Consumer Credit Act 1974 and the FCA Consumer Credit sourcebook (CONC). The FCA's rules prohibit: false or misleading representations (e.g., impersonating court officers); harassment (excessive contact, threatening language); claiming to have powers they do not have; and pressuring people to borrow to pay debts.
When a debt collector contacts you, you have the right to: ask for verification of the debt (proof of the original agreement and the amount owed); ask for a copy of the notice of assignment; and request that they communicate only in writing if you find phone calls harassing. You also have the right to complain to the Financial Ombudsman Service (FOS) if a collector breaches FCA rules.
If you believe the debt is unenforceable (e.g., it is statute-barred, the original credit agreement was improperly executed under the Consumer Credit Act, or you simply do not recognise it), seek debt advice before making any payment โ payment can restart the limitation period in some circumstances.
Legal Basis
- ยงLaw of Property Act 1925, section 136 (legal assignment of debts)
- ยงConsumer Credit Act 1974 (regulated credit agreements)
- ยงFCA Consumer Credit sourcebook (CONC) โ Debt collection rules
- ยงLimitation Act 1980 (statute-barring of debts after six years)
What To Do
Request Written Verification of the Debt
Write to the debt collector requesting written proof of: the original agreement; the amount owed and how it is made up; and a copy of the notice of assignment. Until verification is provided, you are not obliged to make payments.
Check Whether the Debt Is Statute-Barred
In England and Wales, most debts become unenforceable after six years from the last payment or written acknowledgment (Limitation Act 1980, section 5). If the debt is older than this, write to the collector confirming that the debt is statute-barred and that you will not make payment.
Do Not Make a Token Payment Without Advice
Making any payment on a statute-barred debt can restart the limitation period, potentially making the debt enforceable again. If in doubt, seek debt advice from StepChange or National Debtline before making any payment.
Complain if Harassed
If the collector uses harassment, threats, or deceptive practices, make a formal complaint to the collector in writing, then escalate to the Financial Ombudsman Service (FOS) if the complaint is not resolved within eight weeks.
Seek Debt Advice if the Debt Is Valid
If the debt is valid and unmanageable, seek free advice from StepChange or Citizens Advice. Options may include a Debt Management Plan, Individual Voluntary Arrangement, or Debt Relief Order depending on your overall financial position.
Important Warnings
Never make a payment on a debt you do not recognise without first verifying it โ fraud involving false debt collection is a known scam.
A debt sold to a collector does not disappear from your credit file โ it may show as a default with the original creditor and then as a new entry with the debt purchaser.
Frequently asked questions
- What rights do I have if a debt collector contacts me about a sold debt?
- When a debt is sold, the collection agency becomes the new legal owner and can pursue it in their own name. However, they cannot charge more than the original amount, add unagreed penalties, or use harassment. You should request written verification of the debt, including the original agreement and proof of assignment, before making any payments.
- Can a debt collector increase the amount I owe after buying the debt?
- No, the debt amount does not change upon assignment. The collector cannot charge interest beyond what the original agreement permitted, add penalties not in the original contract, or claim amounts not owed to the original creditor. The legal ownership transfers, but the financial terms remain fixed to the initial agreement.
- Does a debt become unenforceable after a certain number of years?
- Yes, under the Limitation Act 1980, most debts become unenforceable in court after six years from the last payment or written acknowledgment. This applies regardless of who owns the debt. If a debt is statute-barred, it cannot be enforced through legal proceedings, though you should seek advice before responding to avoid accidentally restarting the limitation period.
- Who regulates debt collectors and what are they not allowed to do?
- The Financial Conduct Authority (FCA) regulates debt collectors under the Consumer Credit Act 1974 and the FCA Consumer Credit sourcebook. Rules prohibit false representations, harassment, threatening language, and claiming powers the collector does not have. If a collector breaches these rules, you can make a formal complaint and escalate to the Financial Ombudsman Service if unresolved.
- What happens if I make a small payment on a debt I think is too old to enforce?
- Making any payment on a statute-barred debt can restart the six-year limitation period, potentially making the debt enforceable again. Therefore, you should not make a token payment without professional advice. If you are unsure whether a debt is valid or enforceable, seek free debt advice from organisations like StepChange or National Debtline before taking any action.