How long can a debt collection agency pursue a debt?
We know that debt can quickly become unmanageable, particularly when your financial situation changes without warning. When this happens, it may feel impossible to tackle the problem yourself and it is easy to feel tempting to ‘stick your head in the sand’. Unfortunately though, debts do not just disappear because you ignore them.
Your creditors (the company or lender you owe money to) may stop contacting you for payment after a while, but this does not mean that the debt has gone away or that you won’t be contacted at a later date.
It is important to remember that debt collection agencies have no extra legal authority and are not bailiffs, but they can take action to enforce the debt including taking you to court if you do not pay. Having an understanding of debt collection time limits and what is likely to happen if you do not pay can be useful to help you manage your finances.
How long can a debt collection agency chase you for?
There are no strict rules about how long a debt collection agency will chase you to pay a debt. Mostly this will be a business decision set out in that company’s policies and processes.
In practice, you are likely to find that a debt collection agency contacts you regularly when they are first appointed or when they first buy the debt, and less regularly as time goes on. At first, you may receive letters chasing the debt on a weekly basis. You may also be contacted by phone, email or text.
Unfortunately, you cannot stop these companies from contacting you completely as they must by law send certain information to you in writing such as statements. But you can ask any company not to contact you by any other method of communication. If you would rather you were not contacted by email, phone or text, you can ask these companies to remove those details or at least stop using them. The request should then be made in writing under the General Data Protection Regulation 2018 (GDPR).
If you have a reason to believe that you do not owe the debt, either in full or part, you should raise this issue as a formal complaint with the debt collection agency. Most companies will stop chasing you for payment while they investigate your complaint. If they agree with you, the company may write off all or at least part of the outstanding balance.
How long do collection agencies have to collect a debt?
Where they are not receiving payment towards a debt, many companies will make the decision to sell your account to a specialist debt collection company. Often, this can happen multiple times.
There are no laws, rules or regulations which tell a company when they should or shouldn’t sell accounts. It is purely a business decision of the company – and this varies on a case by case basis.
Some creditors might refer to a debt collector a couple of months after the account has defaulted, others may take longer and some creditors may even refer to non defaulted debt to collect arrears on the account.
To further complicate matters, the lender can sell your debt even if you have agreed to a payment plan.
By the time the account is referred to collectors, it is unlikely that you will still be able to use it or draw any further on the credit, so the account is likely to be suspended.
If your account is still owned by the original creditor, the debt collector is likely to chase it until the creditor recalls the debt for around three to four months. If they are not successful, the creditor will recall and sell the debt or send it to another agency. That said, it is their job to make sure that the debt is paid, so they will do whatever they can to collect the balance.
Another instance where debt collectors are not allowed to chase the debt includes if the Financial Ombudsman Service (FOS) fights against them or if they are defeated in court.
If a debt collection agency has been appointed, you should go through that company and not the original creditor who is unlikely to want to help. If you are unsure about who is contacting you, the best thing to do is to speak with the original lender to find out who you should be making payments to.
How long do you have to pay debt collection agencies?
You will need to pay debt collection companies until either the debt is settled in full, you agree to a partial settlement or the debt becomes statute barred.
A debt collection agency will have bought the debt for only a fraction of the amount they say you owe (hence how they make money) but you will still need to pay them the full balance to satisfy the debt in full and have the account marked as closed on your credit file.
Luckily though, this does mean that they are often happy to accept a reduced settlement figure in full to close the account. Once you have agreed and paid a settlement figure, you would then stop paying the debt and the remaining balance would be written off.
There are two schools of thought about when you will be able to negotiate the best settlement offer. Some debt collectors may want to close the account quickly and may be happy to accept a reduced settlement shortly after buying the account, while others may offer better ‘deals’ after a number of months.
If you settle early then the company won’t have incurred many costs in chasing you for the debt (remember – time is money), but they may hold out hope that they will be able to force you into making high regular payments. On the other hand, settling later means the collector is becoming desperate and may even be considering selling the account themselves. The key point is not to give up, even if a settlement offer is rejected. However, this doesn’t mean that the same offer won’t be accepted at a later date when the debt collector is feeling less optimistic.
If you do not pay the debt at all, the law sets a limit on how long a debt collector can chase you. If you do not make any payment to your creditor for six years or acknowledge the debt in writing then the debt becomes ‘statute barred’. This means that your creditors cannot legally pursue the debt through the courts. However, this does not apply to all debts.
Once the debt is statute barred, the lender has run out of time to make you pay the debt. But even when a debt is statute barred, it does not mean that it does not exist. It may also still be on your credit reference file, meaning it will be hard for you to obtain credit or borrow money.
It is important you do not contact a creditor in writing if you believe the debt might be statute barred. This includes sending texts or emails, as writing to them could make it seem as though you are agreeing that you owe the money. If you do that, it might reset the time limit, meaning that it would be another six years before the debt is statute barred.
How long until a debt collector takes me to court?
Again, it is difficult to say for sure how long you have until a debt collector takes you to court. Most companies will try to take you to court before the limitation (or statute barred) period has expired. This means that trying to make an account statute barred is risky, and the debt collector could decide to start court proceedings at any time.
In practice, it is likely to be several years before a debt collector takes you to court. This is because the court process is very expensive, and even then, there is no guarantee that you will make higher repayments when the creditor has judgement against you. A court will only ever order you to pay what you can afford.
Getting judgement may be useful to a debt collection company because it is the first of a number of enforcement actions they can take against you. If you own your own home, they may take you to court with a view to eventually taking control of and selling your property.
The most important thing is to not ignore court papers. If you do then the creditor will be granted judgement and you will have a CCJ on your credit file. Due to this, it’s important to bear in mind that you can always speak to the creditor and stop court action at any time.
If you are being contacted by debt collection agencies, the most important thing is to know your rights. With our help, many people have proven that they do not have to pay anything to the companies chasing them for money. Get in touch with us today to find out more.