What is a Debt Purchasing Company?
The person you owe money to (the creditor) can sell your debt to a debt-purchasing company such as Lowell Financial. This means that your original creditor is no longer the legal owner of the debt.
The debt purchasing company is now the legal owner of the debt and can get in contact with you to chase debt payments. You now owe the debt purchasing company.
How Does Debt Purchasing Work?
When a company is owed an outstanding balance, they may have a contractual right allowing the sale of this balance – your debt – to a debt purchasing company. This is a widely used form of debt collection.
Debt purchasing can include debts such as:
- Credit cards
- Store cards
- Buy now, pay later
- Current accounts
- Unsecured loans
- Overdrafts
- Utility providers such as gas and electric companies
- Phone contracts
- Catalogue companies
Once a debt purchasing company purchases one of the debts above, ownership of debt transfers to them.
What happens if my debt is bought by a Debt Purchasing Company?
The company that purchased your debt must follow the same rules as your original creditor. The same legal rights as your original contract are still in place. This means that interest and charges may only be added to your debt if it is also in the terms of your original credit agreement. Once a debt purchasing company has bought your debt, they can legally contact you regarding this and request your payment. If you’re being threatened by any creditor, new or old, and have unaffordable debts – Trust Deed Scotland® provide free, confidential and tailored advice. Contact Trust Deed Scotland today to find out how we can help you.
Often, you will be able to set up a payment plan with the debt purchasing company to pay the debt off over a certain period. If you were previously having difficulty repaying your debt before the Notice of Assignment was served, this transfer of ownership of your debt may help you. Debt purchasing companies often have more flexibility to freeze interest and charges, allowing you to pay off what is owed more quickly. Make sure to speak to an experienced debt adviser in Scotland to discuss all your options so that you can make the best decision for you.
Why has my debt been bought?
The business of who you owe money to (your original creditor) is designed to lend money and collect it. When a debtor owes them money, it may not be in their interest to spend time and money chasing this debt. A debt purchasing company allows the creditor to collect most of the money owed to them, without the work of chasing up the debtor.
Your creditor may hire a debt collector to chase the money the owed, or a debt collector may purchase debts for their own profit. Both options are in the creditors’ interest as this allows them to receive the money they are owed when a debtor is not paying.
If you, the debtor, is made insolvent or sets up a payment plan, the creditor may have to wait a long time before receiving the debt or could also receive none of it. By selling this debt, they are guaranteed some of the money back, and no longer need to chase the debt.
What’s the difference between Bailiffs and Debt Collectors?
If your debt has been sold to a debt purchasing company and they are now chasing you for this debt, you are held to the same legal agreement as your initial contract. A debt collector does not have any additional legal powers to collect the debt, unlike a bailiff.
In Scotland, a Bailiff is more commonly known as a Sheriff Officer.
The laws differ in Scotland between what a Sheriff Officer can and typically will do vs. a Bailiff in England & Wales. If in doubt, get in touch with an experienced debt adviser.
I am unsure if I am liable for the debt being chased
We know that people can be unaware of their liability on an outstanding balance. There are many reasons for this:
- Closing an account with additional fees you were unaware of
- Cancelling a contract before the fixed period
- Guarantor responsibility
- Joint account debt
If you are being contacted about a debt that you are unsure of. The first step is to avoid fraud by checking the legitimacy of the company. Secondly, get in touch with the debt purchasing company to find out the information on the debt you are being chased for.
The debt purchaser will inform you of their purchase through letter. This will state:
- Who the new owners of your debt are
- The name of the original creditor
- It may also include the account number of the original creditor
- Where your debt payments should now be sent to
Notice of Assignment
The people you owed money to (your original creditor) must inform you that your debt has been sold. This document is known as a Notice of Assignment. Selling debt is a common practice, especially with credit cards and loans. It is nothing to worry about as you are still under the same legal terms as your original contract. Meaning, the terms of formal debt solutions such as a Protected Trust Deed or the Debt Arrangement Scheme are still binding.
The Notice of Assignment is informational for you to be made aware of the transfer in debt ownership. If you are in a debt solution, there is no need to worry when you receive this document.
Simply, inform your debt solution provider, such as Trust Deed Scotland® of the letter. The Trust Deed Scotland® in-house team will update our records and ensure that all future correspondence is sent to the right people i.e. your debt purchaser.