Finance companies attempt to get payment from defaulting customers, but regularly fail to achieve this objective. Customers may have gone missing, moved house or are just being difficult. They all present a problem and become uneconomical to collect. Unsecured debt is then sold on to debt collection agencies and is written-off against taxes.
How Do Debt Collection Agencies Make Money?
Uncollectible unsecured debt is purchased for 10-20% of the loan value. A £10,000 loan will often be bought for as little as £1,500 and they will then pursue those who default for full repayment. Whilst some will never pay-up, they bank on making a profit from those who do.
The Threat of Debt Collectors
Countless threatening letters will be sent out by debt collectors. Threats normally pertain to doorstep collection and even legal action. However, most of the correspondence is little more than a generic letter sent to all defaulting customers. Showing the correspondence to the Citizens Advice Bureau (CAB) or other counselling service will quickly clarify the situation.
How Do You Deal with Debt Collection Agencies?
Unless a debt collector has a court order they are not allowed to force entry to a home. Don't open the door or leave windows open and that way they can't get in. If the door is opened and they may put their foot there to block its closure, it may be too late. Once a debt collector has gained entry they can legally make a list of items of value and arrange to sell them if payment is not made. Don't let them in.
Getting the Better of Debt Collection Agencies
If savings are available, there is a strong chance that a full-and-final settlement can be reached with debt collection agency. It is possible that a loan can be settled for as little as 35% of the outstanding sum. If able to agree upon a settlement figure, make sure that it is received in writing before sending payment.
Debt Solutions
If at least £100 of disposable income is available each month, it may be possible to enter a Debt Management Plan. Moving forwards, an intermediary (private company or charity) will deal with creditor correspondence. It is possible that further interest and charges will be frozen.
If credit problems are more serious, consider personal bankruptcy or an Individual Voluntary Arrangement. These debt solutions are traditionally used for debts over £15,000. A Debt Relief Order is now used to clear sums under this figure.
If unsecured debts are a source of great worry, don't just agree to what debt collection agencies want. It is possible to agree to an affordable monthly payment, arrange a full-and-final settlement or start a debt solution. Talk to a qualified debt counsellor before proceeding.
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