A no-deal Brexit is looming just around the corner and companies up and down the UK are clawing in as much cash reserves as possible. That means, bad debtors will be settled one way or another.
If you receive a debt collection letter it can be pretty worrying. However, there is no need to panic as a letter from a debt collection agency is a normal step in the overall debt collection process.
If you have received a Letter Before Action (LBA) from a debt collection agency or something similar, here are a few steps you can do to ensure you maintain control of the situation.
1. Communicate immediately and confirm the legitimacy of the debt
Before you acknowledge the debt belongs to you, request validation in writing and do this urgently. Asking for proof of debt through documentation such as a credit or loan agreement, an account statement or an invoice. Even if you know you owe the debt, it is important to request this to prevent dealing with a potential fraudulent company. Under the Financial Conduct Authority’s (FCA) guidelines, it is up to the debt collector to prove that you are the right person in regards to the debt (and professional debt collection agencies will do their own legitimacy checks to ensure the debt is valid) and that the amount owing is correct, as well as being in line with the Late Payment of Commercial Debts (Interest) Act 1998.
If a debt does appear to be incorrect (either you don’t owe the debt or the amount owing is not right), you should immediately dispute this in writing. A debt collection agency cannot continue to make payment demands until the dispute has been resolved.
2. Communicate immediately but don’t pay immediately
Unfortunately some unethical debt collectors are extremely intimidating and they might use threatening language in their collection letters, prompting you to start making payments immediately. However, until you have proven the legitimacy of the debt and agreed payments that you can afford, you are under no obligation to make the payment immediately. You are of course still under an obligation to pay off the debt if it's valid in a timely manner. If the debt collection agency are threatening liquidation or bankruptcy, quick communication is key to prevent a Statutory Demand or an enforced County Court Judgement (CCJ). However you must communicate with the debt collection agency at all times to ensure they do not believe you are wrongfully delaying or holding back paying off the debt.
The only caveat to this is debt as a result of unpaid Council Tax. If that is a situation you are facing you must not only communicate with the debt collection agency immediately but calculate your affordability in an urgent manner. Unpaid Council Tax or Council Tax arrears are considered a "priority debt" which means you must pay off the debt before any other debts, for example a credit card bill. Deliberately not paying back Council Tax arrears can lead to a custodial prison sentence in the extreme cases. For more information visit the Citizens Advice Bureau at https://www.citizensadvice.org.uk/debt-and-money/help-with-debt/dealing-with-urgent-debts/dealing-with-council-tax-arrears/
3. Negotiate a payment settlement plan
If the debt collection agency has verified the debt and provided you with all of the information you have requested, then you have two payment settlement options. The first and easiest is to pay off the debt and any interest owed entirely if you can afford to do so. We would advise this as the best step to take.
However debt collectors are always willing to negotiate because they only make their money if you indeed pay back the debt. On occasion, proposing to pay a lump sum immediately vs a payment plan, the debt collector (and their client) might be willing to accept an amount less than the one actually owed. If not, a payment plan is a standard and straight forward method to pay back the debt to the debt collection agency, such as paying off the debt in weekly or monthly instalment amounts.
4. You have legal rights
Even if you do owe the debt legitimately, you have legal and ethical rights in regards to how debt collectors should collect the amounts owed. The FCA’s Consumer Credit code is quite clear in that, debt collectors should not mistreat, harass or abuse consumers regarding debts and they should not call at unreasonable times or at their place of work. If the debt collector or debt collection agency violates these rights, you can make a complaint through the Financial Ombudsman or pursue them for legal compensation.
5. Organise all communication and documents received
After receiving a debt collection letter, you should keep all of the documentation received in either an online file (for example Dropbox or Google Drive) or in a printed-out paper file. Also ensure you keep copies of all letters and emails sent by you to the debt collection agency as well. It's always advisable noting down all of the contacts you spoke to or liaised with at the debt collection agency, what was agreed and include the dates and times. Any payment receipts can be (scanned and) kept in this file as well. Plus if you do need to raise a compliant with the debt collection agency or an external body, you have everything to hand in regards to the debt collection process received.
"When you receive a debt collection letter, you shouldn’t panic as there are steps you can take to help you with the process. However, quick communication is vital and a legitimate debt will not just go away...you mustn't ignore any letters or emails you receive", David - Credit Control UK
The long and short of dealing with debt collection agencies is, do your due diligence, communicate and liase promptly, come up with a practical repayment plan and then stick to it for total peace of mind and prevention of further demands and interest.
For help with getting your outstanding invoice debts collected firmly but professionally, speak to us on 0208 720 7309 or email firstname.lastname@example.org