A collection agency is a company that tries to recoup debt payments owed by individuals or businesses. Most of these firms operate as creditor agents, charging creditors a fee or a percentage of debt. The Office of Fair Trading (OFT) handles the licensing and regulation of debt collection agencies operating in the UK.
This not-for-profit governmental department was created by the Fair Trading Act 1973.
The OFT establishes guidelines for debt collection agency operation and provides examples of practices deemed unfair. Though these guidelines are not considered law, they summarize and interpret legal areas. Agency compliance is used to determine qualification for a credit license.
Unfair practices include harassment, false claims of acting within an official capacity, and claiming that property could be seized.
Though UK debt collection agencies are known for unauthorized behavior, what are they entitled to do? Without a court order, absolutely nothing. Neither a collection agency nor a debt collector is considered a court-appointed bailiff. A debt collection agency may visit the address of a debtor but cannot enter the dwelling without the consent of the resident.
The creditor itself can obtain a County Court Judgment (CCJ) against the debtor and if granted, has the right to execute this. The debtor will receive a Judgment for Claimant and must pay the amount requested, which may be the balance or monthly installment payments.
If the debtor begins making payments as outlined, the creditor may not take further action. It is when the debtor does not make payments as agreed that the creditor can take additional court action.
The creditor may petition the court to enforce payment using several methods. A Warrant of Execution requests that a bailiff be sent to the dwelling to get payment or seize items that can be sold to repay the debt. If a creditor provides a bailiff with access to the property, this allows the bailiff to return to seize additional assets to repay debts.
Certain items are not subject to seizure including tools of the trade, a bed, and items owned by a third party. If the debtor owes more than £600, the creditor may apply for a similar Writ of Fi Fa, which involves the High Court and sheriff.
A creditor may ask the court for an attachment of earnings. When an Attachment of Earnings Order is issued, the employer must make salary deductions to cover the debt. These deductions may not cause income to drop below a certain level. Some creditors apply for a Charging Order, securing the debt against property of the creditor and requiring monthly debt payments.
If the property is sold before the individual has repaid the debt, sale proceeds are used to pay the balance.
Two court-enforced actions that are less common are an examination of means and a third party debt order. An examination of means is a hearing during which the debtor provides evidence of the financial situation. With a third party debt order, the court directly deducts money from the bank account of the debtor.
In a rare case, a creditor may attempt to make a debtor bankrupt.
