What can debt collectors do in the UK vs the US?

Debt Collectors in UK and US

If you’re being contacted by debt collectors, the first thing to know is, you’re not alone and there are lots of ways to deal with them. In this article, we’ll cover exactly what debt collectors can do in the UK vs the US, so that you’re fully informed of your rights against debt collectors, and know how to defend yourself against any court action they may take.

When a debt collection agency first contacts you about unpaid debts, you may not even recognise the name of their company, which can add to your feelings of stress and intimidation. It is likely that the original person or business you owe money to (your creditor) has hired this company to chase you for the debt, or even sold the debt to them. For example, you may have owed money to T-Mobile or Vodafone, but suddenly find yourself being chased by companies like Robinson Way in the UK or Encore Capital Group in the US, because these companies bought your debts from T-Mobile or Vodafone at a fraction of their original amount, and are pushing you to pay them in full.

Unfortunately, the debt collection business is booming in the UK and the US, and debt collectors often unfairly (and illegally) spread fear and misinformation about what they can do, in the hopes of pressuring you to pay up. However, once you are fully informed of your rights, you’ll see that there is a lot that debt collectors have to prove before they can take you to court (it is unlikely to even come to this if you start proper debt management solutions). Even if debt collectors win a case against you, there are still things you can do to avoid being liable for a debt you just can’t afford.

Let’s take a deep dive into what debt collectors can do in the UK vs the US.

What can debt collectors do in the UK vs the US?

In the UK, debt collectors can contact you asking for payments and eventually take you to court if you ignore them, but they cannot harass you, enter or take items from your home, contact you at work, send you to prison, or get you to pay a debt without evidence of your original credit agreement.

In the US, debt collectors can contact you asking you to make payments and eventually file a lawsuit against you if you ignore them, but they cannot abuse or intimidate you, take items from your home, tell your employer about your debt, send you to prison, or get you to pay a debt without proof that you owe it.

Let’s look at what steps debt collectors can take in the UK and US to recover money that is owed, and how you can best defend against their tactics.

What steps can debt collectors take in the US?

Struggling with debt that you can’t pay, and receiving threatening letters from debt collectors (even though they often don’t have as much power as they make out), can be a really upsetting experience. Take a breath – there are lots of things you can do, and you won’t be put in jail for being unable to pay your debts (except for child support, if you had the finances but chose not to pay).

Here, we’re going to go through exactly what steps debt collectors can take against you in the US, and what you can do to protect yourself from a lawsuit.

If you have debts that you haven’t paid (including old debts from years ago that you thought had been forgotten about), a debt collector may contact you with a lawsuit. You are likely to have been contacted several times with letters or phone calls before notice of a lawsuit, though. If you don’t recognise the name of the company contacting you with a lawsuit, this may be because they bought your unpaid debt off your former creditor, and are now chasing you for it. Debt collectors may even try to chase for ‘zombie debts’, which refer to debts which are cleared off your credit report or which you don’t need to pay because the statue of limitations has passed. It goes without saying that you shouldn’t pay a cent of these debts, as the debt collector won’t have a strong case in court.

Once a debt collection company has filed a lawsuit, the matter comes before a court and the judge will consider the case. If the debt collector can prove that you owe the debt, the judge may impose something called garnishment. This is when either a portion of your wages is taken to pay off the debt, or money is taken directly from your bank account.

However, the debt collection company has a lot to prove in court before this can happen. The good news is, the scales are tipped in your favour, because getting enough proof that you owe a debt can be difficult. Use this to your advantage and don’t ignore the lawsuit – this is a surefire way to lose it, and have to pay a debt you might not have to pay.

How do I respond to a debt lawsuit?

LawsuitLet’s look at how to respond to a debt lawsuit, and how you can protect yourself against a debt collection company in court.

Respond to the lawsuit with an ‘Answer’

  • You must make sure you respond to a debt lawsuit. It can be scary to receive a lawsuit, especially if you know you can’t pay the amount, but if you don’t answer it, the collection agency suing you will get a default judgement against you. This means that they can garnish your wages, and potentially take money from your bank account. They are likely to add court costs, lawyers fees and other charges too. Whereas, if you respond to the lawsuit and demand the collection agency prove your debt, they may have a much harder time getting a judgement against you. Don’t admit liability for the alleged debt, because the burden of proof is on the debt collection company to show that you actually owe the money you do.
  • To reply to a debt collection lawsuit, you need to respond through legal briefs called an Answer. You need to file the Answer with the Clerk of Court, and asked for a stamped copy of the Answer. You should send the stamped copy to the debt collection agency (called the ‘plaintiff’ in court, because they’re filing a case against you). In most debt collection lawsuits, you’ll have between 20 and 30 days to file your Answer.
  • There will be a section in the Answer where you can assert your affirmative defence. An affirmative defence is basically a reason that you don’t have to pay the debt (even if you owe it!). This could be the statute of Limitations, because if the time frame in which a debt collection agency is permitted to file a lawsuit has passed, the case will be dismissed. This could also include Failure to Name an Essential Party, as if the debt collection agency have failed to name the right party, or failed to include them in the lawsuit, they won’t have a case. Here is some useful advice on how to draft an answer to a debt collection lawsuit.

How you can challenge the lawsuit

Not only can you get out of a debt lawsuit, but you can even counter-sue the debt collection company! The lawsuit against you all depends on proof, and whether the debt collection agency can prove you owe the debt. Luckily for you, debt collection agencies may often find it hard to get hold of all the necessary paper work – particularly if your debt has been bought and sold several times.

Demand documentation of the debt

You have the right, according to federal and state laws, to demand what is called a debt verification (information about the debt). If the debt collector can’t produce this information, they are much less likely to win the lawsuit. In your request for debt verification, you should demand:

  • a description of the amount owed
  • details of the original creditor, including name and address
  • documentation of all paperwork, to show how a debt which may have changed hands many times – has been purchased from the original creditor.

If the debt collection agency can’t provide this documentation, the lawsuit may well be dismissed, so it’s definitely worth demanding a debt verification.

In fact, if your debt collection agency fails to provide a debt verification, they’re in violation of federal policies. You can bring this up as a strong defence in court, even if the judge doesn’t dismiss the case. If a debt collector doesn’t verify the debt, you can also counter-sue, and get up to $1,000 per lawsuit, plus attorney’s fees and court costs.

What steps can debt collectors can take in the UK?

We understand that struggling with debt is a uniquely painful experience, and that debt collection companies often make us feel intimidated and small. In this section of the blog, we’re going to show you how debt collectors often don’t have as much power as we think, and how, in some circumstances, you won’t end up having to pay the debt (yes, even if you owe it!)

If you continue to ignore people you owe money to (creditors or debt collection companies who have bought the debt off them), they won’t just go away. They may end up taking you to court and getting a County Court Judgement (CCJ) order against you, which demands that you repay the debt. This will arrive in the form of a letter, and will detail:

  • how much you owe
  • how to pay (in full or in instalments)
  • the deadline for paying
  • who you have to pay

A CCJ stays on your credit profile for six years, even if you pay it off within six years, so it will affect your ability to get credit and important loans such as mortgages. You should note that a CCJ is not a criminal judgement, and won’t go on a criminal record. You also can’t go to prison in the UK for being unable to pay your debts (with the exception of debts like council tax and child maintenance arrears, in certain circumstances).

After you receive a CCJ, your creditor can apply for you to pay your debts off in three different ways:

  • Attachment of Earnings
  • Charging Order
  • Bailiff action.

An Attachment of Earnings is an order which tells your employer to deduct money straight from your salary to pay off your debt. This money goes straight to the court. A Charging Order is an order which allows your creditor to secure your debts against, for example, your home. If you don’t keep up with the debt repayments, you could lose your home. When your creditor gets a charging order, they can often apply to the court to force you to sell your home to pay off your debts (‘order for sale’). A CCJ can also allow for bailiff action, where bailiffs may come and remove some of your valuable assets. However, bailiffs are not allowed to remove children’s belongings, household goods or tools or vehicles (usually under £1,500) that you need for work.

This is all a worst case scenario, however, and there are many, many steps and actions you can take to avoid a CCJ, or overturn one in motion.

How to defend against a CCJ

Before creditors and debt collectors can take you to court, they must follow certain protocols. Before any court action, you should get a Letter Before Claim with a Reply Form. If you don’t get these documents, your creditor can’t take you to court, so make sure you check this!

Financial notice

If you debt is covered by the Credit Consumer Act (CCA), you can ask to be sent a copy of your original credit agreement and a statement for your loans. If you creditor can’t produce a CCA, you can’t get a CCJ for the debt and you can even decide to stop paying the debt after a couple of months, as it is no longer enforceable.

However, it is important to know that the CCA doesn’t apply to all debts, and asking for a CCA generally only works if your debt has been sold to a debt collection company (debt purchaser). If your debt is still with the original creditor, you probably won’t be able to stop a CCJ this way.

If you receive a Letter Before Claim, the Reply Form that should come with it, will ask if you owe the money. There are four boxes:

  • Box A – I agree I owe the debt
  • Box B – I owe some of the debt, but not all of it
  • Box C – I don’t know whether I owe the debt
  • Box D – I dispute the debt

Although you may owe money, your creditor may not be able to win a legal defence against you, so it’s important that you don’t rush into ticking anything. Tick Box C if you’re not sure whether you owe the debt and may have a defence against it (see our section on defences below), ‘possible defences’. For example, if the debt collection company taking you to court cant produce the original credit agreement, they won’t have a case against you. Ticking Box C gives you time to request further information, and get together defences against a CCJ.

Potential defences against a CCJ

  • You never owed the money in the first place. Sometimes, debt collection agencies will chase people for debts just because they have a similar name or some family connection to the actual debtor. It goes without saying that you do not have to pay these debts.
  • The debt is already paid. Obviously, if you’ve already paid the debt, then the debt collector is mistaken in chasing you for it, and won’t have a case against you. Still respond using the Reply Form though, as you’ll need to provide proof that you’ve already paid the debt off.
  • The creditor doesn’t have the original credit agreement. As we mentioned above, if your debt is covered by the Credit Consumer Act (CCA) and your creditor can’t provide a copy of the original credit agreement, you can’t get a CCJ.
  • You couldn’t afford the original credit. This is a defence particularly relevant to Payday Loans. If you’ve taken out a loan and the creditor didn’t do proper checks to see if you could afford it, you can send an affordability complaint to the original lender, and if they ignore you, to the Financial Ombudsman. You can even ask for a payday loan refund.
  • The debt is old, and the creditor delayed court action for too long. If your debt is older than six years and your creditor hasn’t taken action before now, you may not have to pay it. This is called a ‘statute barred debt’. The debt will technically still exist, but you it can’t be legally recovered through court action.

Overturning a CCJ

There are official solutions in the UK to help people deal with unaffordable debt. These include:

  • Individual Voluntary Solutions (IVAs), which allow you to pay off a small percentage of the debt that you can afford and write off the rest after five years.
  • Debt Relief Orders (DROs), which are available if you have very few assets and less than £50 spare income, and write off your debt after 12 months
  • Bankruptcy, which is a legal status that lasts for a year and is a way of clearing debts you can’ afford. Your assets and excess income will be used to pay off your creditors, and at the end of the bankruptcy, your debts are written off.

IVAs will usually overturn a CCJ, unless you have a Charging Order against your valuable assets. With DROs and bankruptcy, the CCJ will still technically go ahead, but the CCJ can be included in your DRO or bankruptcy, meaning you won’t have to pay it, or face legal action.

What are debt collectors not allowed to do in the UK

Although debt collectors can come across as very intimidating, there is a long list of things they are barred from doing in the UK. All debt collection companies are regulated by the Financial Conduct Authority (FCA), and if they break any of these rules, you can report them to the FCA.

If you’re being harassed by an illegal money lender (possibly known as a ‘loan shark’), you can report them confidentially via the following contact details:

  • Telephone: 0300 555 2222 (24-hour service)
  • Text a report to 07860 022 116
  • [email protected]
  • Report loan sharks via Stoploansharks.co.uk

Debt collectors in the UK are not allowed to:

1. Call you at work

Calling you at your place of employment, or contacting anyone at your workplace to tell them about your debts, is strictly against Office of Fair Trading (OFT) laws. The debt collectors who use this tactic want to embarrass you into paying up, and you should report them immediately.

2. Contact you on any social media platform

If debt collection companies contact you via any of your social media accounts (Facebook, Twitter, Instagram etc.), you should report them and keep proof of the communication.

3. Contact you outside of 8am-9pm on working days, or at all on weekends and holidays

Debt collectors can only contact you within specific hours, and are not allowed to harass you repeatedly. If any of them contact you outside of these hours,

4. Reveal the details of your debt to family members or friends

Debt collectors are not allowed to reveal details of your debts to your family or friends. They may do this to put psychological pressure on you to pay. This is illegal and any debt collector who does this is in breach of both the laws established by the OFT, and privacy laws.

5. Add additional costs onto the debt that were not specified on the debt repayment contract.

Under UK debt collection regulations, debt collection agencies can only add 8% interest to an account. If any debt collector tries to add more than this to account, refuse to pay it.

6. Give false allegations or information, for example, pretending that they have legal powers which they do not possess.

Debt collectors may try to lie to you, although this is totally against FCA and OFT laws. Debt collection agencies have even falsified documents in the past to look like official court documents, or have told the debt collectors that they’ve already received a CCJ. Scrutinise any letters or contact you receive about court action for false information. In our section ‘How to defend against a CCJ’, we’ve detailed the proper documents you should receive before court action on your debt, so you’ll be able to tell when a debt collector might simply be lying about court action to make you pay now.

7. Operate in a way that is considered threatening or abusive

If a debt collector of bailiff physically or psychologically abuses or harasses you, they’re in breach of the law and you can call the police. Visit the Citizens Advice Bureau’s ‘harassment by creditors’ page for further support.

8. Send or threaten to send bailiffs to your house.

Debt collectors may threaten to send bailiffs to take away your possessions, in order to pressure you into paying up. They know that if they have to take you to court it is a lot more hassle for them, and some of them will (wrongly and illegally) take any measures to get you to pay now. However, debt collection companies cannot send, or threaten to send bailiffs to your house. Only the courts can do this if you get a CCJ, but there are many steps you can take to avoid and even overturn a CCJ when you’ve received one. Regardless, bailiffs are not allowed to take essential household goods, tools you need for work and children’s toys and belongings.

9. Enter your home without permission

Debt collectors are allowed to come to your door, but they don’t have the right to come in unless you give that permission. Even if they say they have the right to enter, this is not true.

What are debt collectors not allowed to do in the US?

If you’re feeling anxious because of debt collectors calling or writing you letters, you should remember that there is a long list of things that debt collectors are not allowed to do in the US. Debt collectors almost never have as much power as they make out, and there are steps you can take to deal with your debt and stop them contacting you for good. Debt collectors in the US are regulated by a federal law called the The Fair Debt Collection Practices Act (FDCPA), and are not allowed to:

1. Contact you before 8am and after 9pm, or at an unusual place

If debt collectors try to contact you at unsociable hours or at places they know are inconvenient to you, it’s because they want to pressure you into paying the debt. However FDCPA law forbids them from contacting you before 8am and after 9pm, and in unusual places. If they do this, you can report them to the Consumer Financial Protection Bureau (CFPB)

2. Tell your employer about your debt

While debt collectors are allowed to contact your employer to ask for your address or telephone number, they are not allowed to tell your employer that you owe a debt. If you’re not allowed to receive personal calls at work, tell the debt collector that. If they have this information, they are not allowed to call you at work.

3. Tell people, other than certain people, about your debt

A debt collector is only allowed to discuss debt with your spouse, your parents (if you’re a minor), your guardian, executor or administrator and your attorney, if you’re being represented about a debt. A debt collector is not allowed to tell anyone else about your debt, and you should report them to the CFPB if they do.

4. Contact you about your debt, if you’re being represented by an attorney.

If you’re being represented by an attorney about your debt, debt collectors are not allowed to contact you, and must usually contact your attorney.

5. Contact you, after you’ve told them in writing to stop contacting you

When you tell a debt collector in writing to stop contacting you, they are not allowed to contact you again except to notify you that they may take specific legal action, such as a lawsuit, against you. Telling a debt collector to stop contacting you won’t stop them from trying to extract the money from you in other legal ways.

6. Threaten, harass or intimidate you

If a debt collector verbally, physically or psychologically abuses you, they are in breach of the law. Report them to the CFPB immediately, and keep any evidence you can of harassment.

7. Deceive you or mislead you while trying to collect a debt

Although debt collectors may lie in order to try and intimate you into paying a debt (for example, threatening jail time when they have no power to do so), it is strictly against FDCPA to do so.

8. If they win a debt lawsuit against you, garnish your unemployment benefits, disability payments, and pension income

If a debt collection company does win a lawsuit against you, they are not allowed to garnish (take money from) federal benefits such as unemployment and socials security benefits, disability benefits and pension income. This doesn’t apply to child support and government debts, though.

9. Enter your home without your permission, and take property

Technically, debt collectors can come to your door and ring and knock, but they have no right to enter. They certainly don’t have the right to take property. If they claim any of these rights, they are lying and in breach of federal law.

What are debt collectors allowed to do in the UK?

While there are many things that it is illegal for debt collectors to do in the UK, they are still allowed to pursue you for late debt repayments, so it is important that seek free debt advice, with a charity such as StepChange or Christians Against Poverty. In the UK, debt collectors can:

  • Contact you about debt repayments, either by phone calls, letters or knocking on your door.
  • Sell your debt to other debt collection agencies, who will then pursue you for the debt
  • Take you to court, and get a CCJ against you

What are debt collectors allowed to do in the US?

While there is a long list of what debt collectors are not allowed to do in the US, they are still allowed to chase up on late debt payments and potentially sue you for a debt. Let’s look at what debt collectors can do in the US, so you are fully informed. Debt collectors can:

  • Contact you about debt repayments, either by phone calls, letters or knocking on your door.
  • Report unpaid debts to credit bureaus (this does significant damage to your credit score, and your ability to take out loans)
  • Sell your debt to other debt collection agencies, who will then pursue you for the debt
  • Sue you for payment on a debt.

You don’t have to deal with debt alone, however. If you’re being chased by creditors or debt management companies, make sure you get free debt advice from nonprofit agencies such as the National Foundation for Credit Counselling (NFCC).

How can you deal with debt collectors in the UK?

You can best deal with debt collectors in the UK by dealing with your debt. There are lots of methods for doing this, even if you cannot afford to repay the full debt. Once a debt collector knows you’ve taken action on your debt through various methods, they are less likely (or may be prohibited from) taking you to court over your debt. Even if you have already been taken to court, there are ways to reverse the effects of this. Let’s look at how you can deal with your debt in the UK

Individual Voluntary Arrangement (IVA)

An IVA s a government approved debt help scheme, which helps you if you’re struggling to repay your debts. An IVA is a legal agreement made between you and the people who you owe money to, and it is managed by an Insolvency Practitioner. An IVA allows you to pay back a small percentage of your total debt, and get the rest of it cleared. At the end of the IVA (which runs for 5-6 years), no matter how much money you have left to pay back, the debt is written off. You will make small, monthly payments towards your debt, based on what you can afford. IVA Advice offers free, online advice for dealing with your debt. If you already have a CCJ, entering into an IVA will overturn this.

Debt Management Plan (DMP)

A Debt Management Plan, either through a charity or a debt management company, allows you make reduced payments to creditors based on what you can afford, and usually freezes the interest on your debts. This means that you can focus on repaying your debts and seeing the figure go down, rather than dealing with spiking interest. Debt collectors are unlikely to keep chasing you if they know you have a repayment plan in place. You can also protect your valuable assets, such as your home or car, whereas if your debt goes to court, you may have to put these up as collateral to pay your debts.

Debt Relief Order (DRO)

A Debt Relief Order tops your creditors from contacting you by giving you legal protection against them, and writes off your debt after around 12 months. If you have a CCJ, it can be included in a DRO.

Bankruptcy

Going bankrupt is another way to deal with debt, but it has a very serious affect on your life and credit rating, and you should only consider doing it after you’ve taken free debt advice. Bankruptcy will clear your debt after around 12 months, although any assets you have may be sold off to pay your creditors.

How can you deal with debt collectors in the US?

Debt management plan with a nonprofit organisation

A Debt Management Plan allows you make reduced payments to creditors based on what you can afford, and usually freezes the interest on your debts. This means that you can focus on repaying your debts and seeing the figure go down, rather than dealing with spiking interest. You should be careful about seeking help from debt management firms though, as they may charge fees and will want to make a profit. You are better off seeking debt management help from a nonprofit debt charity like the NFCC.

Negotiating for a smaller payment

Debt collectors may well be open to negotiating for smaller payment, rather than going through the hassle of taking you to court. If they’ve already bought your defaulted debt at a less money from a creditor than it was originally worth, it won’t take much for them to make a profit. Start by offering them 10% of the original amount. Just make sure you don’t back down.

Be aware that you may have to pay taxes on whatever part of the debt is cancelled during the debt collection. This process is officially called a Cancellation of Debt, and you may have to fill in what’s called a Form 1099-C at the end of the year. You’ll have to report the cancelled amount as gross income in most situations.

If you accept a lawsuit, hiring a lawyer

If you end up accepting a lawsuit, your best bet is to hire an experienced debt lawyer to help argue your case. Most attorneys offer free initial consultations, and you may be able to get law help and legal aid from your state. Just make sure you evaluate whether the potential cost of hiring a lawyer is financially worth it (if your debt is very serious, you may be better off going bankrupt). A free legal consultation can help you decide this.

Fire a countersuit if the debt collector was in breach of FDCPA regulations

If a debt collection agency violated any of the FDCPA rules we highlighted above in our “what are debt collectors not allowed to do in the US” section, you may well have a case for a countersuit, and get paid for any damages they’ve incurred. Get free legal advice on this.

Bankruptcy

Going bankrupt is another way to deal with debt, but it has a very serious affect on your life and credit rating, and you should only consider doing it after you’ve taken free debt advice. Bankruptcy will clear your debt after around 12 months, although any assets you have may be sold off to pay your creditors.

There you have it. Our full rundown of debt collectors and what they can and cannot do in the UK and the US. We hope you’ve found it a helpful read and that, armed with full knowledge of your rights against debt collectors, you can start your journey into the debt-free life you deserve.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.