What Happens When a Debt Is Sold to a Debt Collector?
Creditors can sell debts to third-party debt collection agencies. Your rights remain the same and the rules about what collectors can and cannot do are strictly regulated.
Quick Answer
When a debt is sold to a debt collection agency, the agency becomes the new legal owner of the debt and has the same rights to collect it as the original creditor. However, they cannot demand more than was originally owed, cannot use harassment or deceptive practices, and must comply with the FCA's rules on debt collection. You should ask the new collector to verify the debt before making any payments.
Full Explanation
Creditors routinely sell unpaid debts — often in bulk — to debt purchase companies. When a debt is 'assigned' to a new owner, legal ownership of the debt transfers to the buyer. Under the Law of Property Act 1925 (section 136), a valid legal assignment must be in writing and notice of the assignment must be given to the debtor. Once validly assigned, the debt collector is the legal creditor and can bring court proceedings in their own name.
The amount of the debt does not change on assignment — the collector cannot charge interest beyond what the original agreement permitted, cannot add penalties not agreed in the original contract, and cannot claim amounts that were not owed to the original creditor. If a debt is statute-barred (more than six years since the last payment or written acknowledgment), it is unenforceable in court regardless of who owns it.
Debt collectors are regulated by the Financial Conduct Authority (FCA) under the Consumer Credit Act 1974 and the FCA Consumer Credit sourcebook (CONC). The FCA's rules prohibit: false or misleading representations (e.g., impersonating court officers); harassment (excessive contact, threatening language); claiming to have powers they do not have; and pressuring people to borrow to pay debts.
When a debt collector contacts you, you have the right to: ask for verification of the debt (proof of the original agreement and the amount owed); ask for a copy of the notice of assignment; and request that they communicate only in writing if you find phone calls harassing. You also have the right to complain to the Financial Ombudsman Service (FOS) if a collector breaches FCA rules.
If you believe the debt is unenforceable (e.g., it is statute-barred, the original credit agreement was improperly executed under the Consumer Credit Act, or you simply do not recognise it), seek debt advice before making any payment — payment can restart the limitation period in some circumstances.
Legal Basis
- §Law of Property Act 1925, section 136 (legal assignment of debts)
- §Consumer Credit Act 1974 (regulated credit agreements)
- §FCA Consumer Credit sourcebook (CONC) — Debt collection rules
- §Limitation Act 1980 (statute-barring of debts after six years)
What To Do
Request Written Verification of the Debt
Write to the debt collector requesting written proof of: the original agreement; the amount owed and how it is made up; and a copy of the notice of assignment. Until verification is provided, you are not obliged to make payments.
Check Whether the Debt Is Statute-Barred
In England and Wales, most debts become unenforceable after six years from the last payment or written acknowledgment (Limitation Act 1980, section 5). If the debt is older than this, write to the collector confirming that the debt is statute-barred and that you will not make payment.
Do Not Make a Token Payment Without Advice
Making any payment on a statute-barred debt can restart the limitation period, potentially making the debt enforceable again. If in doubt, seek debt advice from StepChange or National Debtline before making any payment.
Complain if Harassed
If the collector uses harassment, threats, or deceptive practices, make a formal complaint to the collector in writing, then escalate to the Financial Ombudsman Service (FOS) if the complaint is not resolved within eight weeks.
Seek Debt Advice if the Debt Is Valid
If the debt is valid and unmanageable, seek free advice from StepChange or Citizens Advice. Options may include a Debt Management Plan, Individual Voluntary Arrangement, or Debt Relief Order depending on your overall financial position.
Important Warnings
Never make a payment on a debt you do not recognise without first verifying it — fraud involving false debt collection is a known scam.
A debt sold to a collector does not disappear from your credit file — it may show as a default with the original creditor and then as a new entry with the debt purchaser.