What is a debt collection agency?
If you’ve missed repayments or fallen behind on bills, there’s a chance you might hear from a debt collection agency. But what exactly is a debt collection agency, and what do they do?
This guide will help you understand what to expect, your rights, and how to deal with contact from a debt collection agency in a calm and informed way.
What do debt collection agencies do?
Debt collection agencies are businesses that recover unpaid debts on behalf of lenders, like banks, utility companies, or mobile phone providers. Some are hired by lenders to collect outstanding balances. Others might buy the debt outright, often for less than its full value, and then pursue you directly for payment.
Once a debt has been passed to a collection agency, they’ll typically contact you to discuss repayment. This could be by letter, phone, email or even text.
It’s worth knowing that debt collection agencies must follow strict guidelines from the Financial Conduct Authority (FCA). That means they must treat you fairly, give you clear information, and give you the chance to repay the debt in a manageable way.
Debt collector vs debt agency: what’s the difference?
You’ll often hear ‘debt collector’ and ‘debt collection agency’ used as if they mean the same thing. While they’re closely linked, there’s a small distinction.
- A debt collector is the individual or employee trying to recover the money.
- A debt collection agency is the company they work for.
Sometimes, the original creditor (for example, a bank or energy supplier) uses its own in-house collection team. But in many cases, especially after a debt has been unpaid for several months, the creditor will pass or sell the debt to an external agency.
If you’re unsure who you’re dealing with, you can ask for confirmation in writing. It’s your right to know:
- Who they are
- Who they’re acting for (or whether they’ve bought the debt)
- Details of the original debt.
You can also ask them to provide proof of the debt before discussing payment.
How do debt collection agencies operate?
Debt collection agencies typically follow a series of steps:
- Initial contact – you’ll receive letters or calls asking for payment.
- Negotiation – they may ask for full payment or try to agree on a repayment plan.
- Further action – if the debt isn’t settled, they may escalate the matter, including legal action.
In some cases, they might visit your home. But they do not have the legal powers to enter or remove items – they are not bailiffs.
Their job is to recover money owed, but they must do it within the law. Agencies can’t harass, threaten, or mislead you. If you believe they’re overstepping, you can complain – and there are steps you can take to reduce or stop contact from a debt collector.
Your rights when contacted by a debt collection agency
Dealing with debt collectors can feel stressful, but you do have rights – and it’s important to know them.
Debt collection agencies must:
- Treat you fairly, with dignity and respect
- Explain who they are and why they’re contacting you
- Only contact you at reasonable times
- Stop calls if you request contact in writing only
- Provide a clear breakdown of the debt on request.
They cannot:
- Use threatening or aggressive behaviour
- Harass you with constant contact
- Pretend they have legal powers they don’t
- Discuss your debt with other people without your permission.
If you’re unsure whether the debt is valid, you’re entitled to ask for written proof. This is often called a ‘prove the debt’ letter. Until they provide this, they should not continue to pressure you for payment.
What happens if you don’t pay a debt collection agency?
If you ignore a debt collection agency, they may escalate the matter. This could involve:
- Referring the case back to the original creditor
- Starting court proceedings to get a County Court Judgment (CCJ)
- Applying for enforcement, such as using bailiffs, if a CCJ is granted.
A CCJ can stay on your credit file for six years and make it harder to get credit, rent a home, or open certain accounts.
If you can’t afford to pay the debt, don’t panic. There are formal solutions available, such as Individual Voluntary Arrangements (IVAs), or in certain circumstances, you may consider bankruptcy. These solutions can help stop further action.
How to respond to a debt collection agency
If you’ve been contacted, here’s how to take control of the situation:
- Don’t ignore it – even if you think there’s a mistake, respond in writing.
- Check the details – ask for a breakdown of the amount, dates, and who the original lender was.
- Request evidence – if you’re unsure about the debt, ask them to prove it.
- Send a budget – if you can’t pay in full, show what you can realistically afford.
- Set communication terms – you can ask for letters only, rather than calls.
If you’re unsure how to write to them or what to say, a debt adviser can help you draft a response.
Remember, you don’t have to go through this alone. You can access free advice from MoneyHelper. You can also turn to MoneyPlus. We offer confidential, non-judgmental support to help you manage your debt and create a realistic plan.
Still unsure how to move forward?
You’re not alone. Many people find it difficult to deal with debt agencies – especially when contact is unexpected or persistent.
The good news? There’s help available.
Whether you’re facing multiple debts or just one that’s become unmanageable, a personalised debt solution can help you move forward.
If you’d like to speak to someone about your situation, get in touch with a MoneyPlus adviser. We’ll listen, explain your options, and help you work out the right path for you.
