When someone borrows money from a lender, they are expected to pay it back within a specified period, usually with interest. However, not all borrowers are able to repay their debts in full, which is where debt recovery comes in.
Debt recovery is the process of collecting money that is owed by an individual or a company. In some cases, businesses that are owed money may choose to sell these debts to third-party companies, known as debt purchasers. In this article, we will discuss what debt purchasing is, what it means for customers and businesses, and what the next steps are.
How do businesses recover debts?
When a business is owed money by a customer, it will usually try to recover the debt itself by contacting the customer and sending reminders or demand letters. If these efforts are unsuccessful, the business may decide to take legal action or engage a debt collection agency to recover the debt on their behalf. In some cases, the business may choose to sell the debt to a debt purchaser. For example, Intrum are debt purchasers in the UK who cooperate with all major selling banks in the country.
What is debt purchasing?
Debt purchasing is a process where a company buys the rights to collect outstanding debts from another business. These debts can be of various types, including credit card balances, personal loans, or unpaid bills. Debt purchasers buy these debts at a discounted price, and then attempt to recover as much of the original amount owed as possible from the debtor.
What does debt purchasing mean for the customer?
When a debt is sold to a debt purchaser, the customer’s contractual obligations do not change. The debt purchaser has the same legal rights as the original creditor to recover the debt, but the customer should receive notification of the change in ownership. The debt purchaser will then attempt to recover the debt, often by contacting the customer directly.
It is important to note that debt purchasers are regulated by the Financial Conduct Authority (FCA) and must comply with strict rules regarding debt recovery. This includes providing customers with clear information about the debt, their options for repayment, and any assistance that may be available to them.
What does debt purchasing mean for the business?
For businesses that choose to sell their debts, debt purchasing can provide a way to recover some of the money that is owed to them without having to engage in lengthy legal battles or expensive debt recovery processes. By selling the debts to a debt purchaser, the business can free up resources to focus on other areas of their operations.
However, businesses that sell their debts should be aware that they will not receive the full amount owed to them. Debt purchasers buy debts at a discounted rate, which means that businesses will receive less than the full amount of the debt. Additionally, there is no guarantee that the debt purchaser will be able to recover the full amount of the debt from the customer.
What are the next steps?
If you are a customer who has received notification that your debt has been sold to a debt purchaser, it is important to take action. The debt purchaser should provide you with clear information about the debt, your options for repayment, and any assistance that may be available to you. It is important to engage with the debt purchaser and work with them to come up with a repayment plan that is manageable for you.
If you are a business that is considering selling your debts, it is important to do your research and choose a reputable debt purchaser. It is also important to ensure that you have exhausted all other options for debt recovery before selling your debts, as selling debts can result in a loss of income for your business.
