What happens when your debt is sold?

When a lender can’t recover an unpaid debt, it sometimes sells it on to a debt collection agency rather than continuing to chase it directly. If this happens to you, the balance you owe and the default date on your credit file shouldn’t change, but who you deal with, and how they contact you, usually does.

Understanding what should and shouldn’t change can help you spot whether a debt collector is handling things correctly, and whether anything on your credit file needs querying.

What actually happens in a debt sale

The original lender transfers its right to collect the debt to another company, often called a debt purchaser or debt collection agency, for less than the full amount owed. From that point, the new owner is entitled to collect the debt and can take further action if it isn’t paid.

You should be sent a notice of assignment, confirming who now owns the debt and how to contact them. This comes from a long-standing legal requirement (Law of Property Act 1925, s136) for a formal transfer of this kind to be notified to the debtor. If you’re approached by a company chasing a debt you don’t recognise, ask them to confirm the assignment in writing before paying anything, and check the details against your own records.

What should stay the same

If a debt collector tries to add new charges that weren’t part of the original agreement, or reports a fresh default with a later date for the same debt, query it. The default date should carry over from the original lender’s records, not restart from the sale date.

How it can look on your credit file

A debt sale can sometimes make a credit file look more confusing than it is, particularly if:

• The original lender’s entry and the new owner’s entry both appear, even though it’s the same debt.
• The new owner’s name is unfamiliar, making the debt harder to recognise at a glance.
• Dates look slightly different between agencies if they update on different timescales.

If you see what looks like a duplicate default for the same underlying debt, check both entries carefully before assuming there are two separate debts. Our guide on the default date explains what should and shouldn’t move when ownership changes.

What to check before paying a debt collector

If you’re contacted about a debt you believe was sold, it’s worth checking a few things before making any payment:

• Ask for a copy of the notice of assignment, showing when the debt was transferred and to whom.
• Ask for a statement of account, showing the balance, any payments already made, and how the figure was reached.
• Compare the default date shown against your own credit report, using the credit file date calculator to check it hasn’t moved.
• Check the company’s name against the Financial Conduct Authority register, since debt collection is a regulated activity in the UK.
• Get everything in writing before agreeing a payment plan or a settlement figure, so you have a record of what was agreed.

Taking a few minutes to check these details before paying can avoid confusion later, particularly if the debt is later relevant to a mortgage application.

Can you dispute a sold debt?

Yes. Buying a debt doesn’t automatically confirm it’s correct. You can still ask the new owner to provide evidence of the debt, such as a copy of the original agreement or a statement of account, and query it if the amount looks wrong, the account isn’t yours, or you believe it was already settled. If the debt collector can’t provide reasonable evidence, you’re entitled to say you won’t pay until they can.

If a debt is very old, it’s also worth checking whether it might be statute-barred, meaning too much time has passed for it to be enforced through the courts in the normal way. This is a legal position that depends on your specific circumstances, so get free advice from National Debtline or StepChange if you think it might apply, rather than assuming.

Why lenders sell debts in the first place

Lenders sell defaulted debts for a range of reasons: it lets them recover some value from an account they may otherwise have to keep chasing themselves, and specialist debt purchasers may have more resource dedicated to collections than the original lender wants to commit. This is a normal part of how consumer credit is managed in the UK, and being contacted by a debt collector doesn’t, by itself, suggest anything unusual has happened with your account. What matters is checking the details are correct once you’re contacted, rather than assuming a sale means the debt has become something different from what it originally was.

What this means if you’re remortgaging

If a default shows a debt collector’s name rather than the original lender, an adviser will usually still want the same information as for any other default: the default date, the balance, whether it’s settled, and what the debt was originally for. Being able to explain that a debt was sold on, without it changing the date or the amount, can help avoid it looking more complicated than it is.

Our main page on remortgaging with defaults sets out what to gather before speaking to an adviser, and it’s worth getting your free statutory credit report from Experian, Equifax and TransUnion to check exactly how a sold debt is showing before you apply.