Loan Sales: Should You Be Worried?
Funding Circle, the ‘alternative lending’ platform has made headlines for selling 1900 Personally Guaranteed Loans to a large debt purchasing firm. This has sparked concerns about the potential that individuals and businesses could fall victim to aggressive repossession techniques. Loan sales were common practice after the 2008 crash and continues to be a serious issue.
The economy has reopened and legal protections for businesses and debtors have been gradually removed. Now we are seeing more and more instances of individuals facing legal action such as repossessions and Bankruptcies. As a result of debt built up over the past 12 months, the issue of loan sales will once again come to the fore. But what are the consequences if your loan is sold to a third party?
How do I know if my loan has been sold?
After any loan sale, you will be notified by the original creditor and the company that has purchased your loan; this is usually in the form of a letter.
Your lender can sell your debt on, even if you have an accepted payment arrangement. Most loan agreements will contain small print allowing the debt to be passed on to third parties.
After this happens, you will have to contact your new creditor and reach an arrangement with them. This is when things can get nasty as they are not required to accept any arrangement and may ask for larger or full repayments.
If you have taken a personally guaranteed business loan, it is particularly difficult to negotiate as you are personally liable for the full amount.
How will the new owner enforce the loan?
Debt purchasing firms are governed by the same rules as your original lender. This means that they also have the same powers of enforcement. The difference being that these firms are often more aggressive than traditional lenders.
If payments are missed, a CCJ can be issued, assets can be repossessed, and businesses can be forced into liquidation. Agencies cannot send bailiffs to your door but can send their own agents.
These companies use aggressive tactics such as frequent phone calls, letters and agents visiting your home/business.
These companies make profit by buying your debt for lower than its value e.g. £1000 bought for £700. As a result, these companies are often willing to invest more time and effort to recover the liability. It also means they are much harder to negotiate and reach an agreement with.
What are my options?
Loan sale does not change your approach, as with any debt communication is key. Ignoring any creditor can have serious ramifications for you personally as well as your business.
Contacting them can put you in good stead but we never recommend speaking directly with them yourself, especially if the debt was sold to an aggressive collection firm.
You have plenty of options available, but we always recommend seeking independent, professional advice.
After over a decade in the business, Bell & Company have regular communication and good working relationships with creditors, allowing us to reach settlements that would not be possible otherwise.
If your loan has been sold to a third party or you are being harassed by a collection agency, contact our team today to discuss your options. Call us on 0330 159 5820 or email us at [email protected]