Funding Circle, the ‘alternative lending’ platform made headlines in 2021 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.

The economy has reopened and the Government has removed legal protections for businesses and debtors. 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 lender sells your loan to a third party?

How do you Know if Your 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 sold to third parties.

After this happens, you will have to contact your new creditor and reach an arrangement with them. Your new creditor is not required to accept any arrangement. They 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 is 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 a 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.

Direct contact can put you in good stead but we never recommend speaking directly with the creditor yourself. You have plenty of options available, but we always recommend seeking independent, professional advice.

Benefits for the Borrower?

Despite all the negatives, there is one upside to this process.  The main benefit for you is that you are dealing with a company that wants to resolve the issue and are looking for a return that is significantly less than the overall liability. Essentially, a loan sale gives the borrower a chance to finalise a problematic loan.

The most important step in this process is to present your proposals in the right way. 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]

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