Vulture Funds Lure Consumers into Falling Foul of Six Year Lending Rule
in General
When a bad debt reaches the end of its natural life, which in the UK is six years and five in Scotland, is when disreputable collection agencies often pounce. This practice of selling on debts that have passed statutory six year period is now common practice, with lenders selling on Statute Barred Debts to Debt Purchasing Companies (DPC’s) who will then trap the unwary, making money out those that are in debt.
Leading London lawyer, David Greene from the 'UK-200' law firm Edwin Coe and legal council to WACCA comments:
“Technically the debt cannot be collected after the six year period in the UK, however, in the eyes of the creditor, they can still have value and are sold on to the next tier of collections agency. Statute Barred Debts when sold on may only have a value of three pence in the pound. However when bundled and bought in bulk, the company selling them can recoup a tidy sum out of a legally valueless debts.”
The company buying the debt (and it is accepted that the further down the chain you go the morels of the DPC decline at an alarming rate) will now try and collect on a percentage of those debts, playing on the debtor’s ignorance, fear and naivety.
The DPC will often write to all the names and addresses associated with the Statute Barred Debts that they have bought. The letter will say that the Debt Collection Agency is collecting the debt on behalf of the bank or whoever the original lender was and out of goodwill, they are willing to accept only half the original account value in each case. If only 10 percent respond by paying up half the money then the agency will have made a tidy profit for doing very little.
The DPC can’t collect the debt because it is out of date, unless the debtor acknowledges that the debt is still outstanding. This acceptance technically ‘revives’ the debt. These collectors are called Vulture Funds, and extreme caution is needed now that Statute Barred Debts still have a face value and are sought to be collected by the grubbiest of DPC and collection agencies.
Total consumer credit lending to individuals at the end of August 2011 was £209bn. The annual growth rate of consumer credit increased 0.3 percentage points to 2.3% (this is highest this figure has been since May 2009, when it also stood at 2.3%).
UK banks and building societies wrote off £8.0bn of loans to individuals in the 4 quarters to end Q2 2011. In Q2 2011 lending institutions wrote off £2.06bn (£1.15bn of that was credit card debt). This amounts to a write-off of £22.54m a day.
The public community action group WACCA (Worried About Consumer Credit Abuse) exists to fight cases of credit abuse. For more information about WACCA and how we can help send an email to inconfidence@wacca.co.uk
