Debt rights explained

Most of us have debts to pay, whether that’s through a mortgage, loan or credit card or simply household bills such as council tax or utilities. If you find yourself unable to keep up with the payments, creditors are entitled to try and get their money back but there are rules they have to follow to make sure you’re treated fairly.

Your rights when you apply for credit

The rules on debt start when you first apply to borrow money, whether it’s in person, online or over the phone, to make sure you know exactly what you’re taking on and can afford the repayments. 

Consumer credit in the UK is regulated by the Financial Conduct Authority (FCA) and, if you have a complaint about a credit provider you can’t resolve, you can get help from the Financial Ombudsman Service. 

Some types of credit are covered by the Consumer Credit Act. These include:

• Credit cards

• Personal loans

• Payday loans

• Store cards and other store finance

• Hire purchase agreements

• Catalogue purchases

Before giving you credit a provider must look at your credit history using credit reference agencies to make sure you’re likely to be able to pay back the money. 

Along with the credit agreement, you must also be given pre-contract information about the credit provider, the type of borrowing, the interest rate and any other charges, the amount you’re borrowing or your credit limit, how long you’ll be borrowing the money for, the total amount you’ll have to pay back, how you will repay it and when you will repay it by.

Both you and the credit provider must then sign the agreement.

You usually have a 14-day cooling-off cooling off period during which you can cancel the agreement. If you’ve already received any of the money, you’ll have to return it with any interest that has built up and if you’ve bought goods on credit, you’ll have to return them or pay for them another way if you can.

Types of debt not covered by the Consumer Credit Act

Ways to borrow that don’t come under the Consumer Credit Act include mortgages, some buy-now, pay later providers, some credit union loans and charge cards (these differ from credit cards as you have to pay them back in full each month) so different rules apply to these.

If you’re taking out a mortgage to buy a home the lender has to make sure you’ll be able to pay back the loan and give you specific information about the terms of your mortgage, such as how much it will cost you to borrow the money and how you’ll pay it back. 

There is no 14-day cooling-off period but you can choose not to go ahead with the mortgage before you get the money, although there may still be costs involved.

Debt through household bills isn’t regulated by the FCA but other regulators do decide the rules that apply and make sure they’re followed. For example, energy companies are regulated by Ofgem.

Some types of debt aren’t regulated at all, such as debts to family and friends or unlicensed lenders.

Your rights while paying off credit

Under the Consumer Credit Act, if you decide to pay off all or some of your debt early you don’t have to pay all of the interest set out in your credit agreement but a reduced amount. There are regulations that say how this should be calculated. Similar rules apply to mortgages.

Section 75 of the Consumer Credit Act gives you extra rights when spending with a credit card. If you buy something that costs between £100 and £30,000 and the retailer goes bust or there’s a problem with the goods, you can get your money back from either your card provider or the retailer.

In certain circumstances, you can get the same protection for purchases up to £60,260.

Your rights if you fall behind with payments

If you find yourself struggling to pay off your debts, it’s important to speak to your creditors (the organisations you owe money to) to see if you can agree on a way to pay them back. They should be particularly understanding if you’re a vulnerable customer – you have mental health problems, for example.

They must try to help you find an affordable solution before taking more serious action. For example, a mortgage lender might let you increase your mortgage term to make the monthly payments more manageable.

In 2020, the FCA fined Barclays £26 million for not treating customers who were behind with credit payments fairly by failing to take steps to fully understand their circumstances and work with them to resolve their financial difficulties, potentially making them worse.

Through the Breathing Space scheme in England and Wales, you may be able to get protection from your creditors for up to 60 days to give you time to work out how to deal with your debts. 

During this period, they can’t contact you about them or add any interest or charges. You need to apply for the scheme through a debt adviser. Visit MoneyHelper to find a free one.

What creditors can and can’t do

Under FCA regulation there are rules your creditors have to follow when trying to get their money back to make sure you’re treated fairly. 

They can send you reminders and demands for payment or phone you to ask you to pay, which they may start doing once you’ve missed one or two payments. They can also come to your home as long as it’s at a reasonable time of day. 

They can take you to court for non-payment if you owe a lot of money and haven’t made arrangements with them to pay the debt back or they can pass your debt onto a debt collection agency or someone else. 

This could happen once you’ve missed five or six payments when debts regulated by the Consumer Credit Act are likely to have defaulted (you’ve broken the terms of your credit agreement) but different creditors will have different approaches.

A creditor to whom you owe money could pass the collection of the debt onto a debt collection agency – another company that has bought the debt, or a bailiff (known as a sheriff officer in Scotland). It must tell you this in writing, however, and can’t then continue to try and collect the debt itself.

Creditors are not allowed to do anything that is considered to be harassment, such as:

• Contacting you several times a day or at unsociable hours

• Pressuring you to sell your home or take out more credit to pay off the debt

• Threatening you verbally or physically 

• Making false claims 

• Adding unreasonable charges

In 2014, payday lender Wonga agreed to pay compensation of £2.6 million to customers after the FCA found it had used unfair and misleading debt collection practices. 

The company put pressure on people who were behind with their payments by sending them letters from non-existent law firms and in some cases added administration fees for these to their debts that made them even more unaffordable. Wonga went out of business in 2018.

Complaining about a creditor

If you feel you’re being harassed or treated unfairly, collect evidence of what is happening and then complain to the creditor (or whoever is harassing you) in writing, telling them what you want it to stop doing and how you think it should put things right.

For FCA-regulated debt, if this doesn’t solve the problem you can complain to the Financial Ombudsman Service once you’ve received a final reply. If your complaint is about an energy or communications provider, you can complain to Ombudsman Services.

Visit the Ombudsman Association to find out about ombudsman schemes that could help with complaints about other types of creditors.

What bailiffs can do

Unlike debt collectors, bailiffs (officially called enforcement agents) have legal powers to collect debts and take your possessions to sell and pay off your debts. 

They can only usually get involved once a creditor has taken court action and you’re still not paying off your debts. HM Revenue & Customs is an exception to this. 

They may be used to collect government or local authority debts such as child maintenance or council tax arrears, or parking fines, as well as commercial debts such as from credit cards and loans.

Before they can visit your home, they must send you a letter giving you at least seven days’ notice so you have a chance to settle the debt or make arrangements to settle it. You should check their ID when they arrive. 

Bailiffs can’t usually enter your home by force unless they are collecting a criminal fine. They also can’t enter between 9 pm and 6 am, or when only children or vulnerable people are at home, or through anything other than the door.

You don’t have to let them in – it’s best to speak to them through a door or window or over the phone. You can pay them the money on the doorstep if you have it (make sure you get a receipt) or make an offer to pay what you can afford, although they don’t have to accept it. 

If you let a bailiff in, they will normally make a list of valuable items rather than take them straight away as long as you agree to a repayment plan – known as a ‘controlled goods agreement’. They are allowed to take non-essential goods such as your TV but can’t take essential items such as your cooker or fridge.  

They’ll be back to take the items if you break the controlled goods agreement when they can use reasonable force to enter.

You’ll also have to pay bailiff fees as part of your repayment plan or if your goods are sold because you can’t pay.

Complaining about a bailiff

If you think a bailiff has treated you unfairly or harassed you, you should complain to the bailiff’s employer in writing and send a copy to the creditor. 

If your complaint isn’t dealt with satisfactorily by either of these, you can complain to a trade body or ombudsman depending on the type of bailiff. 

Where to go for help with debt

If you’re struggling with debt you can get free advice from organisations including National Debtline, PayPlan or StepChange. Visit MoneyHelper for a full list. You can also get help from Citizens Advice.