Can You Dispute a Debt If It Was Sold to a Collection Agency?

Yes, you can dispute a debt even after it has been sold to a collection agency. The sale of a debt does not remove your legal rights as a debtor, nor does it erase the original creditor’s obligation to have maintained accurate records throughout the process.

This matters because debt sales are increasingly common in the UK, and errors in transferred accounts can lead to businesses and individuals being pursued for amounts they do not legitimately owe. Understanding the dispute process protects your financial position.

This guide covers how debt selling works, your legal rights when a debt changes hands, the step-by-step dispute process, common grounds for challenging a sold debt, and how businesses on the creditor side can reduce disputes by choosing professional debt recovery over outright debt sales.

What Happens When a Debt Is Sold to a Collection Agency?

When a creditor decides it can no longer efficiently recover an outstanding debt internally, one option is to sell that debt to a third-party collection agency. This is a distinct process from simply instructing an agency to collect on the creditor’s behalf. Understanding the difference is critical for both debtors considering a dispute and businesses evaluating their recovery options.

How Debt Selling Works in the UK

Debt selling, also known as debt assignment, involves the original creditor transferring legal ownership of the debt to a purchasing collection agency. The buyer typically pays a fraction of the debt’s face value. Once the sale completes, the purchasing agency becomes the new legal creditor and assumes the right to collect the full outstanding balance.

In the UK, this process is governed by the principles of assignment under the Law of Property Act 1925. The original creditor must provide the debtor with a formal notice of assignment, confirming that the debt has been transferred and identifying the new owner. Without this notice, the debtor is not legally obligated to pay the new agency.

The purchasing agency inherits the debt as it stands. This includes the original terms, any accrued interest (where contractually permitted), and importantly, any disputes or defences the debtor may have had against the original creditor.

What Changes (and What Doesn’t) When Your Debt Is Sold

The key change is who you owe. The new collection agency replaces the original creditor as the party entitled to receive payment. Your point of contact shifts, and the agency may have different communication methods or escalation procedures.

What does not change is equally important. The debt amount should remain the same (unless contractual interest continues to accrue). The terms of the original agreement still apply. Most critically, your rights as a debtor remain fully intact. You retain every defence, counterclaim, and right to dispute that you held against the original creditor.

This principle is established under UK law. An assignee (the debt buyer) cannot acquire greater rights than the assignor (the original creditor) held. If the original debt was flawed, disputed, or unenforceable, those issues transfer with it.

Can You Legally Dispute a Debt with a Collection Agency?

Absolutely. The legal framework in the UK provides clear protections for anyone contacted by a collection agency about a purchased debt. These protections apply regardless of whether the agency bought the debt or is collecting on behalf of the original creditor.

Your Rights Under UK Debt Collection Regulations

Several regulatory frameworks protect debtors when dealing with collection agencies in the UK.

The Financial Conduct Authority (FCA) regulates most debt collection activities. Agencies must hold appropriate FCA authorisation to collect consumer debts. The FCA’s Consumer Credit sourcebook (CONC) sets out detailed rules on how agencies must treat debtors, including requirements around transparency, fairness, and the handling of disputes.

Under CONC rules, a collection agency must:

• Provide clear information about the debt, including the original creditor’s name, the outstanding balance, and how that balance was calculated
• Cease collection activity if a debt is formally disputed, until the dispute is resolved or adequate evidence is provided
• Not use misleading, aggressive, or oppressive tactics to pressure payment
• Respond to disputes and complaints within reasonable timeframes

The Consumer Rights Act 2015 also applies. If the original contract contained unfair terms, those terms remain unenforceable regardless of who now owns the debt.

Additionally, the Limitation Act 1980 sets time limits on when debts can be legally enforced through the courts. In England and Wales, most unsecured debts become statute-barred after six years from the last payment or written acknowledgement.

Grounds for Disputing a Debt After It Has Been Sold

You can dispute a sold debt on several legitimate grounds:

The debt is not yours. Identity errors and administrative mistakes during the sale process can result in the wrong person being contacted.

The amount is incorrect. Balances may be inflated by charges, fees, or interest that were not part of the original agreement, or errors may have occurred during the transfer.

The debt has already been paid. Partial or full payments made to the original creditor may not have been properly recorded before the debt was sold.

The debt is statute-barred. If six years (five in Scotland) have passed since the last payment or written acknowledgement, the debt may no longer be enforceable through the courts.

The original agreement was unenforceable. If the original credit agreement did not comply with the Consumer Credit Act 1974 (for regulated agreements), the debt itself may be unenforceable.

Proper notice of assignment was not given. Without a valid notice of assignment, the collection agency may not have standing to demand payment.

How to Dispute a Debt That Has Been Sold to a Collection Agency

If you believe a debt is incorrect, unenforceable, or not yours, there is a structured process to follow. Acting promptly and in writing strengthens your position.

Step 1: Request a Debt Validation Letter

Your first action should be to write to the collection agency requesting full validation of the debt. This is sometimes called a “prove the debt” letter. You are asking the agency to provide:

• The name of the original creditor
• The original account number or reference
• A copy of the original credit agreement (or a reconstituted version)
• A full statement of account showing how the current balance was calculated
• Confirmation that proper notice of assignment was provided

Send this request by recorded delivery so you have proof it was received. Under FCA guidelines, the agency should pause collection activity while they gather this information.

There is no specific statutory form for this letter in the UK, but templates are widely available from organisations such as Citizens Advice and StepChange.

Step 2: Review the Original Credit Agreement

Once you receive the documentation, review it carefully. Check whether the credit agreement complies with the requirements of the Consumer Credit Act 1974. For regulated agreements, the original creditor was required to provide specific prescribed terms, including the credit limit, interest rate, and repayment terms.

If the agreement is missing, improperly executed, or lacks prescribed terms, the debt may be unenforceable under section 127 of the Act. This does not mean the debt disappears, but it means the agency cannot obtain a court order to force payment.

Compare the balance claimed against your own records. Look for unexplained charges, duplicate entries, or interest applied at rates not specified in the original agreement.

Step 3: Raise a Formal Dispute in Writing

If your review identifies grounds for dispute, write a formal dispute letter to the collection agency. Be specific about why you are disputing the debt. Reference the documentation (or lack thereof) that supports your position.

Include:

• Your reference number with the agency
• A clear statement that you are formally disputing the debt
• The specific grounds for your dispute (incorrect amount, statute-barred, not your debt, unenforceable agreement, etc.)
• Copies (not originals) of any supporting evidence
• A request that all collection activity ceases until the dispute is resolved

Again, send this by recorded delivery. Keep copies of everything.

Under FCA rules, the agency must investigate your dispute and respond. If they cannot adequately validate the debt, they should not continue collection activity.

Step 4: Escalate to the Financial Ombudsman if Needed

If the collection agency does not respond to your dispute, dismisses it without adequate investigation, or continues collection activity despite an unresolved dispute, you have the right to escalate.

First, submit a formal complaint to the collection agency through their internal complaints procedure. They have eight weeks to issue a final response.

If you are unsatisfied with their response, or if they fail to respond within eight weeks, you can refer the matter to the Financial Ombudsman Service (FOS). The FOS can investigate complaints about FCA-regulated firms and has the power to order the agency to take corrective action, including writing off the debt if it was being pursued improperly.

For business debts that fall outside FOS jurisdiction, alternative routes include mediation, legal advice from a solicitor specialising in commercial debt, or court proceedings if necessary.

Common Reasons Debts Are Disputed After Being Sold

Debt disputes after a sale are not uncommon. The transfer process itself introduces opportunities for error, and some debts should never have been sold in the first place.

Incorrect Debt Amount or Duplicate Charges

When debts are sold in bulk portfolios, individual account details can be transferred inaccurately. Balances may include charges that were already disputed with the original creditor, fees that were waived, or payments that were made but not yet processed at the time of sale.

In some cases, a debtor may receive demands from both the original creditor and the purchasing agency for the same debt, creating confusion about who is owed what. This typically indicates a failure in the assignment process.

Statute-Barred Debts and Limitation Periods

A significant proportion of disputed sold debts involve limitation periods. Under the Limitation Act 1980, most unsecured debts in England and Wales become statute-barred six years after the last payment or written acknowledgement. In Scotland, the Prescription and Limitation (Scotland) Act 1973 sets a five-year period.

Once a debt is statute-barred, the creditor (or their assignee) cannot obtain a County Court Judgment (CCJ) to enforce it. The debt still technically exists, but it is unenforceable through the courts. Some collection agencies purchase old debt portfolios at very low prices and attempt to collect on statute-barred debts. Debtors who are unaware of their rights may pay debts they are no longer legally obligated to pay.

It is worth noting that making a payment or providing a written acknowledgement of the debt can restart the limitation clock. This is why seeking advice before responding to a collection agency about an old debt is important.

Debts Sold Without Proper Documentation

For a debt sale to be valid, the purchasing agency needs adequate documentation to prove the debt exists, the amount is correct, and the assignment was properly executed. In practice, particularly with older debts or bulk portfolio sales, documentation can be incomplete.

If the collection agency cannot produce a copy of the original credit agreement, a full statement of account, and a valid notice of assignment, their ability to enforce the debt is significantly weakened. This is one of the most common and effective grounds for dispute.

What Happens After You Dispute a Sold Debt?

Once you have formally raised a dispute, the collection agency is required to take specific steps. The outcome depends on the strength of your grounds and the quality of the agency’s documentation.

How Collection Agencies Must Respond to Disputes

Under FCA regulations, a collection agency that receives a formal dispute must:

Pause collection activity. The agency should not continue sending demands, making calls, or threatening legal action while the dispute is being investigated. Continuing to pursue a disputed debt without resolution is a breach of CONC rules.

Investigate the dispute. The agency must review the documentation it holds, contact the original creditor if necessary, and assess whether the debt is valid and the amount correct.

Respond in writing. The agency should provide a written response to the dispute, either confirming the debt with supporting evidence or acknowledging that the debt cannot be validated.

If the agency fails to follow these steps, this itself becomes grounds for a complaint to the FCA or the Financial Ombudsman Service.

Possible Outcomes of a Debt Dispute

Several outcomes are possible once a dispute is raised:

• Debt confirmed as valid: The agency provides adequate documentation proving the debt, the amount, and the assignment. You may then need to negotiate payment or seek further advice.
• Debt amount adjusted: The agency acknowledges errors in the balance and corrects the amount owed.
• Debt written off or returned: If the agency cannot validate the debt, it may write it off or return it to the original creditor.
• Debt marked as disputed on credit files: If the debt appears on your credit report, it should be marked as disputed while the investigation is ongoing. If the dispute is upheld, the entry should be removed or corrected.
• Legal proceedings paused or withdrawn: If the agency had initiated court action, a successful dispute can result in proceedings being stayed or discontinued.

The timeline varies. Simple disputes may be resolved within weeks. Complex cases involving missing documentation or escalation to the Financial Ombudsman can take several months.

How Businesses Can Reduce Debt Disputes Before Selling or Assigning Debts

For business owners and finance directors reading this from the creditor’s perspective, debt disputes represent a cost. They delay recovery, consume administrative resources, and can damage commercial relationships. Many disputes are preventable.

Maintaining Accurate Records and Documentation

The single most effective way to reduce disputes is to maintain thorough, accurate records from the point of credit origination through to any collection or assignment activity.

This means keeping:

• Signed credit agreements or contracts with clear payment terms
• Complete transaction histories and statements of account
• Records of all communications with the debtor, including payment reminders, dispute correspondence, and any agreed variations to terms
• Documentation of any partial payments, credits, or adjustments

When debts are sold or assigned, incomplete records are the primary driver of disputes. If the purchasing agency cannot prove the debt, the debtor has strong grounds to challenge it. This means the creditor receives less (or nothing) from the sale, and the debtor experience is poor.

Working with a Compliant Debt Collection Agency

Rather than selling debts and losing control of the process, many businesses achieve better outcomes by instructing a professional debt collection agency to recover debts on their behalf. This approach keeps the creditor as the legal owner of the debt while leveraging the agency’s expertise, resources, and regulatory compliance.

A reputable agency will ensure that all communications with debtors are FCA-compliant, that disputes are handled properly, and that documentation is maintained throughout the recovery process. This reduces the risk of disputes and protects the creditor’s reputation.

Choosing an agency with transparent fee structures, proven recovery rates, and a commitment to ethical practices is essential. The agency should act as an extension of your business, not a source of complaints.

When Professional Debt Recovery Is a Better Alternative to Selling Debt

Selling a debt is sometimes presented as the simplest way to remove an overdue account from your books. But simplicity comes at a significant cost, both financially and in terms of control.

Debt Collection vs Debt Sale: Key Differences for Creditors

For most businesses, particularly those that value customer relationships and want to maximise recovery, professional debt collection delivers substantially better outcomes than selling debts at a steep discount.

How Frontline Collections Helps Businesses Recover Debts Without Selling Them

Frontline Collections provides London businesses with a professional, end-to-end debt recovery service that eliminates the need to sell debts at a loss. By instructing Frontline Collections to recover on your behalf, you retain ownership of the debt, maintain control over how your customers are treated, and typically recover significantly more than a debt sale would yield.

The process begins with early-stage communication and negotiation, using proven strategies to secure payment without damaging the commercial relationship. If initial efforts do not resolve the debt, Frontline Collections can escalate through formal demand letters, structured payment plans, and, where necessary, legal action.

Every step is fully compliant with FCA regulations and UK debt recovery law. Fees are transparent, with no hidden charges. You receive regular updates on progress and retain decision-making authority throughout.

For businesses in London dealing with overdue invoices, this approach protects cash flow, reduces the administrative burden of chasing payments internally, and avoids the disputes and reputational risks that often accompany debt sales.

Conclusion

Disputing a debt sold to a collection agency is a legal right protected by UK regulations, and understanding the process empowers both debtors and creditors to handle these situations correctly. From requesting validation to escalating through the Financial Ombudsman, the framework exists to ensure fairness on both sides.

For businesses, the most effective way to avoid debt disputes entirely is to retain control of the recovery process rather than selling debts at a discount. Professional debt collection preserves relationships, maximises recovery, and ensures compliance.

We help London businesses recover outstanding debts efficiently and ethically. Contact Frontline Collections to discuss how our transparent, results-driven approach can protect your cash flow and eliminate the risks associated with debt sales.

Frequently Asked Questions

Can a collection agency collect on a debt that has been sold without notifying me?

No. Under UK law, you must receive a valid notice of assignment informing you that the debt has been transferred to a new owner. Without this notice, the collection agency cannot legally require you to pay them.

Does disputing a sold debt stop collection calls and letters?

Yes. Once you formally dispute a debt in writing, the collection agency is required under FCA rules to pause collection activity until the dispute is investigated and resolved. If they continue, you can complain to the Financial Ombudsman.

Can I dispute a debt if I have already made a partial payment to the collection agency?

You can still dispute the debt, but making a payment may be treated as acknowledgement of the debt, which can affect limitation periods. It is advisable to seek guidance before making any payment on a debt you believe is incorrect.

How long does a collection agency have to respond to my dispute?

There is no single statutory deadline, but FCA guidelines expect a reasonable response. If you submit a formal complaint, the agency has eight weeks to issue a final response before you can escalate to the Financial Ombudsman Service.

What if the collection agency cannot produce the original credit agreement?

If the agency cannot provide a properly executed copy of the original credit agreement, the debt may be unenforceable under the Consumer Credit Act 1974. This does not erase the debt, but it means the agency cannot obtain a court order to force payment.

Is there a time limit for disputing a debt that has been sold?

There is no specific deadline for raising a dispute. However, the Limitation Act 1980 means that most unsecured debts become unenforceable through the courts after six years from the last payment or acknowledgement. Disputing sooner is always more effective.

Should a business sell its debts or use a professional collection agency?

For most businesses, professional debt collection delivers significantly higher recovery rates than selling debts, which typically returns only a fraction of the outstanding balance. Using an agency like Frontline Collections also preserves customer relationships and ensures full regulatory compliance throughout the process.