Q&As

Can a consumer credit debt be sold to a third party debt purchaser?

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Published on LexisPSL on 29/08/2014

The following Financial Services Q&A provides comprehensive and up to date legal information covering:

  • Can a consumer credit debt be sold to a third party debt purchaser?
  • How can a lender under a consumer credit agreement sell a debt to a third party debt purchaser?
  • Why is the distinction between legal and equitable assignment important?
  • Does CONC always require lenders to always give notice of the assignment to the borrower?
  • Will the assignee require an authorisation under FSMA?

Can a consumer credit debt be sold to a third party debt purchaser?

BREXIT: 11pm (GMT) on 31 December 2020 (‘IP completion day’) marked the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. Following IP completion day, key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see: Brexit and financial services: materials on the post-Brexit UK/EU regulatory regime.

How can a lender under a consumer credit agreement sell a debt to a third party debt purchaser?

Lenders sell the debts they are owed by assignment. This can take two forms: legal or equitable, depending on the debt that is assigned and whether certain formalities are observed.

To be a legal assignment the assignment process must comply with the Law Property Act 1925, s 136. The assignment of the debt must be:

  1. in writing and signed by assignor;

  2. absolute (for the whole debt); and

  3. anyone who the assignor could enforce the debt against must be notified in writing of

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