What creditors can do

Creditors want you to make your contractual payment on time. If you default on your payment they can issue a default notice then pass/sell your debt to a debt collection agent. The creditor or collection agent can apply for county court action and may apply for a charging order if you live in your own/mortgaged property.

Creditors can take money from your wages using AOE (attachment of earnings), however they would need to apply to the court to do this.

What rights do I have?

You have many rights as a consumer against creditors in relation to what they can and cannot do and you can find more details on the Consumer Action Website.

The Financial Conduct Authority is the main regulator for rules and regulations on debt collection, debt management and consumer credit.

Rates of Interest

In most debt cases, interest is added and if you don’t pay on time you may also face extra charges.

Interest can be charged at the same amount or it can be ‘variable’ meaning it changes over time. However, creditors cannot increase the rate of interest because you have missed payments. Interest on loans can be added all at once when you start the loan, or a percentage may be added at intervals throughout paying off the loan.

Extra charges for missed payments can only be added if they have been outlined in your credit agreement. The extra charges must also be fair and based on actual costs.


APR or annual percentage rate is how interest is shown, and represents the actual yearly cost of borrowing over the loan.

The higher the percentage, the more expensive it is to borrow.

You must be told the APR before you sign any agreements if your debt is regulated by the Consumer Credit Act, meaning you will know how much you will have to pay back.

APR is a useful way to compare the cost of different loans or cards, however, remember that the total interest added also depends on how long the debt takes to repay.

Can I stop interest rates?

If you are in financial difficulty, the first thing to do is let your creditors know. Creditors are more likely to stop or reduce the interest and charges you are paying if you can prove you are struggling.

You may also want to consider some types of debt solutions such as an Individual Voluntary Arrangement (IVA) as this is a formal contract set up between you and your creditors and all interest and charges will stop once you enter into the IVA.

Will a creditor accept my debt solution?

This depends on the type of debt solution you plan to use. With some informal debt solutions – like Debt Management Plans, full-and-final settlements, or Repayment Arrangements – your creditor is not obliged to accept your proposed offer of repayment.

However, there are some more formal debt solutions (like Individual Voluntary Arrangements, Bankruptcy, or Debt Relief Orders) which are legally binding on both you and your creditors, once they are in place. Speak to our team of expert debt advisers who will talk you through the different options available to you.