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The History of Debt Collection Firms

The practice of debt collection has been around for as long as debts – going way back into the history of mankind, as we reported last week in our article about the History of Debt.  We revealed that debts stretch way back into the ancient civilisations, beginning in Sumer in 3000 BC.  In the Middle Ages, once there were laws formulated to specifically deal with debt collection problems, we saw the beginning of debtors’ prisons here in the UK which lasted for a good few centuries until the passing of the 1869 Debtors Act.

As soon as debtors’ prisons were done away with, creditors had no sure means of collecting the monies owed to them, especially in the case of unsecured debts.  If the debt involved some sort of collateral like a mortgage, then the creditor could legally take the property, but without collateral of this type there is no way of getting money from a debtor who has none.  Even if a creditor received a judgement against the debtor in court, the whole process is dependent upon the debtor being able to pay!  This meant that a lender should only lend money to those who had a good chance of being able to repay the loan.

The very first debt collectors in medieval England were known as “catchpoles”, freelance tax collectors who were legal officials working for the bailiff and responsible for collecting debts using all manner of coercive methods.   In Victorian times the concepts of credit and debt were linked to the perception of a person’s character.  Credit was based on a person’s assets and income, in conjunction with their social status within the community and their attitude to the moral standards of the time.  Being in debt was perceived as a moral failure (rather than an economic circumstance) and was punished accordingly.  This meant that it was more difficult for the working classes to obtain credit.  Those who did manage to obtain a load faced more severe penalties that those faced by the upper classes at the time.  County Court judges would often issue penalties based on the belief that the working classes deliberately defaulted on their debt!

Nowadays debt collection is a practice usually carried out by a debt collection agency, a company that specialises in pursuing payments of debts whether owned by businesses or individuals.  Most of these collection agencies operate as agents of creditors and collect debt for a fee or percentage of the total amount owing.  There are many types of agencies and we’ll be looking at these in one of our future articles. 

Debt collection agency here in the UK have to be licensed by the Financial Conduct Authority (FCA) which sets guidelines on how debt collection agencies operate and lists examples of unfair practice.  Although these guidelines are not laws, they do represent a summary and interpretation of various legal areas and compliance with the guidelines are used as a measure of whether the agency is considered fit to hold a credit licence.