Arrears
Money that has become due for repayment to a creditor, but which has not been paid on time.
Bankruptcy
The legal process for managing the payments of debts from available assets where a debtor cannot afford to pay his debts in full and is therefore adjudged ‘bankrupt’ by a court. This process is managed by an independent accountant known as a trustee in bankruptcy.
Count Court Judgment (CCJ)
A CCJ is a legal decision made by any county court in the UK whereby a debtor is ordered to pay money to a creditor. If a CCJ is not paid within 28 days, it is automatically recorded on the Register of CCJs which is accessed by all credit reference bureaus, so affects an individual’s ‘credit rating’.
Creditor
The person (or business) owed money by a debtor.
Creditor Services Association
The UK trade association which provides a quality assurance ‘mark’ for creditors which adopt fair debt collection practices.
Credit Limit
A credit limit is the maximum amount a creditor will allow a debtor to borrow under his/her credit card, based upon the creditor’s assessment of the debtor’s ‘credit rating’.
Credit Rating/Credit Score
The measurement (between 0-999) which records a person’s eligibility to borrow money which is based on his/her prior credit history. These credit ratings in the UK are issued by credit reference agencies such as Transunion and Experian. The credit reference agencies sell (through subscription services) credit data to banks and other lending institutions.
Debt collection agency (or DCA)
A business which provides debt collection services to creditors, for the creditors’ financial benefit. Where a creditor is owed ‘consumer regulated debt’ by a debtor, and seeks the services of a DCA, the DCA must be licenced and regulated by the Financial Conduct Authority.
Debt negotiation
The process where a debtor and creditor negotiate the financial terms for the repayment of an overdue debt (either for the full amount or for a discounted amount). Debt negotiations are often conducted on a ‘without prejudice’ basis and can focus on the amount to be repaid, a new timetable for repayment, or both.
Debt purchaser
A business (which must be licenced and regulated by the Financial Conduct Authority) permitted to buy debt from creditors, which then transfers the legal entitlement to receive repayment from the debtor from the original creditor to the debt purchaser.
Debt or Liability
The amount of money owed by a debtor to a creditor.
Debtor
The person (or business) owing the debt or liability.
Default
Any breach of agreement (commonly the non-payment of an agreed instalment) which triggers an immediate obligation for a debtor to repay the whole debt to the creditor.
Due date
The date when a debt (be that the whole debt or an instalment towards the debt) must be repaid to the creditor. Missing a due date can result in late payment fees (on top of interest charges) and can potentially damage your credit score.
Financial Conduct Authority (or FCA)
The government backed organisation which regulates the conduct of around 42,000 businesses in the UK to ensure that financial markets work efficiently and fairly for all participants. The UK’s debt collection industry is covered by the FCA’s regulatory remit.
Full and final settlement
The term used for an agreement to settle a debt permanently (even where the agreement is for a sum of money which is less that the actual amount owed to the creditor).
GCC
The Gulf Cooperation Council comprising Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the United Arab Emirates.
Guarantor
A guarantor is someone who agrees to pay a debt if the borrower fails to do so.
Interest charges
The cost of borrowing money agreed between a debtor and a creditor. Interest gets added to the principal debt borrowed by the debtor from the creditor. Under sharia law (which is Islam’s legal system, derived from the Quran) interest charges are known as ‘profit charges’ but operate in the same way.
Judgment
A formal court decision declaring that the debtor owes the creditor money.
Payment plan
A payment plan is an agreement to pay off your debt in smaller amounts over a set period. It can help you manage your debt without paying it all at once.
Secured Debt
A debt where the creditor benefits from more than a simple contractual entitlement to be repaid by the debtor. The contractual entitlement to be repaid by the debtor is typically supported by legal charge (or mortgage) over property (eg. land, motor vehicles, shares) or by a personal guarantee given by a third party to repay the debt.
Settlement Letter or Settlement Agreement
The written record of agreed terms for the settlement of a Debt which will lead, once implemented, to the Debt being extinguished forever.
Statute Barred or Time Barred
The date stipulated by national legislation as the date when legal debt recovery proceedings can no longer be brought before the court. Depending upon the country where the debt originates, these ‘limitation’ periods, before a debt becomes statute barred, range from 5 years to 15 years from the last payment date (or other acknowledgement that the debt is still due for repayment).
The Consumer Credit Act (CCA)
The UK legislation which reformed consumer credit agreements, providing clearer rules (and consumer rights) in relation to consumer lending. Overseas lending is not governed by the CCA, but the FCA’s guidelines on collecting CCA debt are nevertheless followed by IDR Worldwide
Travel Ban
(Applicable only in relation to Debts incurred in the ‘GCC’) the prohibition against flying into or out of any GCC country when a Debt has been registered by a bank with the police and/or immigration authorities.
Unsecured Debt
A debt underpinned by a simple contractual promise to repay given by a debtor to a creditor (with or without interest).
Without Prejudice
The rule of law which gives debtors and creditors freedom to negotiate settlement terms without those negotiations being used against either party as enforceable ‘admissions’ or ‘concessions’ within legal proceedings.
Write-Off
The term used when a bank, internally, treats a debt as being a ‘bad’ debt which might never be repaid. A ‘written off’ debt is still owed by the debtor to the creditor, until such time as the debt becomes ‘statute barred’.
