MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.
Could you legally write off some debt? Answer below to get started.
This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
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For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
Are you holding a letter from PayPal Debt Collection and feeling worried? You’re not alone! Every month, over 170,000 people come to our website looking for guidance on debt matters.
In this article, we will answer key questions:
Will PayPal send debt collectors?
How can you deal with PayPal debt collectors?
Can PayPal debt affect your credit score?
Research shows 64% of people in the UK find dealing with debt collectors stressful1, and even our team includes people who have experienced this.
We know what it’s like to be chased by debt collectors, and we’re here to help guide you through this. Let’s get started!
2023 update: As of June 2023, customers of PayPal have reported they have received an email from PayPal warning them that their interest rates will be going up by a significant amount.
Could you legally write off some debt?
There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out.
Answer below to get started.
This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.
How to deal with PayPal debt collectors
If you’ve received a letter from a debt collection agency on behalf of PayPal, it might seem quite unpleasant.
No one likes owing money, and the circumstances surrounding PayPal debt can be varied. However, it’s important you don’t panic. There are several things you can do to deal with the situation:
Don’t ignore it
We always recommend responding to debt collectors – even just to question the debt’s validity.
It’s important to keep in mind that you have the right to request proof of the debt. They have to prove it, or they can’t charge you.
Debt collection agencies are notoriously persistent when it comes to recovering money!
Depending on the severity of the situation, you will want to contact either PayPal or the debt collection agency. In most cases, you’re better off going directly to PayPal.
If things are in the early stages, they’ll be able to call off the debt collectors and give you some peace while you make repayments.
If the debt is now owned by the debt collection agency, you’ll want to contact them instead. You can arrange a payment schedule that works out for both of you.
Offer payment
If you genuinely owe them the money, you’ll need to pay it back at some point.
Although this may seem hard, particularly if you don’t have the lump sum available upfront, there are ways to manage it.
Perhaps your best bet is to offer to pay back in instalments that you can manage. This gives you a chance to make a fixed monthly payment until the debt is paid.
It’s important to remember that neither PayPal nor the debt collectors are obliged to accept a repayment plan. However, if you’re honest with them and have an idea of what you can afford before you call, they’re likely to accept your terms.
How a debt solution could help
Some debt solutions can:
Stop nasty calls from creditors
Freeze interest and charges
Reduce your monthly payments
A few debt solutions can even result in writing off some of your debt.
Here’s an example:
Situation
Monthly income
£2,504
Monthly expenses
£2,345
Total debt
£32,049
Monthly debt repayments
Before
£587
After
£158
£429 reduction in monthly payments
If you want to learn what debt solutions are available to you, click the button below to get started.
It could be that you’ve received a letter from a debt collection agency in error.
In some very rare cases, they may have mistaken your details, particularly if you live at the address of someone who did have a debt.
Believe it or not, StepChange found that two-thirds of people in debt have experienced some level of bad practice from a debt collector in the last two years2; this not only includes acting outside of FCA regulations but also trying to collect a debt from the wrong person.
So if you think that you don’t owe the money they claim you do, you are able to dispute it. However, to do so, you’ll have to be organised and have proof that they have the wrong person.
A good place to start is to write to the debt collection agency or PayPal and ask them to prove that you owe money. They legally have to provide you with that information.
If they do have some proof and you still think it’s incorrect, you’ll have to use any documents or bank/PayPal statements you have to the contrary.
It’s rare that there are PayPal problems, but things like scams aren’t unheard of.
Know your rights
Because debt collection agencies are governed by FCA rules and guidelines, you do have certain legal rights when it comes to dealing with them.
Knowing where you stand can make the process of dealing with companies like Wescot Credit Services or Akinika a whole lot easier.
There are a few things worth noting when it comes to your rights when dealing with debt collection agencies:
Speaking with other people. They can’t approach your friends, families, or employers without your permission. Similarly, they can’t threaten to do so either.
Adding money. They can’t add lots of extra charges or excessive interest to your debt.
Lying to you. They can’t pretend to have legal powers they don’t have. This includes threatening you with bailiffs or sending letters that look like court orders. Similarly, they can’t harass or mislead you.
Visiting you. Although they can visit you in person, they have no extra rights if they do so. Essentially, they have the same powers in person as over the phone. They have to give you appropriate notice if they are visiting you.
We’ve put together this quick table to help you better understand what debt collectors can and can’t do. If you’d like to learn more about your rights, make sure to check out our detailed guide.
Debt Collectors Can
But They Can’t
Contact you by phone or mail.
Call you after 9pm or before 8am.
Conduct home visits (on rare occasions) and knock on your door.
Forbily enter your home, or stay if you ask them to leave.
Threaten to take you to court by suing you for payment on a debt.
Harrass you, including threats of violence, repeated calls and visits, or abusive language.
Negotiate a debt settlement. Tip: make sure to get this new arrangement in writing.
Visit your workplace.
Access your bank account, but only after a court judgment has been made.
Take anything from your home or threaten to do so.
Sell your debt.
Speak to other people about your debt without your permission.
Contact you frequently.
Keep doing so if you request that they reduce communications.
If you feel that a debt collection agency has breached these rules, you can lodge a formal complaint against them.
You should first raise your issue with the debt collection company and give them time to sort it out. But you can escalate the matter if you feel that your complaint was not taken seriously or their response was inadequate.
Although their powers are limited initially, there are certain things that debt collection agencies can do. Most notably, if you continually ignore them, they can appeal to the courts to escalate matters. There are several potential outcomes from this:
Register a default against your credit file. This is never a good thing, as it can negatively impact your credit. It will stay on your file for six years from the date it’s issued, even if you pay off the money.
Issue a CCJ. A Country Court judgement is a court order that shows how much you owe and legally how much you have to pay. It shows the instalments and deadlines. Again, it can stay on your record for six years unless you pay it within a month.
Petition you for bankruptcy. If your debt is greater than £5000, they can petition for bankruptcy. This means your assets can be sold to pay back your creditors. Again, this can have negative impacts on your credit file for many years after.
Thousands have already tackled their debt
Every day our partners, The Debt Advice Service, help people find out whether they can lower their repayments and finally tackle or write off some of their debt.
Natasha
I’d recommend this firm to anyone struggling with debt – my mind has been put to rest, all is getting sorted.
Yes, using PayPal can impact your credit score because PayPal reports to credit bureaus.
This means that your history with PayPal will be visible on your credit file. So, use PayPal responsibly and make your payments on time and your credit score will increase.
A good credit score can give you access to better rates of credit and lower interest rates.
Many people aren’t quite sure how their account works, which can lead to them owing money without realising.
Many of us sign up without reading the terms of service, meaning we agree to these terms without knowing what they are.
So, we’re going to look at some of the frequently asked questions about PayPal’s service.
Can you go into debt on PayPal?
Yes, you can go into debt with PayPal.
One element that often surprises users is that it is possible to have a negative PayPal balance. This effectively means you then have a debt with the company.
Any payments you make into your account will come off that balance, and any further payments you make will increase your negative balance.
There are several ways that you can go into debt on your PayPal account:
You make a payment using PayPal, but they cannot take payment from your bank account. This will usually only happen if you have insufficient funds in the account linked to PayPal. You will also be charged a fee if this happens.
Someone puts in a claim or dispute against you. If someone purchases something from you using PayPal and they’re unhappy, they can raise a claim. PayPal will then hold the disputed amount while the dispute is settled.
A bank or credit card company reverses a payment you received.
As you can see, each of these is on the surface fairly innocuous. However, if you don’t realise your account has a negative balance, it can soon accumulate.
It’s particularly dangerous if you link your PayPal account to a service that you use regularly. Payments will continually be taken, whether you have the funds or not.
Does PayPal have an overdraft?
No, Paypal does not have an overdraft feature available for their customers’ accounts.
What about PayPal Credit?
One of PayPal’s newest services is PayPal credit.
This is effectively a short-term loan that you can use to pay for different things. It may seem like an appealing prospect as there is four months’ worth 0% interest.
However, after this grace period as stated in the terms and conditions, interest goes up to 17.9% APR, and late payment fees are £12 each time. As you can imagine, this can soon mount up, especially if you can’t afford the repayment.
What happens if you go into debt on PayPal?
You may be wondering about PayPal’s negative balance consequences.
If you go into debt with PayPal you have 90 days to pay the debt back and if you fail to do so or fail to at least contact PayPal, they will likely refer you to a debt collection agency.
It’s never pleasant accruing debt with a company, and PayPal operates in a fairly similar way to many other businesses.
So, if you go into a negative balance with them, the best thing to do is pay back the balance. You’ll have to keep making payments into your PayPal account until you reach the £0 mark again.
If not the debt collection process is automated. They will send you either a letter or call you to notify you of their action. You will then receive contact from the debt collection agency. This can signal the start of a long and drawn-out process.
Your best bet is to always contact PayPal if you have an outstanding debt and you’re having difficulties repaying it. They may be able to help you come up with a repayment plan that works for both parties.
Will PayPal send debt collectors?
Whether Paypal will send debt collectors will depend on how long the debt has been in place. Of course, your natural instinct might be to fear a PayPal debt collection agency turning up at your front door. However, this is not the first step of PayPal’s debt collection process.
When you first have a negative balance from PayPal, you should receive a notification from them.
Usually, this will explain that either you didn’t have enough funds in your bank or that someone has contested a payment they made to you.
It’s therefore worth keeping on top of the activity on your PayPal account.
After the 90 days of negative balance pass, your account will be automatically passed over to a debt collection agency. It is then their responsibility to try and recover the debt for PayPal.
In some circumstances, the agency will purchase the debt, which means you now owe them directly.
Initially, the debt collection agency will only contact you by the available details associated with your account. So expect calls, letters, and maybe emails. If you do not contact PayPal or the debt collection agency directly, these will persist.
If you ignore their attempts at recovering the debt, they may then try and visit your house. They usually have to give you seven days’ notice of such an event. However, they have no legal right to enter your property and must leave if asked to do so.
Here’s a clear table explaining your rights and those of debt collectors in such situations:
What debt collectors do PayPal use?
PayPal is a global entity, and as such, it will use a variety of other companies when it comes to debt collection.
Generally, they will pass over your account to an agency that specialises in debt recovery. Sometimes, they may also sell your debt to a debt collector.
This means they secure some of the money they’re owed, while the risk for the rest is the responsibility of the agency.
In the UK, there are two main agencies they tend to use. Wescot Credit Services is one, and Akinika (pronounced a-kin-i-ka) is another. So, if you have debt with PayPal, you may receive a Wescot Credit Services letter or contact from Akinika.
Both companies are registered in the UK and are authorised and regulated by the Financial Conduct Authority (FCA).
This means that you can be assured that they’re real companies. Thankfully, it also means that you have certain legal rights when dealing with them.
You may be wondering whether you need to pay Wescot or Akinika debt recovery for PayPal debts. The answer depends a little on how you choose to deal with the debt.
Checking for Other Debt Collectors
There are a lot of ways to get into debt. In fact, it’s not uncommon to owe money to several companies at once.
Perhaps you have a mortgage, a car loan, a couple credit cards and an item or two you bought on buy-now-pay-later schemes. It’s easy to lose track.
That’s why it’s important to regularly check your credit report and bank statements to make sure you haven’t missed anything.
If a debt collector has purchased your debt, it appears on your credit report.
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MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.
