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An expensive delay

Blake took out a $3,000 personal loan in early 2015. He stopped making payments in July 2015. The loan company sent a few reminder emails, but when it did not receive any response, it sold Blake’s debt to a debt collection agency. As of July 2015, Blake owed roughly $2,300.

Blake did not hear from the debt collection agency for over two years. In July 2017, Blake finally received a letter from the debt collection agency, demanding he pay $3,638 immediately.



Blake thought it was unfair that the debt collection agency would take so long to contact him, especially while interest was building on his debt. He had contacted the debt collection agency and raised a complaint, but the debt collection agency insisted he pay the full $3,638.

In May 2018, Blake complained to FSCL. Interest was still accruing on his loan, and by this point, his debt had increased to $4,184.



We contacted the debt collection agency, and raised some concerns about its delay contacting Blake. The debt collection agency had Blake’s phone number and email on file, so there was no good reason it could not have contacted Blake when it first purchased the debt. We thought the agency’s delay had been unreasonable, and may have been a breach of the Responsible Lending Code.



The debt collection agency offered to write off $2,000 of Blake’s debt, and agreed to a repayment plan. Blake would pay $100 per week until the remaining $2,184 debt was repaid.

Blake was very pleased with this outcome, and he accepted the offer.


Key insights for the participant

Lenders and debt collection agencies need to act reasonably promptly after a borrower defaults on their payments. They cannot wait to enforce a debt while interest accrues. If there is an unreasonable delay, the lender may lose the right to charge interest on the loan, at least until it takes steps to contact the borrower.