notice of assignment of debt uk

• Insights & events

Assigning debts and other contractual claims - not as easy as first thought

Harking back to law school, we had a thirst for new black letter law. Section 136 of the Law of the Property Act 1925 kindly obliged. This lays down the conditions which need to be satisfied for an effective legal assignment of a chose in action (such as a debt). We won’t bore you with the detail, but suffice to say that what’s important is that a legal assignment must be in writing and signed by the assignor, must be absolute (i.e. no conditions attached) and crucially that written notice of the assignment must be given to the debtor.

When assigning debts, it’s worth remembering that you can’t legally assign part of a debt – any attempt to do so will take effect as an equitable assignment. The main practical difference between a legal and an equitable assignment is that the assignor will need to be joined in any legal proceedings in relation to the assigned debt (e.g. an attempt to recover that part of the debt).

Recent cases which tell another story

Why bother telling you the above?  Aside from our delight in remembering the joys of debating the merits of legal and equitable assignments (ehem), it’s worth revisiting our textbooks in the context of three recent cases. Although at first blush the statutory conditions for a legal assignment seem quite straightforward, attempts to assign contractual claims such as debts continue to throw up legal disputes:

• In  Sumitomo Mitsui Banking Corp Europe Ltd v Euler Hermes Europe SA (NV) [2019] EWHC 2250 (Comm),  the High Court held that a performance bond issued under a construction contract was not effectively assigned despite the surety acknowledging a notice of assignment of the bond. Sadly, the notice of assignment failed to meet the requirements under the bond instrument that the assignee confirm its acceptance of a provision in the bond that required the employer to repay the surety in the event of an overpayment. This case highlights the importance of ensuring any purported assignment meets any conditions stipulated in the underlying documents.
• In  Promontoria (Henrico) Ltd v Melton [2019] EWHC 2243 (Ch) (26 June 2019) , the High Court held that an assignment of a facility agreement and legal charges was valid, even though the debt assigned had to be identified by considering external evidence. The deed of assignment in question listed the assets subject to assignment, but was illegible to the extent that the debtor’s name could not be deciphered. The court got comfortable that there had been an effective assignment, given the following factors: (i) the lender had notified the borrower of its intention to assign the loan to the assignee; (ii) following the assignment, the lender had made no demand for repayment; (iii) a manager of the assignee had given a statement that the loan had been assigned and the borrower had accepted in evidence that he was aware of the assignment. Fortunately for the assignee, a second notice of assignment - which was invalid because it contained an incorrect date of assignment - did not invalidate the earlier assignment, which was found to be effective. The court took a practical and commercial view of the circumstances, although we recommend ensuring that your assignment documents clearly reflect what the parties intend!
• Finally, in Nicoll v Promontoria (Ram 2) Ltd [2019] EWHC 2410 (Ch),  the High Court held that a notice of assignment of a debt given to a debtor was valid, even though the effective date of assignment stated in the notice could not be verified by the debtor. The case concerned a debt assigned by the Co-op Bank to Promontoria and a joint notice given by assignor and assignee to the debtor that the debt had been assigned “on and with effect from 29 July 2016”. A subsequent statutory demand served by Promontoria on the debtor for the outstanding sums was disputed on the basis that the notice of assignment was invalid because it contained an incorrect date of assignment. Whilst accepting that the documentation was incapable of verifying with certainty the date of assignment, the Court held that the joint notice clearly showed that both parties had agreed that an assignment had taken place and was valid. This decision suggests that mistakes as to the date of assignment in a notice of assignment may not necessarily be fatal, if it is otherwise clear that the debt has been assigned.

The conclusion from the above? Maybe it’s not quite as easy as first thought to get an assignment right. Make sure you follow all of the conditions for a legal assignment according to the underlying contract and ensure your assignment documentation is clear.

Contact our experts for further advice

Search our site

Solutions only available in England, Wales and Northern Ireland 

Assignment of Debt UK – Everything You Need To Know

Get confidential debt help for your situation.

• Expert debt help to find the right solution for you
• We give you full support
• Together we can manage your debt

Get started

Struggling with debt? we can help you look at the available solutions.

If you have debts of over £5,000, and you're struggling to repay them, get in touch today!

In the complex financial landscape of the United Kingdom, understanding the nuances of ‘Assignment of Debt’ is essential for both creditors and debtors. This concept, often encountered but not always fully understood, involves the transfer of a debt obligation from the original creditor (the assignor) to a third party (the assignee).

This article aims to demystify the intricacies of debt assignment, explaining its types, legal implications, and impact on individuals’ financial standings.

Whether it’s about navigating through the differences between legal and equitable assignments, understanding the role of deeds, or grasping how such transactions affect your credit report and legal rights, this guide provides a comprehensive overview, ensuring that you are well informed about this critical aspect of financial management in the UK.

Table of Contents

What Does ‘Assignment of Debt’ Mean?

Assignment of Debt: a term that might sound complex, but it’s really quite straightforward. Let’s dive into what this means for you.

Simply put, your original creditor, known as the assignor, transfers your debt to another party, the assignee. This could change who you deal with regarding your debt. The assignee can now take legal steps to recover the debt from you. Thus, this might include court action.

How Debt Assignments Work

When a creditor offers credit to a borrower, they do so believing that the money they lend, along with the interest, is repaid on time. So, the lender waits to recover the money owed according to the timeframe stated in the contract.

In some situations, the lender might decide that they want to sell the debt to a third party because they no longer want to assume responsibility for servicing the loan. In this case, the debtor should be sent a Notice of Assignment (NOA). This should state that someone else is now responsible for collecting the outstanding debt. This is called a debt assignment.

It’s mandatory to inform the debtor when the debt is assigned to a third party so that they are aware of who they should pay the debt to. The payments won’t be accepted if the debtor ends up sending payments to the old creditor after they’re assigned. This might result in the debtor unintentionally defaulting.

Also, once the debtor receives this notice, it’s best that they verify that the new creditor has recorded the correct monthly payment and total balance. In some situations, the new assignee might even decide to make changes to the original terms of the loan. In this case, the creditor should notify the debtor without delay and give them sufficient time to respond.

Need more help to deal with your Debt issue?

There are a number of alternative debt solutions available in the UK that you could use to write off some of your priority debts. But keep in mind that choosing the right solution will aid you in writing off some of your debt, while choosing the wrong one will worsen your debt situation.

Are you struggling with unaffordable debt?

• Affordable repayments
• Reduce Pressure from people you owe
• One simple monthly payment

Legal Assignment vs Equitable Assignment

A legal assignment is when another company takes over the following from a creditor:

• Benefit of a debt
• The right to enforce the debt

This indicates that they have the right to seek court action over the loan.

However, when it comes to equitable assignment, it only transfers the benefit of the loan to a third party. In this case, there is no right to seek court action over the loan. Thus, in a situation where the assignee wants to take the debtor to court, they only have the right to work with the original creditor after the original creditor decides to take the debtor to court.

So, simply said, they don’t have the power to initiate court action themselves. Also, note that in order for the assignment to be effective, the debtor must be notified regarding the assignment. The debtor is obligated to make the payment to the assignee only after they get the notice.

Assignment vs Novation

When it comes to the assignment, the party that assigns will continue performing the obligation associated with the loan. However, the assignee is now entitled to the loan benefits.

For example, assume that you assign a debt, that a debtor owes to you, to another organisation. In this situation, you have some rights and obligations over the loan. But particularly the right to pursue legal action in court.

Meanwhile, when it comes to novation, it consists of a full transfer of both rights and obligations. For example, as per the previous scenario, the creditor would give the assignee company full power when it comes to both the obligations and the rights associated with the loan.

Assignment vs Selling

As mentioned before, the assignment of debt means that the right of an individual to collect a debt has been transferred legally from the assignor (original creditor) to the assignee (third party). Then, the debtors are informed regarding the assignment. They should then make the payments to the assignee.

However, keep in mind that the conditions and terms of the contract do not change.

When it comes to selling debt, this is where a lender sells their loan to another, usually for a lesser amount than what it’s worth. The buyer (most of the time a debt collection company) tries to collect the whole amount from the debtor.

Does an Assignment Need to be a Deed?

When delving into the law of assignment, a crucial question often pops up: is a formal deed essential to make the transfer of debt legitimate? The answer isn’t as straightforward as you might think. Let’s unpack this:

Often, a less formal agreement can do the job. However, in some cases, particularly when the original loan agreement was a deed, a deed for the assignment becomes necessary.

Understanding the importance of deeds in this context is key. If your original loan agreement was signed as a deed, the assignment might also need to be a deed. This adds a layer of formality and legal binding. A deed indicates a more serious commitment, making everyone involved fully aware of the transfer’s details.

Knowing your rights in these situations is non-negotiable:

• Whether it’s through a deed or an agreement, you’re entitled to be informed about the assignment. This ensures the process is fair and transparent.
• This notification is more than just a formality; it validates the transfer and helps you understand the change in your debt obligations.
• The use of a deed or agreement provides legal clarity. This helps in understanding your position in the new arrangement.
• In such situations, seeking legal or financial advice can be a wise move.

In the complex world of debt assignments, whether a deed is necessary depends on various factors. Understanding the role of deeds and your rights is essential in navigating these financial waters.

Benefits of Assignment of Debt

There are multiple reasons why a creditor might decide to assign the debt to another person. One of the main reasons for this is to improve liquidity or to reduce the risk. In some cases, the lender might also be wanting some capital urgently. Also, they might have accumulated a large amount of high-risk loans and be wary that most of them could default.

In such situations, lenders may be willing to assign them to another person swiftly, even for a very small amount. They are open to doing this as long as it will help to improve their financial outlook and appease worried investors.

In other cases, the creditor might decide the debt is too old to spend resources trying to collect it. They might even assume that since it’s old, it’s not worth assigning it to a third party to pick up the collection activity. In such an instance, a company will decide not to assign their debt to a third party.

Criticisms of Assignment of Debt

Even though the assignment of debt may seem like a good option for lenders, it also has a fair bit of criticism.

Over the past, debt buyers have been known to use various unethical practices in order to get paid. This includes constantly harassing debtors and issuing threats. In some situations, they have also been accused of chasing debts that have already been paid.

Additional Advice and Guidance

If you’re struggling with debt, note that there are many debt solutions available in the UK that you can consider taking up. Some of these include:

• Individual Voluntary Arrangement (IVA)
• Debt Management Plan (DMP)
• Debt Relief Orders (DRO)

However, note that while the right debt solutions will help to write off debt, choosing the wrong one might worsen your situation. So, we recommend you reach out to a debt charity for advice before you make the decision. Some debt charities you can reach out to include:

• National Debtline
• Citizens Advice

Alternatively, feel free to fill out our online form , and our MoneyAdvisor team will guide you.

• It refers to the transfer of a debtor’s obligation from the original creditor (assignor) to a third party (assignee).
• Legal Assignment: Transfers both the right to collect the debt and the right to enforce it legally, including court action.
• Equitable Assignment: Only the benefits of the loan are transferred, not the legal right to enforce it.
• Assignment maintains the original terms of the loan with a new creditor, whereas novation transfers all rights and obligations to a new party.
• In assignment, the right to collect the debt is transferred, while selling involves a financial transaction where the lender sells the loan, often at a lower price.
• Generally, a deed is not required for debt assignment, but it may be necessary when the original loan agreement is signed as a deed.
• Assignment of debt will be reflected in the credit report, including any updates on the loan terms and the new lender’s name.
• A formal notice is required, especially in legal assignments, to inform the borrower about the transfer of their debt.
• Once a notice is issued, the new creditor assumes the rights and obligations of the debt and may engage in various debt collection methods.
• Common reasons include avoiding the hassle of debt collection, lacking resources for legal action, or efficiency in debt collection through a third party like a collection agency.
• Under UK law, most debts have a limitation period of six years (twelve for mortgage loans), after which they might be written off if there’s no contact from the creditor.

Under UK law, the limitation period for most debts is six years. For mortgage loans, it extends to twelve years. If your creditor hasn’t contacted you within these time frames, you may have legal grounds to have the debt written off. This includes personal loans, credit cards, payday loans, and others.

The new lender takes on both the obligations and rights of the mortgage loan. Though rare, borrowers can also assign their mortgage to someone else. These assignments are recorded with the county recorder’s office for legal purposes.

Your credit report will reflect the change in lender and any new loan terms. You’ll see the new lender’s name instead of the old one. If you default under the new lender, they will report this to Credit Reference Agencies.

Under the Property Act 1925, it’s a formal notification to the borrower that their debt has been acquired by a new company. This notice is required in cases of legal assignment.

The new creditor assumes the benefits and obligations of the debt. They may hire a collection agency or use other methods to recover the debt, often avoiding court action to minimise costs.

Assigning debt is often done to avoid the trouble of collecting it. Some may lack the resources to take legal action against debtors. If a third party, like a debt collection agency, can handle repayment collection more efficiently, it’s a preferred choice.

Could you write off some debt?

We offer free advice. May not be suitable in all circumstances. Fees apply. Your credit rating may be affected.

Related Post

Direct Earning Attachment (DEA) Guide

What Happens When You Avoid Paying Bus Lane Fine

AEO Fines on Your Payslip: What They Are and How to Manage

Bus Lane Penalty Charge Notice in the UK: Should You Pay?

Start reducing your debt repayments and regain control..., struggling with your debt you don’t need to do it alone. click here.

Feel free to visit our  Complaints Policy  and  Privacy Policy

DEBT SOLUTIONS

• Debt Management Plan
• Debt Consolidation
• Debt Arrangement Scheme (DAS)
• Sequestration
• 0800 056 6820 (Free Phone)
• Crescent House, Lever Street, Bolton, BL3 6NN

Feel free to visit our  Complaints Policy  and  Privacy Policy   Customer Charter

Debt solutions such as IVA, Debt Management, DRO and Bankruptcy will have a negative impact on your credit rating. As part of our service, we’ll look at your financial situation, explain the available options, and then recommend a debt solution which could be suitable for you. Depending on the solution, fees may be involved, which would be fully explained, and details provided in writing.

Should we determine an IVA is the most appropriate solution for you, we will pass your case to The Insolvency Group. Tracey Howarth (IP No: 16410), Mike Reeves (IP No: 7882) and Donald Harper (IP No: 9296) are licensed as insolvency practitioners in the UK with the Insolvency Practitioners Association.

“In the last 12 months, our IVA partner The Insolvency Group achieved a write-off of 70% or more of debts on over 50% of its cases.” Dated 10/07/2024

English law assignments of part of a debt: Practical considerations

United Kingdom |  Publication |  December 2019

Enforcing partially assigned debts against the debtor

The increase of supply chain finance has driven an increased interest in parties considering the sale and purchase of parts of debts (as opposed to purchasing debts in their entirety).

While under English law part of a debt can be assigned, there is a general requirement that the relevant assignee joins the assignor to any proceedings against the debtor, which potentially impedes the assignee’s ability to enforce against the debtor efficiently.

This note considers whether this requirement may be dispensed with in certain circumstances.

Can you assign part of a debt?

Under English law, the beneficial ownership of part of a debt can be assigned, although the legal ownership cannot. 1  This means that an assignment of part of a debt will take effect as an equitable assignment instead of a legal assignment.

Joining the assignor to proceedings against the debtor

While both equitable and legal assignments are capable of removing the assigned asset from the insolvency estate of the assignor, failure to obtain a legal assignment and relying solely on an equitable assignment may require the assignee to join the relevant assignor as a party to any enforcement action against the debtor.

An assignee of part of a debt will want to be able to sue a debtor in its own name and, if it is required to join the assignor to proceedings against the debtor, this could add additional costs and delays if the assignor was unwilling to cooperate. 2

Kapoor v National Westminster Bank plc

English courts have, in recent years, been pragmatic in allowing an assignee of part of a debt to sue the debtor in its own name without the cooperation of the assignor.

In Charnesh Kapoor v National Westminster Bank plc, Kian Seng Tan 3 the court held that an equitable assignee of part of a debt is entitled in its own right and name to bring proceedings for the assigned debt. The equitable assignee will usually be required to join the assignor to the proceedings in order to ensure that the debtor is not exposed to double recovery, but the requirement is a procedural one that can be dispensed with by the court.

The reason for the requirement that an equitable assignee joins the assignor to proceedings against the debtor is not that the assignee has no right which it can assert independently, but that the debtor ought to be protected from the possibility of any further claim by the assignor who should therefore be bound by the judgment.

Application of Kapoor

It is a common feature of supply chain finance transactions that the assigned debt (or part of the debt) is supported by an independent payment undertaking. Such independent payment undertaking makes it clear that the debtor cannot raise defences and that it is required to pay the relevant debt (or part of a debt) without set-off or counterclaim. In respect of an assignee of part of an independent payment undertaking which is not disputed and has itself been equitably assigned to the assignee, we believe that there are good grounds that an English court would accept that the assignee is allowed to pursue an action directly against the debtor without needing the assignor to be joined, as this is likely to be a matter of procedure only, not substance.

This analysis is limited to English law and does not consider the laws of any other jurisdiction.

Notwithstanding the helpful clarifications summarised in Kapoor, as many receivables financing transactions involve a number of cross-border elements, assignees should continue to consider the effect of the laws (and, potentially court procedures) of any other relevant jurisdictions on the assignment of part of a debt even where the sale of such partial debt is completed under English law.

Legal title cannot be assigned in respect of part of a debt. A partial assignment would not satisfy the requirements for a legal assignment of section 136 of the Law of Property Act 1925.

If an assignor does not consent to being joined as a plaintiff in proceedings against the debtor it would be necessary to join the assignor as a co-defendant. However, where an assignor has gone into administration or liquidation, there may be a statutory prohibition on joining such assignor as a co-defendant (without the leave of the court or in certain circumstances the consent of the administrator).

[2011] EWCA Civ 1083

• Financial institutions

Recent publications

Publication

AI-adoption in Australia under the privacy spotlight

AI-adoption must now be on every board room and executive team’s agenda as an emerging area of risk and regulatory focus.

Australia | October 30, 2024

Standing firm on an enforceable termination clause

A recent Ontario decision reminds us that (1) it is possible to draft an enforceable termination clause, and (2) responding to a wrongful dismissal claim does not have to be a lengthy, costly endeavour – some claims can be resolved quickly using procedural tools.

Canada | October 29, 2024

Pensions Ombudsman and PPF Ombudsman annual report and accounts 2023 to 2024 published

The Pensions Ombudsman and PPF Ombudsman Annual Report and Accounts 2023 to 2024 has been published.

United Kingdom | October 29, 2024

Subscribe and stay up to date with the latest legal news, information and events . . .

© Norton Rose Fulbright LLP 2023

• Canada (English)
• Canada (Français)
• United States
• Deutschland (Deutsch)
• Germany (English)
• The Netherlands
• Türkiye
• United Kingdom
• South Africa
• Hong Kong SAR
• Marshall Islands
• Nordic region

• Free Debt Assessment
• Individual Voluntary Arrangement
• Debt Management Plan
• Debt Consolidation
• Private Parking Fines
• Council & Police Fines
• Convicted Driver Insurance
• Equity Release
• Secured Loans
• Customer Stories

• Free Debt Assessment Back
• Knowledge Base
• Customer Stories Back
• About Us Back
• Contact Us Back

Deed of Assignment of Debt – Everything You Need to Know

Scott Nelson

Debt Expert

Scott Nelson is a renowned debt expert who supports people in debt with debt management and debt solution resources.

Janine Marsh

Financial Expert

Janine is a financial expert who supports individuals with debt management, cost-saving resources, and navigating parking tickets.

Total amount of debt?

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.

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 facing a ‘deed of assignment of debt’? Are you worried about a debt collector knocking on your door?

You’re in the right place. Each month, over 170,000 people visit our site looking for guidance on debt issues, just like this one. 

In this article, we’ll explain:

•  What a ‘deed of assignment’ is
•  What it means for your debts
•  Different types of assignment
•  Why companies sell their debts
•  Ways to handle your debt situation

We know how scary it can be when debt collectors get involved; some of our team have faced similar situations. We’re here to help you understand your situation and make the best choices.

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.

How much debt do you have?

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.

Deed of Assignment of Debt – the basics

Being in debt is confusing enough as it is. And it can get even more complicated when you get a letter through the door from a company you may never have heard of demanding (often in quite a strongly-worded way) that you make your payments to them instead.

What’s going on, you might ask yourself?

At the end of the day, the creditor will want the money that you owe back.

However, sometimes when an account falls into arrears , they won’t have the capabilities or resources to claim it back . This is when the original company you owe money might ‘ assign’ your debt . 

What is a Deed of Assignment of Debt?

This is notice that tells you that you now owe a debt collection agency or another collection service the money you originally owed to the creditor .

Instead of paying the company you might have originally owed money to, you now owe a third party company. 

A deed of assignment of debt is a legal documen t alerting you of the transfer of ownership of your debt to another person. The right to receive payment from the debt you owe is transferred over to this new party as well.

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:

Monthly debt repayments

£429 reduction in monthly payments

If you want to  learn what debt solutions are available to you,  click the button below to get started.

What does it mean?

A deed of assignment of debt is used to transfer or sell the right to recover a debt .

Without a deed of assignment of debt, the two companies are not able to do this – you need a written transfer document. 

Once the transfer document, or deed of assignment of debt, has been signed by the assignee (the party transferring the debt) and the party receiving the debt ( assignor ), they must give notice to the debtor (the person that owes the company the sum of money).

Notice must be given within 7 days of assigning the debt. Unless someone gives notice to the debtor, then the new owner of the debt can’t enforce the debt by suing in court.

Is there more than one type of assignment? 

Confusingly, there are actually two different sorts of assignment that a creditor can make. These are Legal and Equitable.

Both types of assignment fall under the Law of Property Act 1925 , and both require the creditor to inform you of the change in writing – this is known as a notice of assignment of debt .

1. Legal Assignment

Legal assignment of debt gives the company who are purchasing the debt the power to enforce it .

Basically it means that you make payments to this company instead of the original creditor, and they can send you letters and make calls to your home.

2. Equitable

If a debt is an equitable assignment, only the amount you owe is transferred , and the original creditor will still retain the original rights and responsibilities .

The purchasing company will not be able to enforce the debt either.

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.

I’d recommend this firm to anyone struggling with debt – my mind has been put to rest, all is getting sorted.

Reviews shown are for The Debt Advice Service.

Why do companies sell their debts?

A deed of assignment of debt can be a real headache, as you now have another layer of money owed. You will probably rightly ask yourself – why? And how can they sell it?

It may seem strange and confusing, but it’s actually completely legal for them to sell your debt . When you sign a credit agreement, there is almost always a clause in fine print that states that the original creditor has the power to assign their rights to a third party.

As you have signed this agreement, they don’t actually need to ask for your permission to assign your debt.

This also means that you cannot dispute it or make a complaint about it either. The only exception to this rule is if you have given evidence of mental health issues .

» TAKE ACTION NOW:  Fill out the short debt form

What are the next steps?

So that’s the basics about a Deed of Assignment of Debt. But what does this mean for you? 

If your creditor passes one of your debts onto a third party company or debt collection agency, it will be officially noted that this new company is now responsible for collection .

You will be able to see this change on your credit report , and any defaults will also be registered in their name too. 

While it certainly adds another layer of confusion to proceedings and you may be unsure of what’s going on when you find out about a deed of assignment of debt, it can occasionally be a bit of a blessing in disguise. 

You may find it much easier dealing with the new company, as they could be more flexible when it comes to discussing interest and additional charges.

There is also the likelihood that these companies actually specialise in collecting debts , and so know how to approach you as the customer with more tact and delicacy than the original creditor.

Is there something missing? We’re all ears and eager to improve. Send us a message and let us know how we can make our article more useful for you.

You can email us directly at [email protected] to share your feedback.