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How Do Banks Collect Foreign Debts in The UK?

14 July 20223 min readby Tom Miskelly

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Foreign debt collection

When it comes to foreign property debt, you can imagine the number of enquiries we receive from potential clients who are concerned with their situation. However, the most common question we receive is:

“Can a foreign debt be collected in the UK?”

The answer, unfortunately, is yes. A lot of people who purchased property abroad are under the assumption that once you ‘hand the keys back’ or no longer pay your mortgage and go back to the UK that you are no longer liable, this is not the case, and cross-jurisdictional pursual tactics are on the rise, more so now than ever. But what are the methods and tools used by Banks to collect debts in the UK? It is important to understand what you are facing if you’re in this predicament, in this article, we will be looking at some of the common practices employed by lenders to collect debts in the UK.

Out of sight, out of mind?

Sadly, this saying doesn’t apply when it comes to foreign debt. Many people have been given advice that leads them to believe they can stop paying their mortgage, leave their property or hand back the keys and face no consequences. However, we can assure you this is not the case. If this is something you have done, you’re probably asking yourself what action the Bank could take against you…read on to find out.

European Enforcement Order

EU Law created this easy approach to collecting debt across member states. Many thought that lenders could not collect foreign debt in the UK after Brexit, but these laws still apply to the UK. They can be used by lenders in any other EU member states, including Spain and Cyprus.

This order means that the courts will be recognise your debt in the UK and will open the door to allow your lender to apply to courts in your home country. This can result in a County Court Judgement or a Statutory Demand being issued against you.

UK Solicitors

Often, instead of pursuing you themselves, the lender will appoint a solicitor in the UK to do the ‘heavy lifting’. They will approach the situation in a very similar way, usually using:

  • County Court Judgments (CCJs)
  • Statutory Demands
  • Bankruptcy proceedings
  • Charges on your UK property

The key difference here is that these UK-based legal firms are much more aggressive and persistent in their pursuit of foreign debts. European Banks are slow and clumsy when it comes to recovering their money but plenty of these legal firms have teams dedicated to UK debt recovery. They know their work and have the stamina to continue hounding you.

Vulture Funds/Loan Sales

This option is becoming extremely common as European lenders look to get rid of some of their ‘bad debt’. It involves the sale of your mortgage to a third-party company, a few of the well-known names include:

  • E&G Solicitors
  • Axactor
  • Pepper Finance
  • LCS Debt Recovery

Often, you can go years, or even decades, without hearing from your original lender. So, it can be a nasty surprise when you get a letter through the door informing you that your lender has sold your loan!

There are a few reasons why vulture funds need special care and attention:

  • They are more commercial and more aggressive than traditional lenders
  • They are harder to negotiate and settle with
  • They can change the terms of your loan agreement
  • They are better at recovering cross-jurisdictionally compared to Banks

You can find out everything you need to know about vulture funds in this article. Click here to read Part 1 or here for Part 2.

Don’t panic…

If you have left any outstanding property debt in another country, it is very likely your lender will use one, or a combination of the above, to recover your foreign debt in the UK. This could put your personal finances, assets and pension at risk.

It is not all doom and gloom. EU Property Solutions are experts in protecting your UK finances from foreign banks. Over the past 10 years, we have saved our clients over £13 Million in property debt issues. If you are worried about a foreign property or would like advice on your situation, you can contact us for an obligation-free call on 0330 124 1230 or email us at [email protected]

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