‘They are ruining my life’: how the shadowy world of debt collection can wreck your finances

James Barnett and his partner were preparing to buy their first property together. On the advice of their mortgage broker, Barnett checked his credit record before applying for a loan. That’s when he discovered a county court judgment (CCJ) had been filed against him for a debt he knew nothing about.

“The case concerned an unpaid Thames Water bill for an address I had never lived at,” he says. “This catastrophic mistake has wrecked my credit score, cost me the property purchase I have been saving my whole adult life for, and left me financially paralysed.”

Barnett discovered that Thames Water had linked his name to a £550 debt accrued by an unknown resident in his block of flats. Despite the fact he was a Thames Water customer, with his address on its system, it set up a new account in his name under the address of the vanished debtor.

Reminder bills were posted to that empty flat. Eventually, Thames passed the account to a debt collection agent, and notices of legal action were sent to him at an old address he had left five years previously.

The court then filed a default judgment against him, in his absence, in July last year. The impact on his credit score could leave him unable to borrow money, take out a credit card or even apply for a mobile phone contract.

Barnett is one of many caught in the shadowy process of debt recovery. A stranger’s bill can be passed in their name down a chain of companies until they reach the courts, without them knowing anything about it.

Some unrecoverable debts are sold to acquisition companies which pay a fraction of their value, then deploy assertive tactics to identify the likely debtor and claim the full sum.

Companies use publicly available records, such as credit reference agency records and the electoral roll, to trace the location of a debtor. An individual might be targeted on the basis of a shared name and date of birth, an address in the same block or street, or even records showing they have lived within a radius of several miles.

Legislation is supposed to ensure debtors are correctly identified, but incomplete records, or sloppy sleuthing, can lead to the wrong person being pursued and the consequences for their finances can be catastrophic.

Thames Water, itself indebted to the tune of £15bn, told the Observer it had used credit reference agency records to match Barnett to the defaulted account, despite its own records showing he was a customer at a different address.

When the bills it sent to the empty property went unanswered, it passed the debt to recovery specialist Just Debt to enforce. Just Debt subcontracted debt collectors TM Legal to start legal action. It then sent notifications to a property Barnett had left in 2018.

According to the Information Commissioner’s Office, which regulates data protection, debt collectors are legally obliged to ensure that the information they hold about a debtor is correct. In Barnett’s case both companies blamed each other.

Thames Water says it expects agents acting on its behalf to make additional checks to verify liability, and questions its processes. TM Legal told the Observer that it had acted on incorrect information about the account holder provided by Thames Water, and had taken “reasonable steps” to establish Barnett’s current whereabouts by checking credit reference records.

TM Legal applied to the court to have the CCJ set aside in July, but Barnett has received no updates on progress, and his credit record remains compromised. Thames Water has offered him £60 in goodwill to reflect the “distress” and says there is nothing more it can do.

GP Amala Gupta* was also chased for a stranger’s unpaid Thames Water bill after the company wrongly identified her as the account holder. The debt was sold in 2022 to a third-party company which recruited law firm BW Legal to recover it.

Gupta was informed that she faced court action unless she handed over £146.61 within 14 days. The letter addressed her by her maiden name, which she has not used for 16 years, and related to a property she has never heard of, in a different London borough from the one she has lived in since 2011.

“BW Legal insisted that I prove that I do not owe the debt,” she said. “They want evidence that I did not live at the address and that I changed my name, and invited me to check the information they say they got from my credit reference agency records.

“I have done so. Not only do they unsurprisingly show no link to the debtor address, I can see that BW Legal searched the record themselves three times and, despite there being no association with the address in question, still chased me.”

BW Legal told the Observer that its searches had identified Gupta as the only person with the same name and date of birth as the debtor living within an eight mile radius of the supply address. It said that it halted recovery action when Gupta disputed liability, and had since closed the file after receiving proof that she had not lived at the property.

TM Legal and BW Legal are signed up to the Credit Services Association, a trade body for the sector, which said that it was “relatively rare” for innocent parties to be asked to prove that they were not the debtor, and that collection agencies should not insist they provide evidence.

It also said victims of mis-traces should be told the source of the information used to identify them. “We expect members to take reasonable steps to verify the information supplied as part of the tracing process, and only send debt collection correspondence to the ‘customer’ using the data provided if they are confident the data is accurate,” it said.

“A member may first send a ‘soft’ communication, which does not provide details of any debt, but instead tries to verify that the information they have for the ‘customer’ is correct.”

Victims of mis-traces can complain to the Information Commissioner’s Office and, if the company is a member, to the Credit Services Association if records linking them to the debt are not promptly corrected.

However, a mis-trace can have a life-changing impact long after the collections agencies are called off.

Instead of buying his first home, Barnett has been forced to move back in with his parents while he waits for the CCJ to be set aside and his financial reputation restored.

“The final damning piss-take from Thames Water is that I keep getting automated emails asking ‘How did we do?’ he says. “The answer is, they are ruining my life.”

* Name has been changed