Question
If a specific company which is owed money by a customer decides to sell the debt owed to them, due to the despondency of recovering the debt from him, to a debt collecting agency, then according to Islamic Law who will be considered the creditor in this case, the company or the debt collecting agency?
Answer:
ﺑﺴﻢ اﷲ اﻟﺮﺣﻤﻦ اﻟﺮﺣﯿﻢ
In the name of Allah, the Most Gracious, the Most Merciful
Firstly, it is important to note that selling debts is prohibited in Islam because it is an interest-based transaction. Allah ﺗﻌﺎﻟﻰ says, “And Allah has made permissible trade and forbidden usury.” (2:275) Furthermore, the new creditor in this particular scenario will be the debt collecting agency since the company (i.e. the original creditor) has officially closed the account of the debtor, thus the debtor will no longer have the option of paying the original creditor because they no longer own the debt. In conclusion, the original creditor will have nothing to do with the debtor after selling their debt, and the debtor will be obliged to pay the new creditor, i.e. the debt collecting agency.
Only Allah knows best
Written by Maulana Mohammad Ahsan Osmani
Checked and approved by Mufti Mohammed Tosir Miah Darul Ifta Birmingham