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Letters from creditors

When you miss payments, it is common for creditors to send letters that threaten further action such as court action or sheriff officers.

Often creditors will describe ‘possible’ action rather than what they are actually going to do. If you read these letters carefully, you will usually find they refer to actions they ‘could’ take or ‘may’ take.

We recommend that you do not ignore these letters. Some will be regular statements or reminders, but others such as default notices or letters from collection agencies are more important. In some cases, creditors take court action and send important legal paperwork to you through the post.

While some letters are designed to put pressure on you to make payments, some are more serious. In all cases, creditors must follow Office of Fair Trading (OFT) guidelines on fair debt collection when writing to you.

Legal action is costly to any creditors and as long as you can show them you cannot afford their payment, they are likely to accept a reduced payment towards the debt. The consequence may be that you cannot use the credit facility any more, or borrow any more money from that creditor, but this is better than legal action.

Free debt help from CCCS

If you are worried about your debts and need help with any letters sent to you by creditors, make sure you get free, impartial debt advice as soon as possible. For an instant assessment of your situation, use CCCS Debt Remedy, our online debt counselling service, available 24 hours a day.

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FAQs

How do I recognise a default notice?

A default notice will clearly state at the top of “This is a default notice served under section 87(1) of the Consumer Credit Act”.

There are several other important points that must be listed:

The type of credit agreement
The terms of the agreement which have been broken
The action that is required to prevent the account from defaulting, this is usually to pay off all arrears by a certain date
What action the creditor intends to take if this is not done. For instance, pass the debt to a collection agency or proceed with court action

How does a default notice affect my credit file?

The fact that an account has defaulted is recorded on your credit file for six years, and will make it harder to obtain credit for that time. A credit agreement can only default once.

Creditors often talk about default notices in terms that make them sound like a serious threat. If you want to preserve a good credit rating they are a valid threat. But if you have a record of missed or late payments and are having trouble managing your debts, your credit rating will be affected already.

Who can I speak to if I have a complaint about a debt collection agency?

To make a complaint about a debt collection agency you should complain to them directly in the first place.

You can also contact the original creditor to complain.

Collection agencies must have a consumer credit licence to trade, so if your complaint is not resolved within eight weeks it can be referred to the Financial Ombudsman Service who can investigate the matter on your behalf.

Many collection agencies are also members of the Credit Services Association who have their own complaints process.