Mr A asks:
I have had an arrangement with a debt collector for a number of years, paying £10 a month.
They have sent a letter asking for a review.
Do I have to do this? Can they do anything if I just continue with my current payments?
You don’t have to give these numbers but…
It is a good idea to give revised details
Everyone was happy when the arrangement was set up.
Mr A was relieved this debt was “sorted” in a way he could afford.
The creditor was getting some money and knew Mr A was paying a fair amount.
A few years later, Mr A is still happy, he doesn’t mind carrying on paying this. But now the creditor is wondering if Mr A can pay more.
This may feel unfair – you have kept your side of the bargain, why does the debt collector want to change it?
But this sort of arrangement is not a formal long-term contract. It is just a temporary agreement with the creditor to accept less than the original contract said because you were in financial difficulty.
You don’t have to send them a new Income & Expenditure (I&E) form. They can’t make you!
But if you don’t, they may think you do have more money … in which case they may decide to start adding interest again (that is most likely with the original lender) or take you to court for a CCJ (that is most likely with a debt collector).
So it’s better to give them your revised income and expenditure details.
Make sure your numbers are up to date
It’s worth thinking about what your expenses actually are – it’s easy to miss off things if you don’t budget in detail. And inflation has been pushing up a lot of expenses.
So make sure you have the new energy bills, council tax, mobile bills etc. And probably a much larger amount for food than when you first set up the agreement.
Using an online tool such as National Debtline’s My Budget can help you to get a full list. You can also download the Inome & Expenses from there to show your creditor if you want or just use the numbers to complete the debt collector’s form.
Do you have arrears of important bills? Or may you have soon?
If your situation is bad, this is your chance to ask for your payments to be reduced, not increased.
In particular you should highlight to the creditor if you have arrears on any priority debts such as rent, council tax or energy bills. Or if you know there are big problems ahead eg when you mortgage fix ends later in the year.
Here you should ask for your current payments to be reduced so you can clear the arrears. This could be down to a token £1 a month payment.
I am in a DMP – do I still have to do this?
Some people prefer to use a DMP firm as it means making only one payment per month and not having to deal with their creditors directly. A debt management plan run by a DMP firm is essentially a series of debt arrangements made with creditors.
In a DMP a creditor won’t usually ask you to send them a new I&E.
But if one does, just send the letter to your DMP firm – it’s their job to deal with it!
Your DMP firm will do an annual review with you. This will include doing an updated I&E. This will look at whether your payments should increase or decrease. And at whether there are now nay better debt options for you. If you are finding the DMP payment hard to manage, you can ask for a review in mid year.
What are your other options?
Getting a letter from a debt collector asking for a payment review is a good time to think about your other options.
You may be very happy paying that £10 a month, but it isn’t clearing the debt very fast…
Four things to think about:
- could you make a settlement offer? A debt collector may be happy to take an offer and it would sort this debt out. A debt that has dropped off your credit record will not reappear if you settle it. And if it is defaulted, it will still drop off your record after 6 years from the default date.
- can the debt collector produce the right paperwork? If the debt is a loan, credit card, catalogue or Hire Purchase, read How to ask for the CCA agreement.
- could you win an affordability complaint? This would be against the original lender, not the debt collector, but if you win then the lender will sort out the debt with the debt collector.
- do you have a better debt option? Talk to National Debtline on 0808 808 4000.