Getting a debt written off is unusual.
This should probably not be the first thing you think of if you have problems paying your bills and debts.
But there are some situations where a write-off should be considered by the creditor, so this article looks at these “good cases”.
When should you ask for a write-off
There was something unfair about the original contract
If you have a good case for saying that there was something wrong with the original contract, then if you ask the creditor to use their discretion and write off the debt they will sometimes agree.
The types of problems could include:
- you were under 18 ;
- you weren’t capable of agreeing to the contract (for example because of a learning disability, drink or drugs);
- you were pressured to take out the debt whilst you were in an abusive relationship which has now ended. It is only in the last few years that Financial Abuse has starting to be recognised as the serious problem it often is;
- you have a long-term mental health condition that makes you particularly vulnerable;
- you were sold something that was clearly completely unsuitable and this was financed by a loan organised with the sale;
- if the lender had not checked the debt was affordable they may be in breach of the Financial Conduct Authority’s CONC 5.2A rule – but this usually means that interest is removed from the debt, rather than it being written off;
- the terms of the contract were misleading.
Sometimes it can be argued that there is no valid contract at all, or you may have a legal remedy because the contract was unfair. But it may not be clear what a court would decide and you may not want to go to court or may not be able to afford it so it can be better to ask for a discretionary write-off. The creditor may also be uncertain what a court would decide and so may agree.
If the creditor doesn’t agree, you may be able to take your complaint to the Financial Ombudsman, saying the creditor has not treated you fairly and explaining why. This is much less informal and scary than going to court!
Payday loans are a common example of the failure of the lender to check affordability. These are covered in more detail in Can I get payday loan compensation? because this applies not just to asking for outstanding debts to be written off, but also to loans that were repaid. Here you aren’t actually getting a debt written off, you are getting a refund of interest you paid on earlier debts which is being used to repay the debt which is still outstanding.
You have been paying a small amount for a long while and can never repay the debt
Here you agree you owe the debt, but your situation is now that the small payments you are making will never repay it. For example you may have a big shortfall from a house repossession and now be retired on a small pension. Or perhaps you have a long term health problem that means you are very unlikely to be able to return to earning a good wage.
The longer you have been making small payments the more likely this is to be accepted. If you don’t have any assets that also makes it more likely. And if you have mental health issues now, which the debt repayments are making worse.
I don’t want to give the impression this is is easy, but creditors in 2021 are more sympathetic than they used to be if you have been trying your best for a long while but it is obvious that the debt is just impossibly large.
Here is a case where the Financial Ombudsman decided Vanquis should write off a debt where a customer had long-term major health problems, had to retire early and was getting Personal Independence Payment. As a result she could only pay a token £1 a month to Vanquis which would never clear her debt and was causing her stress.
The debt collector can’t produce the Consumer Credit Act agreement
This isn’t legally a write-off – but the end result is you can stop paying anything so it’s much the same!
This is more likely to work for pretty old debts. And is unlikely to work unless you have defaulted and the debt has been sold to a debt collector.
Here you can ask the debt collector (NOT the original lender) to produce a copy of the CCA agreement for the loans, credit card or catalogue. If they can’t, then the debt is unenforceable and though they haven’t written it off you can stop paying as they can’t take you to court.
See When to ask for a CCA agreement for the details of how and when to do this.
Unaffordable council tax arrears
If you have council tax arrears and no possible way of paying them, even over quite a long time or by deductions from your benefits, then you can ask the council for a Section 13A discretionary write off. You are likely to have to prove you have absolutely no spare income or assets.
If you want to try this, go and ask your local Citizens Advice for help in drawing up a budget to show the council and to write the letter.
Pressured into a loan?
Guarantor loans from lenders such as Amigo have become increasingly common since 2016. There can be the potential for someone to be pressured into taking out a loan by their partner (or some times ex partner or a family member you live with) as the example here show: Guarantor loans – open to financial abuse.
In 2019 guarantors started to win a lot of complaints about these loans. There is a template letter here you can use: How to complain when you are the guarantor for a loan.
Here you aren’t asking for the loan itself to be “written off”, you are just asking that you should be removed as the guarantor. If you do win, you are released as the guarantor and any money you have paid is refunded to you.
This approach can also be used if you were made to take out a non-guarantor loan for someone else. Very often it will depend on whether the lender should have realised what was happening – here is an Ombudsman decision about a customer who was pressured into taking out car finance for her partner where the Ombudsman found:
I accepted that Ms C’s partner had exercised undue influence over her to force her to enter into the hire agreement. I also thought the circumstances in which she signed the agreement were such that VWFS was on notice of the likelihood of undue influence. It should have taken steps to ensure that Ms C was acting of her own volition but did not do so. I noted that Ms C had told VWFS very soon after she signed the agreement what had happened.
If you think it is obvious you could never have afforded the loan, you may be able to win simply arguing that.
But if there is financial abuse involved and you are worried about how to “prove” this, I suggest you go to your local Citizens Advice and ask for their help.
Is there a better alternative?
There are a couple of situations where you usually have a better option than asking for a discretionary write off:
- if you didn’t take out the debt, you should instead tell the creditor to produce evidence that it is yours;
- if there has been no contact between you and the creditor for more than 6 years, then it may be unenforceable in court because it is too old, see Statute barred debt for more information.
If the debt concerned is part of a bigger debt situation then it may be simpler to just tackle that. The creditor lending to your mum in the early stages of Alzheimer’s may well have been irresponsible, but if the overall picture means that bankruptcy or a DRO is the best option, there is little point in trying to wrestle with a lot of creditors over individual debts.
How to ask for a write-off
Think what evidence you have to support your case. Often this won’t refer specifically to the debt, but it will help explain your situation. Examples include:
- any benefits letters showing that you or someone in your family is in receipt of disability benefits;
- mental health issues are more likely to be accepted as a reason for a write-off if you can supply a DMHEF (Debt and Mental Health Evidence Form);
- a letter from the refuge you went to when escaping from an abusive relationship;
- a letter from your doctor or copies of prescriptions, clinic appointments;
- if you are helping someone with learning difficulties and they attend a course at a local college, then a letter from their tutor could help.
Then you need to write a letter to the creditor, enclosing any evidence.
This is one situation where can often be helpful if the letter comes on headed paper from an expert rather than from you, so go to your local Citizens Advice office to get help. They can also help you get a DMHEF form.
If you do want to write the letter yourself then:
- start off by saying that you are a vulnerable customer because of your health problems (or domestic abuse or other reason) and say you would like your request to be considered by their Vulnerability team;
- enclose any of the “evidence” mentioned above that you have;
- enclose a Budget Statement with the letter if you can’t afford the debt repayments. That link is to a National Debtline calculator, that will print out your income and expenditure in a format your creditors will be familiar with – if you aren’t sure what to put in, call them on 0808 808 4000 for help;
- enclose any benefits letters that prove you are on Universal Credit, JSA, ESA or Pension Credit. Creditors may be more likely to agree to a write-off if it is clear you aren’t going to be able to repay the debt anyway;
- if you are never going to be able return to work because of your health or age, point this out;
- if you think there was something wrong with the original contract, make it clear that you do not accept you are liable for the debt but you are asking the creditor to agree to write the debt off rather than incur the expense of legal action;
- refer to the CONC 5.2A rule (see above) if relevant
- think whether it is worth saying if the creditor rejects your request for a write off they should supply you with a copy of the CCA agreement for the debt. See How to ask for a CCA agreement if you want to do this.
- check if the creditor is a member of a Trade Association or Professional Body. If they are, check if there is a code of conduct that they may have broken.
How two different banks reacted
This article M&S waived my dementia-suffering husband’s credit card debt… so why did Co-op Bank refuse to? shows that some creditors are getting better at handling these situations, but that some still have a way to go:
- M&S wrote off a credit card debt when they were sent a letter by Age Concern and the card holder’s care home confirming his dementia;
- the Co-op didn’t until the newspaper challenged it… It later said this was because the monthly payments were still being made so the case was never looked at by its vulnerable customers team.
Pros gets rid of a debt completely
Cons can be very hard to get creditors to agree so a ‘debt plan’ based mainly on this will have a low chance of working if there are multiple debts
Debt Camel says Think about getting help to write the letters if you want to try this.