A reader asked what she should do as her reasonable Full & Final settlement offer had been rejected. It’s going to seem obvious, but the creditor rejected the offer because it didn’t seem reasonable to them.
You may be thinking “I paid off the amount I borrowed ages ago, their interest is too high” or “They probably bought this debt for pennies, so they should be happy to accept 10%” but that’s not the way your creditors think. They are running a business which means they want to get the most money that they can from you.
So if your F&F has been refused, you need to look at your offer through the eyes of your creditor and think why they would have rejected it, and then use that to decide what to do next.
Your creditor thinks you can afford to pay more each month
You know you can’t but you have to prove this with detail, not just say it.
If you enclose an Income & Expenditure statement with a settlement offer, the creditor can see your full situation. This calculator has an option to print off a version to send to your creditors.
If your health is poor, you should think about enclosing some information about this – say a copy of a hospital appointment – it’s all evidence about your situation. If your only income is from benefits, enclose a letter about your Universal Credit, disability benefit or Pension Credit to prove this.
It’s too soon for this offer
If you have just lost your job, you may know that you won’t be able to find another one at the same money and your situation is just going to get worse, but creditors will rarely accept F&F offers before you have defaulted on your debts.
And if you have only missed a few months payments they are unlikely to accept a low F&F. Here is a reader asking about his case, and my reply.
In this situation, the best thing is usually to set up a Debt Management Plan(DMP) or making £1 a month token payments. You can then revisit the idea of making a settlement offer in a year or two.
At that point your creditor will have realised that you weren’t kidding and that you really do have difficulties.
It is also often much easier to get a F&F offer accepted after your debt has been sold to a debt collector, so that can actually be good news when it happens.
It’s not high enough
This partly depends on how long you have been making no or reduced payments – the longer time, the more likely your creditors are to accept a low offer. It also depends on how large your monthly payments are – if the full debt will be repaid in 3 or 4 years, then your creditor isn’t likely to accept a 20% F&F.
One option here is to make a larger offer to one or two creditors. So if all your creditors refuse a 30% offer, then you could consider offering a couple of them 50%. Of course it would have been better to sort out all your debts, but clearing some of them out of the way will mean the remaining ones are faster to repay.
It’s not clear where the money is coming from
If the money for the F&F offer is coming from a “one-off” source – perhaps you have reclaimed PPI or it is redundancy pay – then explain this in your F&F letter, so your creditor will realise that they may as well accept as there isn’t going to be any more on offer. If the money is a gift from a relative you could say “I am being offered this money by my brother if it will assist in securing a settlement of my debts”.
(NB If you have been made redundant and are going to find it difficult to get another job, then think about your essential bills – mortgage, food, utilities etc – before using your redundancy money to clear unsecured debts.)
They know you have assets
If you owe a lot of money to a creditor, especially if the creditor is your bank, then they may have decided to look into your finances in some detail and realise that you own a house with a lot of equity in it. That doesn’t mean they will never accept a F&F, but it is unlikely that they will accept a really low one.
If you have been making very low payments for a lot of years, not just a few, AND the debt has been sold to a debt collector, look at this alternative approach: When and Why to ask for the CCA agreement for a debt.
It is rare for a creditor to accept a partial settlement on a secured loan. Even if you can demonstrate that you have negative equity, most secured lenders or creditors who have got a charge on your house will usually reject an offer.
Summary
Your options come down to some combination of:
- repeating your offer with more information about your situation and/or where the money for the offer is coming from;
- offering more to a few creditors; or
- waiting a while then repeating your offer.
How a F&F affects your credit record
When can you get a default deleted?
Can you get a mortgage if you are in a DMP?
Hbeiber says
Hi , no mention at all of seven day offer
Sara (Debt Camel) says
Well it’s up to you if you can be bothered to go back and argue about this. If they say now it was a time-limited offer but that wasn’t made clear to you at the time, you could.
Lucy says
Hi
I have a joint unsecured loan for £12700 with my husband. Was part of a mortgage taken out in 2006 but we had to sell in 2014 with negative equity. Last payment made in June 2014 and recorded as defaulted on my credit report. No CCJs, we made an offer of £3k in May 2017 that they turned down. No correspondence from them at all until May 2020 informing us we’d get a letter with a new Ref number. So, debt sold on I assume.
I requested a CCA which they have now provided so we’d like to make a f & f offer. I know you don’t have a crystal ball but would they accept an offer of 10%?
Both our jobs are questionable as COVID-19 continues and we have 2 small kids and are in rented accommodation
Any advice gratefully rec’d
Best wishes
Lucy
Sara (Debt Camel) says
What happened to the negative equity? What other debts do you have? Where us the F&F money conjugal from?
Lucy says
Hi Sara
We sold the flat which covered the mortgage but the loan was part of the borrowing to buy the flat if that makes sense? We don’t have any other debts. My dad is lending us £2500 for f & f offer
Lucy says
They have just turned down our offer after providing all evidence that we have no money to enter into a monthly payment plan. What would you suggest we do!
Sara (Debt Camel) says
It would seem that your options are:
1) offer a token £1 a month to the debt if you can’t afford any more, see https://debtcamel.co.uk/token-payment-debt/. Plan to reoffer the F&F every year until they give in and accept.
2) both get a debt relief order, see https://debtcamel.co.uk/debt-options/guide-to-debt-relief-orders/. This is a form of insolvency like bankruptcy. talk to National Debtline om 0808 808 4000 about this, the pros and cons and whether you are eligible for a DRO. If you aren’t it would be bankruptcy instead
3) do nothing. If/when they start threatening legal action offer the F&F then and say you will be going for a DRO/bankruptcy if it is refused.
Did you make it clear the money for the F&F was coming from a relative not from you?
The advantage of going for a DRO/Bankruptcy now is it gets it all over and done with. If you had done this in 2014 the debt would be long gone and your credit record would be clean. It also saves your dad £2500…
I think it would be good for you to talk to National Debtline now. letting this sort of thing drift on is stressful and often you have to go for bankruptcy in the end anyway.
Lucy says
Yes I told them the f& f was coming from my dad. I’m going to see if I can stretch the 40% offer. Really don’t want a DMO or bankruptcy as our jobs would be affected. How long does a partially paid stay on your credit file?
Sara (Debt Camel) says
Is the debt currently showing on your credit record? It shouldn’t be…
Lucy says
Yes, it’s showing as a default account. NRAM also did a hard debt collection search last month
Sara (Debt Camel) says
A default date should have been added in 2014, or possibly early 2015. If it is much later than that, ask them to backdate the default.
A partial settlement market doesn’t affect your credit score. A partially settled debt will drop off at the same time a fully settled debt would – 6 years after the default date or, ir there is no default date, 6 years after the settlement date.
What are your jobs as very few are actually affected by a DRO?
Steve says
Hi Sara
I have been in a DMP since 2011 for 4 old credit card debts and have been making the regular monthly payments since then. Due to their age the debts and default notices no longer show on my credit report. Now due to COVID-19 and its impact my employer has proposed a firm-wide pay cut, and has just completed a voluntary redundancy process. The relative lack of take up on this has meant they are now looking at compulsory redundancy, and all staff are potentially at risk of this. Just the proposed pay cut will make it impossible to make the regular DMP payments. Due to the financial position and the resultant stress this is causing, I took steps and after requesting / obtaining the original CCA’s, I submitted F&F offers to the creditors as my mother has offered to provide funds for this. Today the first response came back – my offer was rejected, and their counter offer was for 95% of the remaining balance. My fear is that the other creditors will follow suit in a similar manner.
Any advice on next steps gratefully received.
Sara (Debt Camel) says
That was unlucky, to have all 4 debt collectors find a CCA agreement from before 2011.
I suggest you wait 6 months and reduce your DMP payments if your income is reduced. then you can make a lower offer and may have it accepted.
Paul says
Hi there,
My wife and I have had a joint business overdraft debt of £23,000 with Santander since our company went into liquidation 8 years ago. Unfortunately, we had signed personal guarantees and so we were liable for the debt ourselves. We have been in a payment plan for those 8 years and have been paying £15 per month towards the debt for the last 6 years or so. We recently contacted Santander Collections & Recoveries by letter to ask if they would kindly consider a partial settlement figure of £900 (by way of a gift from my mother), to rid ourselves of this debt once and for all. We provided them with our current income/ expenditure details. Also informing them we have other debts and are still in arrears with our mortgage.
The Santander Head of Collections & Recoveries, G P Rymer, replied yesterday by letter stating they were unable to accept our reduced payment offer and that we continue making our agreed payments. We are gutted as they didn’t come back to us with an alternative settlement figure.
I understand that we are indeed liable for the debt but my question is do you think we could respond by asking them to reconsider their decision, or let us know the bottom line they would be willing to accept, if anything ?
It would help if you could advise of any similar scenarios and their outcomes.
Thank you.
Sara (Debt Camel) says
To answer your questions, yes you could ask them to reconsider but it is unlikely they will for several reasons. This debt cannot become statute barred as too old as you have been making payments towards it. It is a large debt so the creditor could if they wanted go to court for a CCJ and charge over your house. It is a business debt so scenarios about consumer debts are simply not relevant.
But why are you worried about this? Why not sit back and carry on paying £15 a month? Any spare money from your mum would be better used to help with the mortgage arrears or any high interest debts you have.
How large are your other debts? Have you taken debt advice?
Pezzza says
Thanks Sara. Not particularly worried, I can see what you’re saying, we can still afford the £15 monthly payment, we just wanted it cleared and off our heads after having it for so many years. At this rate it would take more than 120 years to clear!
Do you think it would still be classed as a business debt when we signed ‘personal’ guarantees for the overdraft?
Yes, we took debt advice from StepChange at the time we lost the business but decided to handle the problems ourselves rather than enter a DMP.
Yes, we’ve had a few other debts from when we lost the business.. personal credit cards, a few of which we have just partially settled and the last one which we have requested CCA for. We pay £1 per month towards it. The Santander debt is by far the largest though.
Because we feel we are making headway with the other debts we were keen to tackle this one as well, albeit a little cautious for reasons you mentioned, ie. a charge over the house.
Lastly, there is one old British Gas debt for around £400 which we pay £1 per month for. It was passed to a company called BPO a few years ago. Is this a debt we could offer a partial settlement to for a minimal amount?
Thanks again.
Sara (Debt Camel) says
Do you think it would still be classed as a business debt when we signed ‘personal’ guarantees for the overdraft?
yes.
I suggest you sit back, carry on paying off your other debts and the clear those mortgage arrears and make the offer again in a year.
Pezza says
Okey doke, thanks Sara
Lisa says
Hi Sarah I am looking to make a full and final settlement offer to moorcroft the balance outstanding is £14,800 from an original £25k loan dating back to 2009 they are managing it for Lloyds tsb. In the sample letter it states If you accept this offer, please confirm that you will mark my credit reference agency file to show that the above account has been paid and closed. However this debt dropped off my file years ago.
Should I just omit this line or leave it in. I don’t want it back on my file.
What do you advise please?
Sara (Debt Camel) says
That is a lot of money you are offering – can you afford that much? How much are you paying each month?
Lisa says
Sorry my message has not explained the facts very well my parents are offering me £2,100 as a gift to offer as a f&f settlement. My monthly payments are currently £21.00 per month on a dmp. It would take nearly 10 years to pay that amount off and I don’t think paying £21 per month I will ever clear the debt as I would still have over £12k left to pay after 10 years. It will take 60 years to pay back in full and I’d be over 100 by then if I live that long!
Sara (Debt Camel) says
ah right. so it isn’t you offering the amount, it is a relative.
I suggest you add a statement to the F&F offer letter explaining where the money will be coming from and that it will only be offered in final settlement of the outstanding balance.
You can change “If you accept this offer, please confirm that you will mark my credit reference agency file to show that the above account has been paid and closed.” to “This debt has already dropped off my credit record. I understand that if you accept this offer the debt will not reappear.” if you want. But it isn’t strictly needed as they can’t put the debt back on!
Lisa says
Thank you sarah I’ll put it on I think.
I’ll let you know how I get on. Thank you for your help it is really appreciated and a wonderful site for reference/help.