A reader asked:
I have a Debt Management Plan where I still owe 17k to 10 creditors. I have been paying for ten years at £150 a month, so it will end in about 8 years. Most of the debts have gone from my credit record but a few are marked as “on a DMP”.
I want to pay off the debts and improve my credit rating. I have been offered about 7k by a relative, so I could offer all my DMP creditors around 40%. How would settlements affect my credit rating? Is it worth me finding out if the debts are actually enforceable?
It’s a great idea to try to end a long-running Debt Management Plan (DMP).
This Guide to F&Fs looks at the how to make a good full and final settlement offer to a creditor.
But this reader’s case is different:
- older debts have different options as it may be that the debts are unenforceable;
- there is the added complication of the different way his DMP is showing on his credit record.
Are the debts enforceable?
It’s best to do this before you offer a settlement.
For credit cards, catalogues and most loans, the debt collector has to be able to supply you with a copy of your Consumer Credit Act agreement if you ask for it. See How to ask for a CCA agreement, which looks at how to do this and when you should do it. It doesn’t apply to overdrafts, utility or mobile bills.
How likely is this to work?
This reader’s accounts are at least ten years old. It is likely that at least some of his current creditors may be unable to produce the CCA agreement:
- the older a debt is the less likely it is that it can be found;
- it is also harder to find if the debt has been sold to a debt collector, who usually has to ask the original creditor for it.
If it can’t be found
If the creditor can’t produce the CCA agreement for your debt, it is unenforceable.
I would allow the debt collector a couple of months before deciding that they aren’t going to be able to find it. Three if you are feeling nervous.
The debt is still legal, it stays on your credit record and the creditor can ask you to pay it … but they can’t make you by taking you to court. The regulator says they have to explain this to you – they aren’t allowed to pretend you do have to pay it.
In this case you can simply stop paying the debt – or tell your DMP firm to stop paying it, explaining why.
There is a small chance that the CCA agreement could be found later. This seems to be rare – if the debt collector hasn’t found in in the first few months the chances of it turning up later seem very low! To prevent that being a problem, and to stop the odd polite letter, you may decide to offer them a really low settlement amount, say 5%.
But if you want to offer this low amount to tidy up the loose end, then it is best to stop paying the debt first for a couple of months. Then the creditor will realise you are serious about not carrying on paying them. And then make your low offer. If they reject it, just say then you won’t be paying them anything.
This is why it’s worth asking for the CCA agreement before making a good settlement offer. By clearing out of the way any unenforceable debts you will have more money left to settle the others.
When the CCA agreement is produced
If you aren’t sure that what you have been sent is a proper CCA, read “How can you tell if it’s right” in the main article on CCAs.
If the creditor produces the CCA agreement, then the reader can just make the full and final settlement offer of 40% that was planned. That is a very good offer for a debt that old if only low payments are being made. He can help ensure the offer is accepted by:
- explaining that the money is coming from a relative if it will help to settle the debt; and
- enclosing an income and expenditure statement showing that he can’t afford to increase his monthly payment.
The only downside to asking for a CCA agreement is that if the creditor finds it, they may then decide to go to court for a CCJ. But that would be pretty unusual if you are making them a good settlement offer!
Effect on your credit score
Settling debts doesn’t improve your credit rating. People often don’t believe that, it sounds so odd. In practice settling the debts makes some lenders much more likely to give you more credit and it’s vital if you want a mortgage in the next few years. But that headline credit score number will not change.
Where a debt already has a default date, it is going to disappear 6 years after that date and making a full and final settlement offer won’t change that. In this readers case the debts have already gone – they will not reappear.
For debts with an arrangement to pay marker and no default date, settling the debts will mean they drop off 6 years after the settlement.
It is a pity all the debts weren’t defaulted originally – the reader should ask the original creditor (not the current debt collector that owns the debt) to add a default to the record back before it was sold.
If that is done – and some creditors do agree easily – that will remove the debt sooner and improve the credit rating. But do this after asking for the CCA agreement and sorting out the F&Fs – it’s too complicated to try to do this all at once.
Do F&Fs make it harder to get a mortgage?
How does a DMP affect your credit score?
Do I have to pay a debt not on my credit file?
Sam says
Hi Sara,
I have been paying a well known debt purchaser for some years for a debt defaulted in 2009, they bought it in 2011.
At the start of July I submitted a CCA request and they said they’d aim to respond within 14 days and would update me in 40 days if I hadn’t been responded to by then.
40 days came and went with no update so I’ve had to chase them. They have replied saying they are waiting on the original lender and they will update me when they hear from them. They said that the account was “on hold”.
They haven’t told me at any point yet that the debt is currently unenforceable although I know it is. Shouldn’t they be making me aware by now that they can’t enforce it? I know that they could come back at a later date with the agreement and it would be enforceable again.
Should I just wait for them to come back to me again or continue to chase them?
Sara (Debt Camel) says
How much are you paying a month? You are still paying this?
Is the debt still on your credit record?
Who is the debt purchaser?
Sam says
There’s about £4000 left and I’m paying £20 a month on it at the moment, it’s with Lowell. There is no longer a default as it dropped off.
I find it strange they are not telling me it’s unenforceable when I know it is just that it’s “on hold”. It’s been 2.5 months now since I requested the CCA. Twice I’ve received a statement of account from the original lender but not the agreement itself, so I am assuming after no CCA was produced after the first request Lowell have then requested it again hence the 2nd statement.
My plan is that if the CCA can’t be produced I’ll offer a very small settlement amount to get rid of it forever. I know it seems a bit pointless paying if it can’t be enforced but if I didn’t they’d still be entitled to send me letters etc and I don’t want that I’d rather just give them a small percentage to leave me alone.
Sara (Debt Camel) says
Then I suggest you tell Lowell that as your debt is currently unenforceable, you will be putting your payments on hold until they produce the CCA agreement.
Unfortunately your plan of offering a very small settlement is unlikely to work. You maty think it’s logical for the debt collector to accept something rather than nothing, but Lowell know that if they refuse, many people will just carry on making the monthly payments.
Kim Taylor says
Hi Sarah,
About a year ago I asked Opos for a copy of my CCA and they replied after a couple of weeks that they would need more time. I have asked many times since by letter and phone and still have no letter stating that they can not find it and it is unenforcable. Do I have to have confirmation by letter or should I just presume and stop paying ?
Sara (Debt Camel) says
have they just ignored your letters and phone calls?
Kim Taylor says
They replied to the first letter asking for the CCA saying they would need more time.I have since sent three emails with no reply and spoken to three different people.The last person I spoke to on the 9/10/24 said they should have it as it was with Santander , I think the debt was originally an overdraft or flexible loan with Cahoot and from 2004.
Sara (Debt Camel) says
send them an email with COMPLAINT as the subject saying that you asked for the CCA a year ago and have asked them since to confirm that while they can’t produce it, it is unenforceable, but they have not done this. Point out that CONC 13.1.6 says “(1) Failure to comply with the provisions means that the agreement becomes unenforceable while the failure to comply persists, and the courts have no discretion to allow enforcement.
(2) In such cases, a firm should in no way, either by act or omission, mislead a customer as to the enforceability of the agreement. ”
I suggest you also stop paying and say you will restart if they ever produce the CCA.
Kim Taylor says
Thank you Sara for your advice so far.
I contacted Opos and once again asked for the CCA. They put forward a complaint to Santander. Their reply states that due to the time lapse, they haven’t been able to locate the CCA and also that there is no requirement to hold on to banking documents for longer than six years. They write: Your account defaulted in 2011 and you were in contact with us before and after this time via phone when you had discussed the account numerous times. Payments were also made before and after it went to collections which confirms your awareness of the debt, the account and the agreement in place. The account was referred to agents for collection, once this happens Santander don’t normally pursue the debt any longer and if you require any further assistance it would be best to contact the agents directly.
What would you advise that I do next?
Many thanks
Sara (Debt Camel) says
Why have you asked for the CCA again?
Kim Taylor says
I contacted them again as they had not confirmed they did not have the CCA.
Sara (Debt Camel) says
This started on 2023. I have suggested before that you stop paying.
Kim Taylor says
Can I just clarify that because Santander have said I was aware of the debt and have been in contact about it after the default and paid money towards it that this doesn’t put me in a different position? Am I right in thinking that you are suggesting I stop paying anything as they are not providing a copy of the CCA?
Sara (Debt Camel) says
If you feel uncomfortable about this, phone National Debtline in 0808 808 4000. It is their template to request the CCA that you have used.
Jason says
Hi.
I have spoken to TSB today about a £6k credit card debt and a £5k overdraft debt where both defaulted in 2015 and are no longer on my credit file. I still pay token payments of £1pm to both debts.
I asked TSB for a CCA agreement copy for both and they have referred me to their website to ask for this.
I did ask where I stood with both debts and they mentioned on the call that they wouldn’t legally chase the debt now given the time that has passed, but if I stopped paying that they could still sell the debt to a third party debt collection agency.
What I’m looking for advice wise, is:
1. Are they likely to do this, given that the said they wouldn’t legally chase the debt?
2. If they decide to do that, would the debts reappear on my credit file again?
3. If I choose to stop paying and they didn’t pursue either debt, if I were to pass away would they be written off?
Thanks
Sara (Debt Camel) says
1. I can’t guess
2. no the debts wont reappear but the debt collector may be able to apply for a CCJ, which would show on your credit record
3. do you have any assets – eg a house with equity? Can I ask how old you are?
Jason says
Thanks for the reply.
I think I will look to pursue the CCA agreement route for now given your responses.
I’m only 40, long time to go yet I hope! But I just wondered out of curiosity how it worked if debts eventually became statue barred, would they ever pursue it if an individual passed away. I only have a car in my name (value approx £4k) but is needed for work
Jo says
Hi,
I have several debts which all defaulted in 2021, I had a company work on my behalf to contact my creditors to request cca in the hope that the debts would be unenforceable. The company apparently contacted my creditors and none of them have produced the CCA. Has admitted that the debts is unenforceable but the others have not. My problem is that I don’t have any proof of this ie copy of letters to or from my creditors all I have is an email from the company I used. The company has now disappeared and when I’ve looked online it looks like it was a bit of a dodgy company. Should I start the process again requesting the CCA so that I have proof? or should I write to them says that as they have not provided the information requested can they confirm that the debts is unenforceable? I was also going to offer a very low offer to settle the debt but only because myself and my husband agreed hoping to buy a house very soon and the unsettled debt is having a terrible impact on my credit report.
Sara (Debt Camel) says
These companies are a menace. they don’t do anything you can’t for free, but they take your money every month and then often just stop…
How do these debts show on your credit report at the moment – missed payments, payment arrangements, defaulted…
Jo says
They’re all defaulted on my credit report
Sara (Debt Camel) says
Then settling them will still leave you with a very bad credit score. You will find it hard to get a mortgage at an OK rate for a coupld of years after the settlement.
What are the exact default dates?
Jo says
They’re all defaulted Between feb21 and May 21
Sara (Debt Camel) says
ok they are more than 3 years ago. So a year or two after after you settle them, you should be able to get a mortgage at an OK rate.
If you go down the “ask for the CCA” route” and they cant be produced so you stop paying, the debts will drop off your record in 2027. From that point you will also be able to get a mortgage at an OK rate as a mortgage lender won’t be able to see the old debts.
But you should NOT expect that if they can’t produce the CCA the debt collector will agree to a very low settlement offer. Often they just say No, as many people will then offer more…
jo says
Thank you,
So there’s probably not much point in trying to settle them then as they’ll be off my report in 2 years anyway. would you advise asking for the CCA so that I have proof that it has indeed been requested? or requesting confirmation that the debts are unenforceable (presuming that the company did what they said they did)?
Sara (Debt Camel) says
You have to settle debts before a mortgage! Even when they have dropped off your credit score, the mortgage lender will still see the payments to them on your bank statements – and if you stop paying the creditor may well go for a CCJ.
My point is that your credit score will not improve with settling them, and a mortgage lender will still care about recently settled default debts – so settling doesnt mean you will be able to get a mortgage at an OK rate soon. I was not saying don’t settle…
JP says
Hi,
. I have 2 old RBS credit cards now dealt with my westcot/cabot. They dropped off my credit file a few years ago. I requested cca agreements and have had confirmation that they are unenforceable. I made 5% full and final settlement offers that have been rejected. I am going to write to them to say that I will no longer pay the monthly payments but am scared to do so and worry about the consequences. Please can you reassure me.
Sara (Debt Camel) says
Creditors often reject F&F offers in this situation as they know many people will be scared and just keep on paying
If the creditors have said the debts are unenforceable, they won’t take you to court. If that happened there would be people saying this! There is a slim chance the CCA agreement will later turn up, how long ago did you ask?