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).
I have already looked at offering settlements where the DMP had only been running a few years. And 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. 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. 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%.
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 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?
ron johnson says
can i ask for cca even though i own my own property.and then not have to pay my crediortior if they cannot prouduce cca.thank you
Sara (Debt Camel) says
Yes. The CCA has nothing to do with whether you CAN afford to pay the debt at all. The law takes the view that if a creditor can’t prove you owe the debts – and that includes producing the details of the agreement which shows the terms when you opened the account – then they can’t enforce it in court.
BUT whether you should ask for the CCA depends a lot on how likely it is they can produce it. Because if you make a debt collector locate the CCA agreement and they suspect you should be paying more to them each month they could then go for a CCJ and then a charge over your house. So you need to think:
– how old is the debt? what sort of debt? who is the original creditor? Has it been sold to a debt collector? and how much are you paying them every month?
ron johnson says
many thanks,very good answer ,and very helpful,RON
Jay says
Hi Sara
Looking for some guidance.
Entered in a DMP in 2009. have 7 debts, 5 have dropped off credit file, 2 remain. All have been sold on from original debtors some numerous times. I have approached the original lender (MBNA) of one that still shows to ask for a default to be recorded. They have advised they are unable to as they sold it over 6 years ago so they no longer report the debt. The current holder (Idem) will not doing anything as MBNA hadn’t placed a default when they bought it. I haven’t tried the same approach with the other debt which is Barclaycard>link financial.
My question is should i approach all current holders of the debts (except one relating to an O/D) and ask for copies of the CCA agreements?
If they find them is that detrimental? If they don’t provide them, do i make very low settlement offers? I assume those debts that have dropped off will be unaffected either way? what about the two that remain? if they cant supply the CCA and i settle for a lower amount how is the credit file affected?
As it stands the plan would end in Aug 2022 and I’m not struggling with the current monthly payment.
TIA
Jay
Sara (Debt Camel) says
With 7 debts from 2009 which have all been sold on more than once there is a very good chance that at some of them will be unable to produce the CCA agreement.
“If they find them is that detrimental?” in theory with the CCA agreement they could go to court for a CCJ. But if you can settle some of your debts this way, then you can increase the payments to the others. A creditor who is going to be repaid in 12 or 18 months isn’t likely to bother going to court (although it is theoretically possible).
“If they don’t provide them, do i make very low settlement offers?” yes, or just stop paying.
“I assume those debts that have dropped off will be unaffected either way?” yes, they will never re-appear on your credit record
“what about the two that remain? if they cant supply the CCA and i settle for a lower amount how is the credit file affected?” your credit record would be marked with a partial settlement marker and the record would drop off after 6 years.
Jay says
Thanks for your comments very helpful.
If I ask for the CCA and they provide. Why would they go to court if I’m paying an agree amount anyway?
Sara (Debt Camel) says
I didn’t say it was likely they would, I just said it was possible. Perhaps they might think you would repay them more quickly – that is less likely as you are actually paying a reasonable amount, not just a token £1 a month to each debt.
Jay says
Understood. Appears no harm in asking for CCAS if only for my records. Cheers
Sara (Debt Camel) says
if you do. come back and say what results you get! People would love to know which debt collectors/original creditors this works with.
Clive says
Hi Sara
I have two debts with Lloyd’s Bank
One for credit card the other for a loan
Credit card pre 2005 with debt of £5185
Loan with outstanding debt £5078 taken out 2009
Each debt has been placed with 5 different DMC’s
Each time they have changed DMC I have requested the original agreements but never had a response
Lloyd’s have now sold the credit card debt to Intrum
How do I stand in challenging these debts when Lloyd’s will not respond to the cca requests
Clive
Sara (Debt Camel) says
When did you last make payments to these debts?
You send the two CCA requests to Intrum – see https://debtcamel.co.uk/ask-cca-agreement-for-debt/. Send these as two separate requests, each with a £1 fee.
Let us know how you get on!
Clive says
Hi Sara
Thank you for your reply
I will send a cca request to Intrum for the credit card debt. The last payment for this account was paid on 10/12/2018 this payment was paid to Lloyd’s Bank the original owner of the debt before they sold it on to Intrum. Before Lloyd’s sold this debt to Intrum I requested a cca on five depart occasions with out a reply
As for the Lloyd’s Bank loan debt this is still owned by Lloyd’s Bank
Again I have requested the original agreements under s77of the cca without a reply
This loan was taken out in 2009
Last payment on this account was made on 09/12/2018
I don’t know if this question has come up before but if Lloyd’s can’t produce the original agreements or a reconstituted one before they sold the debt to Intrum would they have to inform Intrum I have requested the original agreements and that they could not produce them
Sara (Debt Camel) says
Did Lloyd’s ignore your requests or did they say they couldn’t find it? Did you send £1 with the requests?
Clive says
Hi Sara
Lloyd’s Bank have ignored any request for the credit agreements. The last time of asking for these agreement was 22/10/2018
Each request have been sent with the £1.00 cost
Several debt companies have been dealing with these debts for Lloyd’s
When asking for the agreements through them they all said the would contact Lloyd’s for the agreements only to come back with the answer they are no longer dealing with the debts and the debts have been sent back to the original owner
As I have mentioned Lloyd’s sold one of these debts to Intrum on 28/12/2018
And I have received a notice of assignment from Lloyd’s Bank and a letter from Intrum confirming this
I will send a letter requesting a copy of the agreement to Intrum but don’t know where I stand with the other debt still owned by Lloyd’s Bank as they continue to ignore my request for the agreements
I much appreciate your replies
Kindest regards
Clive
Sara (Debt Camel) says
Credit card debt with Intrum. If Lloyds had previously said they cannot locate the CCA agreement, then you could have just sent Intrum a copy of that, rather than a new request for the CCA agreement. But as they haven’t, it’s going to be simpler to send Intrum a new request than complicate it with failures to reply to old ones. I suggest you don’t set up any arrangement to pay them until you get an answer to the new request – normally I suggest leaving arrangements to pay in place, but in this case you don’t have one with Intrum.
Loan debt still with Lloyds.
If the cheque you sent on 22/10/18 was cashed:
Send them a complaint that you have not had a reply to your request for a copy of your CCA dated 22/10/18 and that the £1 cheque has been cashed. Point out the CCA act says the debt is currently unenforceable. Say you will be stopping making any payments to this debt after 30 days if they do not provide you with a copy of the agreement.
If the cheque you sent on 22/10/18 was NOT cashed:
Send them a complaint that you have not had a reply to your request for a copy of your CCA dated 22/10/18. Repeat your request and enclose a new cheque for £1. Say you will be stopping making any payments to this debt after 30 days if they do not provide you with a copy of the agreement.
Send a copy of this letter to any debt collector you are currently paying but make it clear this is a cc copy and it is addressed to Lloyds.
Clive says
Hello Sara
Thank you for the advice and I will follow this up with the letters of complaint.
On one other note I did receive a letter from Wescot Credit Services stating they had been assigned the debt from the original creditor (Lloyd’s Bank). For collection and as they had been assigned the debt the debt was enforceable.
They have not sent me a credit agreement that I requested from them
What they seem to be saying because they had been assigned the debt they don’t need the original agreement to enforce the debt
Wescot at present return the debt back to Lloyd’s Bank but would like your advice on this question in case it crops up in the near future
Clive
Clive says
Hi Sara
Just a quick up date
At present I still have had no response from Lloyd’s on the CCA Request or for the letter of complaint
Also still not heard anything from Intrum
Thank you for your continuing advice
Clive
Janet says
Hi.. So, arrow global have sent me this morning replies for requests of CCA’s ..but its just statements of how much I’ve paid and total still owing, they’ve profusely apologised as they should of sent this information yearly, but they’ve sent nothing in the space of 7 years. They go on to say ‘ this remediation exercise in no way affects the balance, your repayment or obligation to pay..get in touch with Moorcroft who is managing your account’…..
They’ve just sent statements but no proof of CCA’s .. does this mean they haven’t located them yet? Thank you in advance for advice, Janet
Sara (Debt Camel) says
I think you have just received these statements as Arrow are doing a general tidy-up about accounts where they haven’t sent an annual Notice of Statement In Arrears. If that is right, it has nothing to do with your request for your CCAs. When did you ask for the CCAs?
Janet says
I Sara, Just quite recently- mid to end December 18. Guess they are still within the time frame of 12 working days to reply with the CCA’s. These go back from 2003.. I’ve been paying minimum of pounds, until a few months ago when another debt company yet again, took it over, that’s when I’ve decided to go for copies of CCA’s. 2 are credit card debts, one is an large overdraft ( joint names of my ex , which I believe they have not traced)
Not sure how I stand with overdraft either.
Thank you again for your help, Jan
Sara (Debt Camel) says
ok well you have to give them at least 40 days, better a couple of months, to think it is reasonably likely that they can’t find the CCAs for the cards.
There is no CCA agreement for an overdraft. But Arrow should produce a detailed statement of account showing how the current balance has arisen. If they can’t do that, you could ask them to write it off but they may not agree.
Miss D says
I’ve had Paypal credit for nearly a year and aside from the initial few uses, I haven’t been able to use it as the option doesn’t show on any websites. Having contacted Paypal several times I get the same unhelpful ‘clear cache, leave it 72hrs, only use your own internet connection’ response that I’ve tried multiple times to no effect.
Essentially I want to close the account AND have it removed from my credit report as I feel it has been mis sold. Is this ever an option and if so, will you advise how I may go about it?
Thanks in advance.
Sara (Debt Camel) says
Unless the account shows any problems such as late payments, it isn’t going to help your credit score to have it removed so there isn’t much point in this. Do you still owe any money?
Laura Hill says
Hi Sara
I have a quite a few debts at the three mark since defaulting, I was hoping to send a cca to all of the companies but just checking do I send it the original creditor or the company that bought the debt , and for the £ 1 fee do I send it to the debt collection agency or the original creditor . Sorry for the questions but just wanted to check , I was doing it right .
Thanks
Laura
Sara (Debt Camel) says
What do you mean “at the three mark”? Has a default been added to your credit record? When did you default?
You ask the current creditor for the CCA agreement and send them the £1 – not the original creditor.
Laura hill says
Thanks for replying , sorry was meant to put my defaults were three years old.
Just wondering are debt collector agencies likely to add a ccj if they have the cca agreement, as I have only made token payments for the last year.
Thanks
Laura Hill