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?
jones says
Getting settlement agreements is a nightmare as (in my experience) one company simply blames the other company for delays. My situation was further confusing as I was in the middle of a battle with the financial ombudsman about correctly getting defaults backdated or even applied in the first place so I could not stop paying those creditors at that point…….But yes – if all the creditors have defaulted you (and ideally dropped off) by all means stop paying and ask for full and final……It does get slightly messy though.
Jane says
All defaulted and off my credit file. When you say it gets messy, how do you mean?
Jones says
Messy as with multiple creditors, the ombudsman is involved with default issues, quite threatening letters off creditors, payplan wanting to know what’s happened to your repayments etc…. This was my experience. So I quickly nipped it in the bud by repaying the lowest full and final to the ones who did supply the original contract and the ones who were still fighting the default dates, ignoring the ones who couldn’t supply contracts and had defaulted and then closing the DMP and quickly buggering off to Bali for a month to hide lol….. No nasty letters on my return too
PM says
Spoke to PayPlan who I had already contacted re settling DMP.They have asked me to call my creditors to ask if they are still reporting on my credit file,have defaulted me & when or when they will stop.I have to offer them 25% .I asked about getting CCA first as some of loans might not able to be upheld.Payplsn strongly advised against asking for CCA first.They said to only ask for that if the creditors refuse offer….want to get this DMP done with asap but not sure what’s best to do !? Any advice please?
Sara (Debt Camel) says
That is strange and unhelpful advice from Payplan. Why settle an unenforceable debt which is of your credit record for 25%? You want to settle those debts as cheaply as possible or simply stop paying them if they off your credit file already or soon to go. That way you will have more money if the debts where there is a CCA won’t accept 25%.
It is a good idea to check your credit records so you know exactly what they say now. But don’t ask your creditors this, do it your self as it’s faster and you don’t want to have to start a conversation with loads of creditors to find out the facts. See https://debtcamel.co.uk/best-way-to-check-credit-score/
Then send out the CCA requests to loans, credit cards, catalogues. Not overdrafts or odd debts such as utilities that are in your DMP. You can offer the odd ones 25% now if you want, but for the rest, wait until you get the CCA. If they haven’t produced it in 2 months, tell payplan you want to stop paying them. Then offer them a settlement a couple of months later.
Yes this takes some time. But it may save you a lot of money. And you can’t be sure that all your creditrors will accept 25%…
PM says
Hi Sara So I checked my Credit file & only two of the debts are still on it.One will come off soon due to Ombudsman settlement (thanks).The other one is for £3900 credit card.
Should I just ask all for the CCA? I’m terrified something adverse goes back on my credit report? I’m desperately trying to cc lose my DMP, improve my very poor credit beating do I can get a mortgage.
Thanks
PM says
I settled 3 loans with NCO at 25% of total.No hassle at all .Barclaycard wanted 50% to settle so I have asked for CCA.Westcot for HSBC even worse…said no & wanted to take take me through a financial affordability questionnaire!! This is for a debt not on my credit report! Said no & send me the CCA.Payplan have asked me to offer 25% first but the attitude of these two companies makes me determined not to pay anything.What happens if they both come back with a CCA ? Thanks.
Sara (Debt Camel) says
If they come back with the CCAs then you need to carry on with your DMP or make a settlement offer that they will accept.
PM says
Thank you Sara.
Gary Edwards says
I’m surprised if Payplan said offer them 25%. When I tried to discuss full and final settlements with Payplan they informed me that creditors would be expecting settlements around 75%. Needless to say I decided to enter negotiations for full and final settlements myself and settled some of my debts at 35%. where the creditor had not sold the debt on. I settled with Barclays and Capital One, John Lewis were inflexible and the whole process of making claims with them was difficult due to their offer procedures.
I wrote to John Lewis to produce the cca back in September and despite several phone calls and broken promises on their part, they haven’t produced the cca or even acknowledged the request in writing. I’ve now written to John Lewis telling them that I am classing the debt as unenforceable and will not be paying them any more payments unless they can produce the cca. Luckily this debt is not on my credit file anymore.
Sara (Debt Camel) says
That sounds a good plan. If they ever produce the CCA you can then make an offer.
People get too hung up on getting offers agreed – if they can’t find the CCA and the debt isn’t on your credit record, just stop paying!
Gary Edwards says
I have two debts with Link Financial who bought the debts from Barclaycard. I have read many times including from discussions with Payplan that Link Financial are difficult to deal with. I have taken a different approach with Link Financial as these debts are still on my credit file. I wrote to them asking them to produce copies of the cca’s which they came back and advised they were unable to do. I am now fighting to get the default date changed on my credit file with the aim of having these debts fall off my credit file as they would be over 6 years old. I have not stopped paying these debts yet so defaults to appear on my credit file. It seems to be a common issue with Barclaycard that when they sell on debts they have not entered the credit default date on the credit file even when they have previously issued a written default notice. Link Financial then purchase the debt and start the default date as the date that they purchased the debt. Hopefully this month I will have confirmation that these debts have disappeared from my credit file after Barclaycard Complaints department agreed to amend the default date after I raised a complaint via Resolver. However to get this stage has been a battle with Link Financial and Barclaycard initially blaming each other for who was responsible for correcting the incorrect default date and Barclaycard Payments Solutions Team giving conflicting advice depending on which day of the week it was.
gareth says
I have an ongoing issue with Barclaycard and Link which never seems to end. Basically I got Barclaycard to change the default date to 2012 and they even sent me an £80 cheque to apologise. Annoyingly though, the default date has not been updated on 2 credit agencies but Experian still showing 2015 (but the others have updated it correctly).
Sara (Debt Camel) says
tell Barclaycard that unless the Experian record is corrected within a month you are sending the case to the Financial Ombudsman and asking for extra compensation.
Ange says
Hi my debt is 10 years old, I have been paying £10 per month for all of those ten years. Cabot was recently threatening a CCJ but I applied for the CCA documents back in November and they have now confirmed that they cannot get the information from the original lender and that my account is unenforceable. I think the original debt was around £2700 and is now £2000. The debt is no longer on my credit file and I really want to get rid of this debt/correspondence from this company. Should I stop paying? If I offer them a settlement offer I could only afford around £50. Many thanks in advance.
Sara (Debt Camel) says
I suggest you stop paying – what are they going to do? They have said the debt is unenforceable. It can never reappear on your credit record. Save your £50 for something more useful!
Ange says
Thank you Sara, I was just worried that they might try to continue to pursue me for the debt, I would rather not pay the £50 if I don’t have to.
Sara (Debt Camel) says
They can send you the odd letter saying the debt legally exists and you should make a payment arrangement, but each letter/email should also say that the debt is unenforceable. Come back here if you do have problems, most people don’t.
Ange says
Great, thank you. I have cancelled the direct debit and will let you know :)
Sarah says
I spoke to Hoist or Robinson Way what ever they call themselves about a debt that was sold to them through HSBC it was a loan. They admitted on the phone that they didn’t have a CCA and couldn’t get one. I emailed them to get this in writing and i received an email to day with them saying the CCA is excluded from the consumer act under section 5 so don’t have to produce one. Is this true? As an aside they said on the phone that it was an overdraft. Which it wasn’t. It was definitely a loan for £2000. I have never been given that size an overdraft.
Any thoughts/help please :)
Sara (Debt Camel) says
If it was an overdraft, there is no CCA to be produced. I suggest you reply to them that this was a loan, not an overdraft. Do you have any old letter from HSBC refering to the loan? How does this show on your credit record?
Jane says
Feel deflated. Have a debt with Cabot relating to an old mint card. Cabot confirmed in writing that they couldn’t locate the CCA therefore debt unenforceable 4 months ago. Plucked up courage to call them and offer full and final only to be told they’ve now got the paperwork and debt is now enforceable so wouldn’t accept my offer. (20%). I’ve asked them to send the CCA to me to Check and they are but now thinking bit of a coincidence they’ve now found it? Would they actually fun that they have it to get me to increase my f&f?
Sara (Debt Camel) says
it’s unusual for a CCA to turn up late, but see what they send you. If you aren’t sure that is a real CCA, then see https://debtcamel.co.uk/ask-cca-agreement-for-debt/ which has a section entitled How can you tell if it is right?
PS if they cant find the CCA then 20% is a very high amount to offer them!
Brian says
Hi – I had a Barclaycard account which defaulted in June 2014. The debt was sold to Link Financial later that year and I have been making a smallish agreed payment to them monthly. The balance is now around 5k and if I maintain my current payment it will take around 30 years to repay…
Wondered if anyone could give me any advice as to how to proceed after June this year when the debt and default fall off of my records. I want them off my radar asap tbh but am realistic in realising that I can’t just stop paying and risk a CCJ.
I have previously made to f+f offers of around 40% which they rejected – the figures they came back with were about 75% of the debt. After the default goes are they more or less likely to accept a low f+f ?
Any advice gratefully received
Sara (Debt Camel) says
The credit record isn’t really relevant to them. Do you have other problem debts to or this the only one?
Brian says
I also have an Argos account in default since Jan 2015 which was sold to Lowell, but they have never been able to provide me with the signed agreement and have not contacted me since 2016. As far as I am concerned they have given up on that one.
I have worked hard to clear my other debts and barring these two I am virtually debt free for the first time in 35 years (mortgage aside). Its more about finally breaking free from debt rather than keeping on paying and paying on the Barclaycard debt for years.
Sara (Debt Camel) says
Have you asked Link for the CCA for the Barclaycard?
Brian says
No I haven’t. When would be the best time for me – before it after June this year ?
Sara (Debt Camel) says
it doesn’t make any difference. Either they have the CCA or they don’t.
Brian says
Ok thanks. I will send your pro forma letter with a cheque for £1 by signed for post and see what comes back. I assume that they will need to request the CCA from Barclaycard ?
I plan to continue making the agreed payments at this stage as from previous replies etc that seems the right thing to do ?
Thanks
Sara (Debt Camel) says
I usually suggest carrying on making payments for a couple of months. After that you may decide to assume that don’t have it and can’t get it from Barclaycard. This isn’t a very old debt so they may able to produce it but it’s worth a try.
Brian says
ok thanks – if they do provide it I guess I’m stuck with it then and my options will be limited to either continuing to make monthly payments or hope to get a reduced settlement.
Sara (Debt Camel) says
exactly.
Brian says
Ok – I’ll let you know how it goes.
Thanks for all your help.
Regards
Lisa says
Hi
I have two debts through Moorgroup and one with Link Financial. I wrote to both of them at the beginning of January enclosing £1 for each debt asking for the agreements. I havent heard anything from Link so chased this via an email. Moorgroup returned the £2 on the 8th January and said their client no longer asks for this contribution. They said that they had asked their client for the info (Arrow Global Ltd) but they had not yet heard back. I chased this last week and received an email today stating:
“We write to advise that we are still communicating with our client in respect of your raised query.
During these communications, follow-up action will be suspended on this account and we will endeavor to provide you with an appropriate response to your query as soon as possible.”
Should I stop paying?
Sara (Debt Camel) says
I normally suggest you give 2 months before you stop paying. But it’s not scientific.
Lisa says
Great thank you for the advice I will see if they have anything after another month.
NIna says
hi i have a debt intrum currenly on a repayment plan of £1 a month, they recently offered a 70% discount off £1200 balance and was considering asking a family member.
However they have told me that a partical settlement wont show on my credit file as this came off a few months ago due to been over 6 years old but they only purchased this debt in 2019 but im not sure if from another debt collector or the company itself which was a tesco credit card, what do you suggest do i pay the reduced and settle or can i ask for a cca and try and stop all payments? thanks Nina
Sara (Debt Camel) says
“they have told me that a partial settlement wont show on my credit file”
that is correct. if it has dropped off your credit record, it will never reappear.
Would you have to repay this family member? I wouldn’t suggest you should get into debt with family – which can be quite stressful – when you are just paying £1 a month. better to just plod on, surely?
If you do want to settle it, asking for the CCA agreement can be sensible.