A possible breakthrough with creditor?

Where there is a default but a lender has formally accepted in full and final settlement a smaller amount than was owed under the terms of the original agreement, then it would be unfair to process personal data to record an outstanding balance on a default when the matter had been formally and finally concluded.

There are other circumstances where the terms ‘satisfied’ or ‘settled’ are not appropriate because they do not adequately reflect the fact that lenders have been left with no choice but to accept significantly less than they were owed under the terms of the original agreement.

Examples include the following:

• Where an IVA, which included the lender, has been successfully completed even if the lender did not recover all the money owed under the terms of the original agreement.
• Where a lender has received all the money owed under the terms of a bankruptcy order which has been discharged, even though the amount received falls short of the amount owed under the original agreement and, in some cases, may not have received any payment at all.
• Where a secured asset has been possessed and the lender is no longer chasing payment of any outstanding debt.
• Where the lender has accepted as part of a negotiated settlement a payment that is less than the outstanding amount and the customer has agreed as part of the settlement how their credit record will be affected.

In the first two examples above, borrowers are under no legal obligation to pay any more money. In the last two examples the lender who is responsible for the record has decided it is not worth chasing further payment. In these circumstances, we understand a lender may be reluctant to mark the entry as ‘satisfied’ or ‘settled’. However the entry must record the position adequately, for example, by showing that no further monies are expected and the account was partially paid.

Thank you for your email.

We note that you require clarification regarding full and final settlement offers because the information on our fact sheet and the Information Commissioner’s website seem to differ.

You are correct in thinking that it is important for you to have confirmation from the creditor that your offer is accepted as full and final settlement. You must also ensure that you keep this confirmation for at least 6.5 years incase the debt is passed onto another debt collection agency in error. If the creditor does not issue and serve court proceedings during this time the debt becomes ‘statute barred’ and you would have grounds to defend the action. We have attached a fact sheet regarding the Limitation Act which explains more.

If the creditor will agree to mark the credit file as satisfied this would be an excellent result for you as it would look better on your credit file. However, your credit file should show an accurate credit history and to mark a debt as ‘satisfied’ when it has only been partially satisfied could be deemed to be misleading. Therefore the creditors are well within their rights to mark your credit reference file partially settled/satisfied.

If a change in circumstances led to your inability to settle the debts in full you can add a notice of correction to your file to explain this to future creditors so that they will take this information into account when considering you application for credit. Please read the attached fact sheet about credit reference agencies for further information.