Credit Card Settlement - views?

SinkingFast

Hi. Got a £11k credit card debt. DH lost job at christmas and only started a new one this week. Obviously unable to pay anything since christmas and prior to that due to a salary reduction we were on reduced payments with frozen interest after taking advice from CCCS.

Tonight they rang and offered a settlement of £5.8k as full and final split over 4 payments. We have not accepted it yet, seems too good to be true.

Where's the catch?

hullight

Get the offer in writing and ask them to make sure your credit file shows that it is settled.

izools

Yes do not hand over a single penny over and above the already agreed arrangement until you have it in writing that this is acceptable and the account will show as fully satisfied with a nil balance afterward

stephane_2

SinkingFast wrote: »

Hi. Got a £11k credit card debt. DH lost job at christmas and only started a new one this week. Obviously unable to pay anything since christmas and prior to that due to a salary reduction we were on reduced payments with frozen interest after taking advice from CCCS.

Tonight they rang and offered a settlement of £5.8k as full and final split over 4 payments. We have not accepted it yet, seems too good to be true.

Where's the catch?

As previous post, get it in black & white and with the mention that account will show as settled. If you can afford it, it's a good deal. But beware if making 4 payments, stick to the plan payment schedule or they will be straight back at you saying you have not complied...

SinkingFast

Is it normal to offer such a huge difference and why do companies offer settlement?

hullight

SinkingFast wrote: »

Is it normal to offer such a huge difference and why do companies offer settlement?

It's normal for huge discounts (even as low as 25%, possible even lower) to be given in cases like this because they would rather take the hit and get £5k now rather than £1 a month for however many years. Also banks especially will sometimes accept a settlement in several instalments. All in all a pretty good deal if you follow the above advice.

stephane_2

SinkingFast wrote: »

Is it normal to offer such a huge difference and why do companies offer settlement?

I would say that it is quite rare for a credit card company to offer directly a settlement offer, generally they tend to sell the debt to a Debt Collection Agency, but they probably want to cut their losses. But be in no doubt that if you refuse their offer they are most certainly going to sell the debt to a DCA with fees & interest added....

SinkingFast

Hhhhmmm... Thanks for your thoughts.

izools

I got a letter from a DCA at the beginning of Jan offering a £600 settlement on a £850 debt and it was the first letter I'd ever received from the DCA! And it was there in black and white with their signature before they'd ever had a conversation with me...

So it can happen. Although in that instance I called them, spoke to the management, and had the account closed and debt written off within 20 mins; but that notwithstanding reduced settlements are often profitable for DCAs as they will have bought the debt for a fraction of it's value anyway.

PNPSUKNET

the only thing they may do is put a partial settlement flag on your credit report, some do