Pausing credit card repayments

jonathon01

Hello,

I have a couple of credit cards to which I have been repaying the minimum repayments for a long time. Due to a drop in my income, I can no longer afford to make even the minimum repayments. I therefore wrote to my credit card providers, stating that as my situation has changed, I will not be able to make the minimum repayments for the next 6 months or so although I would make a token payment of £5/month if this helped to show that I do intend stay in touch with the lenders and that I do intend to get the accounts back on track.

One lender has just replied to me asking me to complete a detailed financial statement (similar to the state of affaris I have seen on here), including listing all of my creditors, my offer of repayment and the reason for my current financial difficulties and that the lender is unable to defer repayments until it has received all of this information.

While I do not wish to be recalcitrant towards the lender, per se, I am wary about providing this information. I have written to them stating I cannot afford to pay them for the time being, which, as far as I am concerned, should suffice for now so is it unreasonable for me to decline to provide them with all of this extra detailed information which they have asked for?

What is the lender likely to do if I write back to them saying I do not wish to provide all of this information and what is the lender likely to do if I do provide all of this information?

What are the relevant legal aspects of this situation?

Many thanks.

Tixy

Well you don't have to supply this information legally but the lender does not have to agree to your token payments or to freeze interest. Legally they could choose to take you to court for not meeting the contractual minimum payments (its not that likely but legally thats what they can do)

It is normal to show them an income & expenditure account, pretty much all creditors expect to see it. I have seen it suggested that you send off the information but rather than list all your creditors individually just list all unsecured creditors as 1 figure and 1 repayment figure (being the sum of all your offered reduced payments) Their aim is to see that 1) you are not spending on luxuries or spending excessively and 2) you are treating all unsecured creditors the same - i.e you have asked all to accept token payments not just 1 or 2.

If you are unsure you could post the income & expenditure on here first to see if anyone on here can spot areas they are likely to have an issue with (eg spending £100s on clothes or entertainment)

jonathon01

Tixy,

What is the lender likely to do if I do supply all of this information? Will they attempt to contact all of my other creditors and what sort of marker goes on to the account with the CRAs?

Maybe it is the cynic in me but I just don't trust giving lenders anything more than the absolute statutory minimum that I have to.

Annisele

jonathon01 wrote: »

I have written to them stating I cannot afford to pay them for the time being, which, as far as I am concerned, should suffice for now so is it unreasonable for me to decline to provide them with all of this extra detailed information which they have asked for?

I'm afraid I do think you're being a bit unreasonable there.

It isn't unknown for people to pretend they are in financial difficulties when they aren't. (It's not a smart thing to do, but sometimes people don't see beyond "oooh, interest frozen" through to "messed up credit report).

The Financial Ombudsman Service would expect lenders to carry out "a proper assessment of the consumer’s financial situation". The lender can't do that if you won't cooperate.

So far as I know, there isn't a "statutory minimum" amount of information that you have to give the lender. However, there also isn't anything that says they have to agree to accept anything less than the minimum payment in the contract. They have to treat consumers "sympathetically and fairly" (see the FOS link), but that's about it.

The Financial Services Authority publishes some information on dealing with debt, and there are stickies with helpful organisations listed.

Tixy

If you pay less than the minimum then you will almost certainly have a default notice issued and a default put on your credit file - that in truth screws up your chances of getting decent credit for a few years. It stays on your file for 6years.
They also may mark your files with arrangement to pay.
They will not contact your other creditors.

If you don't provide them with anything then I guess they are likely to refuse to accept your payment and refuse to freeze interest.

You only have to provide the type of information requested to a judge in court - but ideally you don't want things to go that far.

PNPSUKNET

No matter what it will likely go down with the cra's as a AP , however if you dont disclose the reasonably requested information they cant help you. Think you are best going down the cab if you feel this way however

Rico6.9

If you don't give them what they ask for, they could easily default you. Definitely something to avoid, particularly if you'll be looking for low cost borrowing or mortgages in the next 3 years.
If you comply, they'll probably freeze interest on your account and give you a few months to find your feet before hitting you with a default.
I think the magic number is 0.8% of the balance. If you can afford this each month, you'll avoid a default.
I was in the same situation you're in about a year ago. Avoid the default if you can. I've moved to interest only mortgage and contacted ALL my creditors over a period of a few months.
Sadly for me, after 6 months unemployed and no help from the government I've ended up with a default. Work has come just 2 months too late.
I wish you better luck and a better government.

debtstressed

Rico6.9 wrote: »

I think the magic number is 0.8% of the balance. If you can afford this each month, you'll avoid a default.
I was in the same situation you're in about a year ago. Avoid the default if you can. I've moved to interest only mortgage and contacted ALL my creditors over a period of a few months.
Sadly for me, after 6 months unemployed and no help from the government I've ended up with a default. Work has come just 2 months too late.

Hello and sorry to hijack. I'm struggling with my debt but have worked out that I can afford 1% of my balances in repayment and my situation should improve in the next 6 months. Are you saying that you approached your creditors and they accepted your reduced payments for 6 months without issuing a default?

Thanks and to OP, I think its only fair you show why you are asking for help because you are breking an agreement with you creditors. Its like if a mate borrowed £50 off you and said he would return it by a certain date, would you not expect some sort of explanation (common courtesy perhaps?) if he fell into some sort of financial difficulty? Would you not be less ccommodting if he became offhand or aggressive towards you instead of being polite and open?

Just something to think about...hope it helps.

Tixy

Hi debtstressed.

Most creditors will default you after around 3months of missed payments of payments lower than the original contracted amount.
They should, according to guidelines default you anything from 3-6months.

Occasionally people do manage to negotiate a deal like Rico appears to have done.

I am unaware of any magic percentage across all creditors which will stop you getting a default. I know some creditors will only accept payment plans where you are paying at least 1% of the balance, but will still default you for this (if you cannot pay the 1% they will send your debt to debt collectors - either inhouse or 3rd party).

It is usual that you will get a default for any payment plan less than the minimum as per the original agreement.

BigCraigJohn

Citicard have accepted 1% for 12 months frozen interest. And say they won't default me(there word only so will see).

Rico6.9

Are you saying that you approached your creditors and they accepted your reduced payments for 6 months without issuing a default?

Yes. Sadly some could only hold out for 8 months. All creditors asked for a financial statement dealing with income and expenses. Most could be done over the phone. Others insisted on mail. One could be done by e-mail. (About 7 all together). Basically you can only pay what you can afford. My understanding is that if they agree to what they call an arrangement to pay (marked AP on your credit file) they'll not default you. Once the arrangement to pay is set up it's hassle free unless you don't pay. Then the defaults start flying!