CCJs and property restrictions

thehog

RAS wrote: »

Goodie

Thought it was but lovely to have this confirmed.

TH - you can now defend your case and win.

I can??? But how? I understand that the default is defective but what do I do now? Does this mean Optima Legal can't CCJ me? I'm sorry to sound so silly but this is all so new to me!

thehog

Just doing some research on the forum - found a great link toa topic which has almost made my eyes pop out my head!

"Where a DN is invalid then the account terminated, the creditor loses the legal right to the capital sum as they terminated the account without giving the debtor an opportunity to mend the breach that led to the default in the first place. All they can claim is any arrears that arose whilst the agreement was current."

That is amazing! I will read on to find out what I need to do next. Thank you all so very very much - this is truly a fantastic place with wonderful helpful people.

thehog

So I see that my DN is invalid due to my not having sufficient time to rectify the breach. What about the amounts involved? My letter said:

"In order to remedy this breach we must receive a payment of £x by x 2010. Your account balance is currently £x. IF THE ACTION REQUIRED BY THIS NOTICE IS TAKEN BEFORE THE DATE SHOWN NO FURTHER ENFORCEMENT ACTION WILL BE TAKEN IN RESPECT OF THE BREACH".

Presumably this is the key - they are talking about taking action in respect of the breach only. Am I correct in my understanding please?

thehog

Me again. So I know my account has been terminated as I've heard from Optima Legal and when I phoned MBNA they advised me that they no longer had any of my details on their files. However, I have not received anything from MBNA since the DN - only the letter threatening legal action and immediate recovery of the full balance outstanding from Optima Legal. No termination letter from MBNA - where does this leave me in respect of challenging Optima Legal please?

property.advert

thehog wrote: »

Indeed I do realise that the £4,300 is important - I couldn't believe MBNA had actually suggested it!

Do you think this means that MBNA sold the debt to Optima Legal for less than the £11,316 and that Optima are trying it on? As MBNA had me on their severe financial hardship programme they knew the score in respect of my income and expenditure. Is there any way of finding this out? I have received nothing in writing from MBNA to say that they have actually sold the debt on.

What I meant was that if MBNA suggested £4300 then it is because they were only going to receive around £4300 as a maximum from their third party and quite possibly less. If MBNA are selling it on for £4300 then they might as well get it from you. I think they were selling it for quite a bit less than £4300.

If MBNA have invested in a really sophisticated debt management system which includes a constantly updated cost benefit analysis tool, then they know a debt which has just gone into default is worth more than one which has received no repayments for 6 months. They will know the cost of continually managing the chasing up of your debt, the cost of telephone calls, staff time, letters etc. and be aware that the real value of your debt will decrease over time as the likelihood of ever receiving the balance recedes. They might know that in 6 months time they will only receive £1500 from a third party but that now, their risk system shows your debt has an implied value of £4300. A third party is not going to pay £4300 for your debt I would not think, to which they have to add an implied amount of interest, their management costs and their required profit margin.

Of course the big win for the third party is when the debtor repays it all so that is what they will ask for. If they have paid £1500 then they will write down the value of that debt as time goes on, eventually to near zero, at least in their accounts. We never know these true percentages but we sometimes hear full and final settlement percentages. If someone pays 50% then it goes without saying that the company bought the debt for far far below 50%. I would estimate in the 10% to 20% range, all adjusted by the risk they put on your particular circumstances.

I do not know about this industry from the inside but I have had businesses with bad debts and also been offered settlement figures. Chasing bad debts is a high risk business and as such will require high profit margins. Reversing that means that they are buying in debt at very low percentages of its face value.

So if you agree with some of this argument or can formulate a better one and it is not rocket science, but just requires lateral thought and reasoning (the third party must turn a profit at the end of the day) then I feel you can come to some number which makes sense in light of your particular position. This is a one off repayment figure though. Payments over time will require more as the company receiving your repayments will have an internal interest rate as if they are borrowing the money to buy the debt in the first place.

If you know MBNA will accept £4300 now but will not sell it on for 6 months, then all rational arguments point to the figure they will accept as being lower than £4300 but marginally higher than the figure they would receive from the third party.

thehog

Thank you, that's very interesting.

SusieT

If it helps MBNA have offered me a 30% settlement on my card, I did not have the funds to take them up on it but it does show that they will take less than 38% in some cases.

property.advert

Perhaps it is easier to understand if you come at it from the other side, thinking about the business model of the 3rd party company. Now I do not know if this applies to financial companies but a very simple business model is the 1/3rd concept, where 1/3rd is your stock, 1/3rd is your cost of operation and 1/3rd is your profit. If you worked on that principle, then the stock, your bad debts, would come in at 33% of face value.

However, if you are a bar and buy in wine at 33% of the price you sell it, it does not go off, it does not deteriorate and it does not have a depreciating value. Contrast that to a debt which might have a shelf life of 6 years and become less and less valuable as time goes on and which costs more and more to collect as time passes. If you accept that argument, it dictates that you must buy in your "stock" at much less than 33% of face value.

I have heard of single digit percentages and the mid teens as perhaps the top of the market. That would not be an unreasonable assumption in my opinion. However, if MBNA sell it for 15% of face value, the business model of the third party would look for at least triple that or around 45% of face value and most likely much more in the beginning. As time goes on, then the value goes down.

Thus, there would appear to be a window of opportunity for full and final settlement in the time period just before the lender sells it on to a third party. After that, the minimum cost to get rid of it would rise significantly, only falling as the debt moves towards a zero value if not CCJ'd within 6 years.

thehog

So that's why there are so keen to get a CCJ!

But if my DN is faulty then hopefully I'll only be liable for the arrears - not the full settlement that Optima Legal are looking for.

I can't wait to see Optima Legal's response to my correspondence disputing the debt - presumably they can't start CCJ action against me if I am disputing the debt before they have started?

thehog

bumped - sorry!!