Consolidating Partners Credit Cards & Loans

HaSBeenConsolidated

Has any one any views on the rights and wrongs of two people, who are not in any form of legal relationship (e.g. Married / Civil Partnership etc.) becoming bound together by their bank to pay off each others loans?

- For example:- Both Mr A and Miss B have some Personal and Credit Card debts. All short term with high interest rates.
- They enter into a relationship and open a Joint Account at a Bank, which soon goes overdrawn as the Standing Orders & Direct Debits servicing their existing debts is not being covered by their joint incomes.
- The Bank subsequently signs them Jointly & Severally to a Conslidating Personal Loan over a long term - say 25 years - at a lower interest rate than their previous loans.
- This money is used to pay off all their existing short term personal & credit card debts.
- This action results in a significant, say 50%, reduction in their Monthly payments to service their previously existing loans.
- A while later Mr A leaves Miss B and disappears, leaving her to pay off the loan on her own.

* Miss B was only 18 at the time and very naive, whilst Mr A was around 10 years older then her and much more worldly-wise.
- It appears he used their relationship to influence her into signing-up the new Consolidating Loan.
- Neither Mr A nor the bank explained to her, nor did they ensure she clearly understood, that if (when) he left her or simply died she would be left carrying not only the baby but his legacy debts as well.

The bank consequently looks to Miss B to pay off the entire Consolidated Loan, including Mr A's debts incurred prior to him entering into the relationship with Miss B.

Q-1: How should Miss B deal with this?

Q:-2 Should the Bank have ever encouraged or even allowed Miss B to enter into such a contract with them?

Your views and advice please.

ch3101

It is entirely up to the parties involved to get involved in a joint financial agreement, nothing to do with the bank.

Remember that BOTH people are responsible to pay the FULL amount every month, not just their half.

This may be useful :

https://forums.moneysavingexpert.com/discussion/4748128

Tixy

My view is that joint loans (particularly unsecured) are best avoided.
Unsecured loans are rarely available over a 25 year period and thats a very good thing. The longer a period of time I guess the greater the likelihood of there being a financial fallout before the loan is repaid.

The loan documentation that both parties signed would have made it clear that they were each liable for the whole debt.

The bank won't have given financial advice to the 2 parties, they offered a loan in response to a joint loan application.

How should Miss B deal with it?
Is she in a position to keep up with the full repayments? Does she value keeping her credit rating enough to continue with the repayments. Has she considered asking the bank if they will restructure the loan over a longer period to make it more affordable.

Alternatively she could default on the loan and pay just what she can afford, which would affect both her and the other parties credit reports and ability to get future credit.

Some people may suggest she tries to obtain a CCJ against the other party. This is usually very hard to do without a written agreement between the 2 of them. And even then if a CCJ is obtained is would be very difficult to enforce if she does not know where he is and if he has no assets.

HaSBeenConsolidated

Miss B is arguing that she didn't really know what she was doing. That Mr A told her the bank had suggested they enter into this new Consolidating Loan and that this would enable them to resolve their problems. She believed him

It turned out that it was Mr A's problems that were being resolved.

And the Bank's as well as it now had effectively got Guarantors for each of the two people's pre-existing debts.

Shouldn't the bank have advised Miss B to take independent legal advice before entering into such a major commitment - in excess of £20,000?

Tixy

Did Miss B read the loan agreement in detail before she signed it? If she read it and did not understand it then she could have sought her own legal advice, or possibly consulted with family or trusted person, or decided not to sign it.

No the bank would not advise her to take legal advice first.

It is likely the agreement contained a clause along the lines of this one

Joint Borrowers
10. Where the loan is in joint names, your liability is joint
and several. This means you are liable jointly but also
individually for all the terms of this Agreement even if
the relationship with another joint borrower ends.

(that from HSBC as an example).

sharp82

Unfortunately, as Miss B was an adult when taking out the loan, the defence of 'I didn't know what I was doing' wont get very far.

She had access to all the terms and conditions, and the ability to question anything she didn't fully understand.

I agree she may have been pressured into by her partner at the time, however, in the eyes of the law she is an adult, responsible for her own decisions.

happycamel_2

Exactly as sharp82 puts to, I'm afraid. Adults (those over 18) are deemed to be able to read and understand contracts before they sign them or ask for seek advice from an appropriate source if they don't.

The law has to deem us to be grown up at some point. Sadly some of us make big mistakes early on that affect the rest of our lives. It's harsh but not unfair as it is all avoidable, it would have been better if the signature has been on a marriage certificate before a birth certificate or joint loan, for example.

HaSBeenConsolidated

It was mis-selling in my book, in that the Product 'sold' to Miss B was not the right product for her circumstances.

A re-financing loan for only Miss B's own unsecured debts to enable her to reschedule them over a longer term, at a more acceptable rate of interest would have resolved her problem.


A similar solution for Mr B could also have been offered and in principle has resolved his problem.


This would have resolved the problems each of the couple had (in so far as they were resolvable).


The Bank was surely at fault in lumping the two of them together. Only the bank would really benefit by this arrangement, by effectively getting Miss B and Mr A to go Guarantor for each others debts. Neither of them were any better off. In fact they were both worse off! - Hence the Consolidating Loan must surely have been missold?

Good_Goose

You can bet Miss B did know what she was doing/signing. She just didnt think about what would happen if the relationship ended.

But now the romance had died she realises alright and is looking possible get out clauses. Well im afriad there are none.

Still the loan will cost considerably less than bringing up a child without any support from the absent father (And I bet we will all be contributing towards it through our taxes!!)

Tixy

It was not missold.
The applicants applied for a joint loan, the bank accepted that application based on their combined circumstances (existing debts/commitments, earnigs, credit files etc) and a loan was offered to them. They signed to agree to the loan.

Whether she would have been able to get a loan in just her name for just her debts based on her circumstances it is impossible to know now, but she didn't apply for that. Plus they had already got joined finances from having a joint bank account that was overdrawn.

Only the bank would really benefit by this arrangement

You say yourself in the first post that they were better off, because as a couple their monthly repayments reduced and they couldn't afford their outgoings previously and that the interest rate was less than their existing debts.

Kabazzzz

I agree with the other posters. The bank offered a financial product to two willing parties.

The fact that she didn't read/understand the terms and conditions is an unfortunate lesson to learn.

How can all the blame be laid at Mr A's door? Miss B willingly signed the contract perhaps, as you suggest naively but she signed it all the same. Legally, that is all that matters.

It is not up to the bank to offer independent financial advice, they are there to sell their products.