Credit card partial settlements

ccdean100

If anyone can help with the following it would be most welcome - I have a deadline for this of the 30th September 2014. I will keep it as brief as possible....

I have had two credit cards (HSBCicon and MBNA) for ~ 7 years. During this time I kept up with monthly repayments of ~ £50 a month. 18 months ago I entered a bout of ill-health which culminated in me having to resign from my job. At this stage both cards were at ~ £2000 each. I went on to benefits which gave me enough to live on but not enough to keep up with the card payments. I informed the providers and they both transferred my accounts to the specialist teams (due to ill health). After 7 months they both informed me that the accounts would soon default. I was informed by one of them that I could make a partial settlement for some of the balance. I researched partial settlements and got the impression that they were a bad idea - that the remainder of the debt was often sold on leading to pursuit from a third party, and that you needed it in writing that it was a "full and final settlement". I made offers of £400 for F&F settlements using a letter template from a debt advice website (my Dad and sister agreed to help me out as much as they could financially because they didn't want DCAicon's knocking on my door whilst I was suffering with ill-health). The offers were accepted, but both letters state they will be a partial settlement (not F&F). I have rung both companies numerous times requesting it be F&F and they always say that is not possible because the full amount isn't being paid.

Today I rang Stepchange, the Financial Ombudsmanicon, the Financial Conduct Authority and the Money Advice Service and read the letters out to them. None could give me much advice except for the FCA who said whilst listening they were looking for the words "cancelled" and "zero balance". I rang HSBC / MBNA asking if I could have letters with those words in but they said they only send out standard letter templatesicon, not tailored letters. The FCA also said to ask what happens to the remaining debt. HSBC said it goes to an internal bad debt department where it sits (for how long??) but that it is no longer associated with your name. MBNA said that it is simply "written off" but didn't say what happens to it. I don't understand; if the debt is written off, why can't I have it in writing that there will be a "zero balance". If the balance isn't zero then doesn't the debt still exist?

Here I will give two excerpts from the two letters, the only letters they are willing to send out:

HSBC: "Providing funds are received by the above date, your account will be closed and you will be released from all liability in respect of this account preventing further action being taken."

MBNA: "After receipt of the required payment, we'll close your account and register a partial settlement with the credit reference agencies".

I have also managed to get the following email from MBNA:

"What happens when you proceed with a partial settlement?
We will:
· Register a partial settlement with the credit reference agencies for up to six years, which may affect your ability to obtain credit in the future.
· MBNA as well as any other third party will take no further action to recover the remaining balance.
· Close your account."

To me, it sounds as though the debt really will be written off in both cases, and that there is no chance of me being chased by either company or by a third party. However numerous forum discussions from around the web state that partial settlements are a bad idea, and you don't know whether you will be pursued further down the line. I don't understand why they are so cagey about saying the debt is written off and that there is a zero balance. According to HSBC, the remaining debt still exists but stays internally in the "bad debt" department. HSBC have said categorically on the phone that they rarely sell on such debts - the operative gave me his name, staff number, and call time / date, and said if there was any issue in the future to ask for a recording of the call.

Can anyone provide a final answer to me as to whether I should go through with these partial settlements? I want to settle these debts once and for all, but at the same time don't want to be taken for a mug - if they end up chasing the rest, what is the point in paying the £400 in the first place? I fully accept that my credit score will be affected - I know that is unavoidable. However my concern is that the debt still exists, that there is still an outstanding balance - both companies have stated I can call up any time in the next six years and pay the remainder, and restore my credit file accordingly. Surely that means the debt still exists? I am worried that they will somehow find a way of recovering the remainder of the debt.

Apologies for the long post - any advice is welcome.

Thanks,

Charles :undecided

eskbanker

It seems clear to me that neither party will take any further action:

HSBC: "you will be released from all liability in respect of this account preventing further action being taken"

MBNA: "MBNA as well as any other third party will take no further action to recover the remaining balance"

They won't call it full and final settlement because it isn't full, although it should be final, based on their assurances above.

Tixy

There is no problem with it being recorded as partial settlement on your credit file, that is normal but the letters to you need to make it clear that you will not be chased further in relation to these debts, ideally using the wording full & final.

I would accept those wordings personally.

However I would also generally recommend running the wording past national debtline (although they may not have given you different advice from the other places you have spoken to).

InsideInsurance

Tixy wrote: »

There is no problem with it being recorded as partial settlement on your credit file, that is normal but the letters to you need to make it clear that you will not be chased further in relation to these debts, ideally using the wording full & final

why are you contradicting yourself?? You say partial is fine but then say you want to see full and final???

There are two parts:

Full or Partial - was the debt paid off in total or just part of it
Final - means its the end of it

The OP has been offered/ had their offer of a Partial and Final settlement accepted. You wont ever get this described as full and final because it isnt

Tixy

InsideInsurance wrote: »

why are you contradicting yourself?? You say partial is fine but then say you want to see full and final???

There are two parts:

Full or Partial - was the debt paid off in total or just part of it
Final - means its the end of it

The OP has been offered/ had their offer of a Partial and Final settlement accepted. You wont ever get this described as full and final because it isnt

Not a contradiction.
Quite common for a debt to be marked as partially settled on the debtor's credit file (to show they did not pay the full amount), but for the creditor to put in writing that the payment will be accepted in full & final settlement of the debt.

InsideInsurance

Tixy wrote: »

Not a contradiction.
Quite common for a debt to be marked as partially settled on the debtor's credit file (to show they did not pay the full amount), but for the creditor to put in writing that the payment will be accepted in full & final settlement of the debt.

It happens occasionally, Id dispute its common.

If it does happen then its a simple complaint to the lender that they are in breach of the DPA as they have advised its full settlement but marked the CRA as partial.

If they dont fix it then go to the ICO or FOS. I had a similar issue and Natwest immediately rolled over and paid £100 compensation for the "mistake"

National_Debtline

InsideInsurance wrote: »

It happens occasionally, Id dispute its common.

It's very common.

We sought opinion on this very matter from Experian. This is what they came back with:

'The debt would be recorded as a partial settlement. A P flag would be added to the file to indicate a partial settlement.

The outstanding balance will be changed to zero to reflect that no money is due; but the P flag will show that it was not paid in full. We don't currently believe such flags are usually used in credit scoring, but they could well be included in a lender’s underwriting policy rules. This could mean that the appearance of a flag on a report would trigger a manual review of the application, where the additional information could then be considered by one of the lender’s underwriting experts.'

The assurances given by the various lenders appear to be pretty robust. I would always suggest keeping the correspondance in a safe place - just in case someone does try and take further action later on down the line. For what it's worth - I've never come across this happening to any of the callers I, or any of my colleagues, have helped over the years.

Best wishes,

David @ National Debtline.

InsideInsurance

National_Debtline wrote: »

It's very common.

We sought opinion on this very matter from Experian.

I stand corrected on the first point then

On the second point, I dont see the relevance of Experian's view in this matter? They are a CRA and as such simply display the information that is given to them.

My issue with Natwest, and my point in general, was that if an agreement is explicitly such that it is full and final settlement then they cannot then tell the CRAs it is anything but a full and final settlement as then they have gone against the terms of the agreement and would be in breach of the Data Protection Act by having spread in accurate information.

Certainly in my case Natwest immediately backed down and paid compensation for their "error" in loading it on Experian as Partial and Final rather than F&F. I have informally helped a couple of friends/ family with similar issues and they similarly have found that banks back down and correct.

It does appear that there is some banks at least that have spotted this issue as there are plenty of examples on here of HSBC rejecting offers as full and final but saying they'll accept them as partial and final.

ccdean100

National_Debtline wrote: »

The assurances given by the various lenders appear to be pretty robust. I would always suggest keeping the correspondance in a safe place - just in case someone does try and take further action later on down the line. For what it's worth - I've never come across this happening to any of the callers I, or any of my colleagues, have helped over the years.

Thank-you for the post. Given the information I've given, do you think it is safe to go ahead and settle these two debts with the documentation I have, or is further documentation required?

I have been advised by Consumer Action Group to send a "Subject Access Request" (SAR) to both lenders, and to re-claim PPI / other charges before making any payments. Not sure what to do.

eskbanker

ccdean100 wrote: »

Thank-you for the post. Given the information I've given, do you think it is safe to go ahead and settle these two debts with the documentation I have, or is further documentation required?

I have been advised by Consumer Action Group to send a "Subject Access Request" (SAR) to both lenders, and to re-claim PPI / other charges before making any payments. Not sure what to do.

You'll need to take a view on how rigid your 30 September deadline is as there is practically no chance of either going through a SAR process, where recipients have forty days to respond (what do CAG believe this will achieve anyway?), or a reclaim of PPI or other charges within a week. If you had PPI on either or both of these cards, wasn't it available to you when you were forced to give up work?

ccdean100

eskbanker wrote: »

You'll need to take a view on how rigid your 30 September deadline is as there is practically no chance of either going through a SAR process, where recipients have forty days to respond (what do CAG believe this will achieve anyway?), or a reclaim of PPI or other charges within a week. If you had PPI on either or both of these cards, wasn't it available to you when you were forced to give up work?

I have just checked my credit file on Noddle. The two cards have not yet defaulted but are said to be in "sustained arrears" and have been so for 6 months, since I stopped paying in March 2014. Both card providers said the default would be placed after 7 months - which means that so far they have kept to their word .

I think I have no choice but to go through with these settlements before the defaults are placed.