Automatically Defaulting on all Accounts when with Stepchange

waller2012

Hi All,

A few months ago I thought it would be a good idea to use Stepchange to make my monthly outgoing and dealings with my creditors a lot more hassle free. Everything was set up correctly and fine untill I started receiving letters from creditors saying my accounts were now in default! Due to the amount I was paying Stepchange each month to distribute to creditors it meant I was now paying MORE than the minimum or arranged amount on all of my credit accounts each month than I was previously....so why was I going in to default?

One particular letter from Nationwide prompted me to investigate, it must have been auto generated as it said my "reduced" payment of £250 was accepted and the original agreed monthly payment of £155 was no longer in force but my account was now in default!! I rang Nationwide and they said they had never seen anything like it, someone on a DMP that is paying MORE than the original agreement. They told me that the moment a consumer goes on to a DMP regardless of the payment amount the account will go to Default!

Nationwide said they would remove the default if I no longer dealt with Stepchange so that's what i did, and followed suit with all other creditors who did the same and have duely removed all defaults from my Experian credit report with no hassle...all creditors bar one that is....Capital One....after numerous phone calls and a letter of complaint they still are adamant there is nothing they can do! Im beginning to get extremeley frustrated as this default is crippling my credit score! If other companies can remove it so easily why can't they?!

Just wanted to get some views on this and to make people aware of the "Auto-Default" if using StepChange as don't want others to make the same mistake I did! I thought I was making life easier but turns out its been a lot more hassle than I bargained for!

Thanks for reading!

[Deleted User]

Why on earth did you set up payment plans via Stepchange if you could make your payments and more?

waller2012

Because over the years ive been pretty rubbish paying off creditors, always paying the minimum to get all the extra cash i could for myself each month, as soon as it started getting me down I went to the doctors and they recommended stepchange, i looked in to it and worked out that I could pay these people much more than I was paying creditors at the time at no cost to myself and they did all the work...great! The one lump payment would come out on my payday and id have no choice but to pay more in to debts and take away the desire to pay as little as possible meaning my debts would clear quicker. Totally gone in 10months in fact! It all seemed too easy...however when the default letters started coming in I quickly realised it was a mistake!

I have since just used the Stepchange budgeting tool and have set up individual payment plans with each creditor and they have all removed the defaults. I set up the same payment plan with Capital One, £42 a month instead of the minimum £7 that they want, yet they refuse to take off the default?

I understand it was me looking for a way to clear debts without putting in so much effort myself, it just appeared to be the easy option. With them being a charity I didnt think it would have the implications that it did. Clearly didnt read the small print as my assumption was if im still paying more regardless whether through a DMP charity or not, my accounts would not be defauled because technically they arent in default.

Monkeyballs

Yeah... Bit of a weird one... I suspect it has something to do with creditors having to pay Step Change? In theory they will automatically get less money back at the end of the debt than they would by dealing with you directly.

What did Step Change say when they went through your income & expenses? Didn't they point out that a DMP isn't suitable for you?

Just read your last update, so you wanted Step Change's payment to almost be like a consolidation loan? Single payment, no hassle... I'd run it past Step Change personally and see if they can swing it with Cap One, gotta be worth a shot right?

MB

[Deleted User]

waller2012 wrote: »

my assumption was if im still paying more regardless whether through a DMP charity or not, my accounts would not be defauled because technically they arent in default.

The problem is, your accounts were technically in default. Default means that you are not adhering to the original terms.

So any payments you agree are over riding their normal terms (eg in terms of calculating payments), even if you are actually paying more.

Their systems won't tell the difference between paying more or less, only that you have defaulted on the agreement.

waller2012

Monkeyballs wrote: »

What did Step Change say when they went through your income & expenses? Didn't they point out that a DMP isn't suitable for you?

Just read your last update, so you wanted Step Change's payment to almost be like a consolidation loan? Single payment, no hassle... I'd run it past Step Change personally and see if they can swing it with Cap One, gotta be worth a shot right?

MB

It was borderline to be fair, when i took out the Stepchange DMP id moved back in with parents and was paying drastically less out a month than when i rented my own place. My thinking was to put my expenses down as if i was still in my own place just in case i moved back out. When i did this it recommended DMP, when i put expenses down as they were at my parents, it recommended budgeting and not a DMP.

Basically yes, one increased monthly payment distrubuted to creditors to clear the debt quicker, no interest charges, debt done in 10months paying £700+ a month and still having a little left over for leisure. If i knew id default on my accounts id never have done it as id worked hard for the previous 3years to do all i can to improve my credit score, never missed a payment, old missed payments dropping off etc, id got it from Very Bad to Good but now after this it has gone straight back down to Very Bad due to the default and the effort id put in to improve all seems like a waste of time (

waller2012

Deleted_User wrote: »

The problem is, your accounts were technically in default. Default means that you are not adhering to the original terms.

So any payments you agree are over riding their normal terms (eg in terms of calculating payments), even if you are actually paying more.

Their systems won't tell the difference between paying more or less, only that you have defaulted on the agreement.

This is what Nationwide said. When people go on to DMP's they 99.99% of the time are dealing with people that pay less than their agreed terms. All other creditors mirrored that too, this is why they told me to stop dealing with Stepchange and go back to the original plan.

The confusing thing is however, they said I could increase my monthly payments if i wish to clear the debt quicker as long as it was not through a DMP and would not default my account....is'nt that exactly the same thing? Not sticking to original terms and paying more?

[Deleted User]

No. You can overpay but the original conditions still stand. Overpayments are allowed in the terms.

A payment plan says "I'm paying this, regardless of what the terms say".

waller2012

Deleted_User wrote: »

No. You can overpay but the original conditions still stand. Overpayments are allowed in the terms.

A payment plan says "I'm paying this, regardless of what the terms say".

I think this is what confused the heck out of creditors, because if id rang up myself and increased my direct debit to whatever Stepchange said they would pay, it would have been fine.....but the face Stepchange contacted them with an "increased" payment plan, it all went tits up and defaults galore.

All of them understood this and appeared quite fascinated on the phone and very helpful, why Capital One are being awkward I have no idea!

The creditors literally took one increased monthly payment from Stepchange before I cancelled it all and went back to dealing with them direct

[Deleted User]

I think you've been lucky that they've all reverted apart from Cap 1. I'm very surprised that Stepchange did not advise you to go direct - they should have seen that you were not in financial difficulty. A DMP is generally to be avoided at all costs.

I imagine Cap 1 are just finding it difficult to undo the status changes they'll have made to your account. All you can do is keep on at them - you may get lucky, but remember they are technically in the right.

fermi

Well, if you think Cap One are being unreasonable over this then I would make a formal complaint saying that you will be taking the matter to the FOS if they don't remove the default as your other creditors have done.

See: http://www.financial-ombudsman.org.uk/consumer/complaints.htm