Tesco Credit Card Default? Can Anyone Help?

sdw3075

Hi all, I've never posted in this forum before and I'm hoping that there is someone out there who is able to give me any advice on on a situation that is completely baffling me...apologies if this turns into a long post but I just want to give as much background as possible.

A couple of years ago I got into some financial difficulty when my work contract finished. At the time I had two credit cards - one Barclaycard (balance ca. £5k) and one with Tesco Bank (approx £3.5k). Prior to this time I had an excellent credit rating and had rarely, if ever, been late with payments. I have to admit that at this point I did miss a couple of payments on the Tesco card, because I was trying to sort out my priority debts first. I contacted both Barclaycard and Tesco to let them know the situation and came to a reduced payment arragement with both until such a time as my situation improved. Tesco put me in touch with Allied International, who I believed were dealing with the payment arrangement on their behalf, and that once I was in a better position and making more than the minimum payment each month, the account would revert back to Tesco.

Thankfully I am now back on track and since October of 2014 have been paying more. Barclaycard contacted me and said that because I had stuck to our arrangement they would amend my credit file to say that the reduced payment arrangement had now ended and the account is now in order. I decided to check my credit file, and noted that throughout the reduced payment period my credit file showed that the payments were on time and had a "0" rating, which I believe is fair as I had stuck to the agreement.

My Tesco account however is another matter. Although I only missed 2 payments at the start, and my credit file shows that there have been regular monthly payments of the agreed amount, the account has a "8" default status. Having looked into the meaning of the default status I was quite alarmed to find out that it meant that no payments had been made and the "debtor had not made attempts to bring the account back in order", which of course is completely wrong. I contacted Experian at this point for some clarification, who confirmed to me that the debt was indeed still owned by Tesco and not by Allied International, and that I should contact Tesco about the matter. I had always believed that when an account goes into default it is sold by the original debtor to a debt collection company, although I am not sure whether this is the case.

I sent a letter to Tesco, including screen prints of my credit file which showed my account with them and the default status. I was contacted by a Tesco employee who basically tried to fudge the issue and said that the debt was nothing to do with Tesco, that it had been passed to Allied, the account was in default and that the default notice would stay on my account for 6 years. I explained that my credit file clearly showed that Tesco were the owners of the debt and as I had reached an arrangement to pay what I could afford at the time and hadn't just ignored the debt (as the default status would suggest), I wanted a note to be put on my file to explain this. I was told that there was nothing to be done and I needed to deal with Allied.

I called Allied and spoke to an account adviser there who confirmed that the debt was owned by Tesco. I asked again whether a note could be put on my credit file to state that I had reached an arrangement and pointed out that my credit report showed that I had only missed two payments before the account went into default. I explained that I was concerned that my credit rating had been irreperably damaged because of the default staying on the account for 6 years, even after the balance is paid in full. The lady then informed me that as soon as the full balance is paid on the card then the default status would be removed from my credit file and the account passed back to Tesco.

I had assumed that a default was a default, plain and simple. I've been given so much conflicting information that I have no idea where I stand and what I should do next.

Apologies for the epic! I really would be incredibly grateful of any advice anyone could give me

SeduLOUs

I understand you can still get a default for failing to meet your minimum payments, even if you attempted to come to an arrangement about it.

However, it sounds from your post that there was only an issue with 2 payments? It would be highly unusual for a default to be added after only 2 months and I would argue this accordingly.

If you were only making token payments for a time, and then a default was issued 3-6 months after the account first hit problems then the default is probably correct.

Debts are often passed to a debt collection agency, but the original lender can issue the default and continue to pursue the money if they wish.

A debt collection agency cannot add a new (duplicate) default to your file for the same debt.

Defaults stay on your file for 6 years from the default date, regardless of whether you then pay off the debt.

Tixy

So you missed 2 payments, then after that have you been paying the contracted minimum payment or a reduced payment?

If a debt has been passed to a DCA for collection then this would usually be on its own an indicator of default. Not just when an account is sold to a debt collector.

Having looked into the meaning of the default status I was quite alarmed to find out that it meant that no payments had been made and the "debtor had not made attempts to bring the account back in order", which of course is completely wrong.

That isn't a good definition of a default, which is probably confusing you.

The creditor or debt collector would have sent you a notice of intention to file a default notice and given you 14 days to bring the account back the account back in to terms. If you do not do that (even if you come to a reduced payment arrangement with them) then they are entitled to file a default notice.

It sounds like your other creditor entered as arrangement to pay rather than default as so has now removed this, but as tesco went down the default route then as they stay that stays on file for 6years.

sdw3075

Hi, thanks for your advice

Although I only missed two payments, the reduced payment arrangement has been in place since I first got into difficulty, which is back in 2012. On a balance of £3.5k I was paying about £50 a month, which is less than the minimum and so this may be why the default was added. However by looking at my credit file it looks as though the default was added straight away, after the two missed payments. I am now paying £125 a month, which on a balance of around £2.7k should be more than the minimum required.

I am still receiving statements from Tesco, which show the account being in arrears by about £280, and I have offered to pay this to bring the account back into line but I have been told by Tesco that the account is nothing to do with them anymore and that I have to deal with Allied, who say that I shouldn't worry about what my statements say as my arrangement is with them (which leads me to question why Tesco are bothering to send me statements, but anyway...)

Am I right in assuming that creditors have different ways of working, because otherwise why did Barclaycard treat me completely differently? My account with them on my credit file shows my account as being up to date, even though a reduced payment arrangement was in place.

If I were to query the application of the default how would I go about this?

Thanks again

SeduLOUs

I suspect you may be better leaving it alone.

You could argue they placed the default too early, but based on the account status after that it appears they were entitled to issue a default anyway, so the best result you would get is a different, later default date. They may remove the default and issue a new one now!

As the default falls off you file 6 years from date of default, it's actually in your interest for the default date to be earlier.

sdw3075

Thanks again for your help

Would it make any difference to my credit rating if I were to pay off the full balance now, even though the default would remain on my file for another 4 years or so (so the default would be a negative but the fact that the account was satisifed would be a positive)?

I don't have the ready cash but if it would improve my credit file if the debt were paid off I would consider transferring the balance to my Barclaycard. If it wouldn't make a difference then I guess there's no point but I'm hoping to move house soon and so would be looking to for a new mortgage and am scared I'm going to be stuck where I am because of the default.

SeduLOUs

A default is a fairly major 'flaw' on your file, and it won't make a lot of difference to clear it - it will still show as a defaulted account. Having it satisfied may help, but for high street mortgage companies, they will still want it to have been satisfied several years ago rather than several months.

It's still a good idea to reduce your overall debt though. I'd probably focus your attention on paying whichever balance is currently charging the highest interest or charges.

Pips_Mum

No advice unfortunately just empathy as the same happened to me with a different company. I was made redundant and contacted creditor who agreed to accept a reduced payment, this agreement was kept up and I thought all was ok until we applied for a mortgage and found that they logged account as defaulted for every month the lower payments were received. The mortgage company said it needed to have been settled for 3 years before they would consider us viable for a mortgage again.

VERY, VERY annoying. Good luck with Tesco

SeduLOUs

I'm riding out a 2011 Capital One default that came about purely because of my own stupidity regarding debts and nothing to do with me losing my job.

My other cards were more lenient and I got away with the 'scratch' of missed payments, but no high street mortgage for me for a good while yet.

I'm using the remaining years to get debt free, rebuild my file (no missed or late payments since 2011!), save a decent deposit, pass my Open Uni degree in 2019, find a better job (without having any location restrictions), and then buy a house!