Default payments - voluntary termination

SJNE

Back in 2007 I had a car on finance which was stolen, the matter was reported to the police and dealt with by the insurance company (or should have been). However I was approached by the car finance company for £1300 which I did not pay as insurance should have covered the finance payments. That has been removed from my file however last year another company bought the debt and are now asking me for the £1300. I have been on my credit report and it shows as defaulted since this company bought the debt last year, however it also says voluntary termination.

I am not sure how this can be defaulted and voluntary termination and am looking for advice as to what is the best thing to do regarding this account?

wiltsguy_2

i had a similar issue many years ago, a motorcycle was stolen from me, only had it 11 days on finance and the insurance company paid out exactly what i paid for it £2300...but what i didnt know that this didnt clear the finance! I still owed the finance company £950 in intersest....is this the case with you?

Paul_the_Painter

This is what GAP insurance is for, it covers the difference between a cars value and the amount that may be outstanding on finance.

Imagine a situation where you purchase a new £20,000 car on finance over 5 years, but you are a day a track day fan, over the next year you go to a dozen track days and hit a couple of barriers and in between do 2000 miles a week in your job.

1 year later you have a knackered car with a bunch of knackered panels and 100,000 miles on it. It is then stolen.

It's worth at best 50% of what you paid for it (£10,000) that is what the insurance company would pay out (to put you in the position you were before)

However you still owe the finance company over £16,000.

The £6,000 difference is your problem, because you could have taken the £10,000 and bought another knackered car similar to the one stolen and been in exactly the situation you were before I.e. with a knackered car and owing £16,000 to a finance company.

On the other hand your debt may be statue barred (over 6 years since acknowledgement of the debt) make sure you don't speak to the finance company or sign anything from them, or wrote anything to them until you have taken advice on that point.

SJNE

wiltsguy wrote: »

i had a similar issue many years ago, a motorcycle was stolen from me, only had it 11 days on finance and the insurance company paid out exactly what i paid for it £2300...but what i didnt know that this didnt clear the finance! I still owed the finance company £950 in intersest....is this the case with you?

Yes this is the case with me. Did you pay the £950? It's so frustrating as the debt with the finance company had been wiped off my credit report with it being 7 years ago but this new company had bought it so it looks like I have defaulted in the last year.

I don't understand how it is a default and a voluntary termination, should I pay this or should I dispute it?

National_Debtline

Hi SJNE,

Welcome to MSE,

Paul the Painter gave some great advice and examples of how Gap Insurance works and that this debt could be statute barred. However, based on your original message I believe the other issue you have is that the new debt collector appears to have ‘re-registered’ a default on your credit file. (I hope I have understood your message correctly). If that is the case you will need to write to the company concerned about two things. First of all you can challenge that the money owed is still enforceable because of the age of the debt. And you can challenge the default on your credit file.

There is a piece of legislation called the Limitations Act 1980 that does state, if there has been a 6 year block of time since the debt fell due, with no written acknowledgement or payment to the debt and no County Court Judgement has been obtained, the debt may no longer be enforceable through the County Court and becomes known as Statute Barred. It would seem this may be the case for this debt. We have a factsheet and a sample letter about statute barred debts and the Limitations Act for more information - https://www.nationaldebtline.org/EW/factsheets/Pages/25 EW Time limits for recovering debts/Default.aspx

It is also important to note that a default can only be recorded on your credit file once. A default would be removed from your credit file 6 years from the date of default and cannot be registered again (which is what this company appears to have done). So what you can do is challenge the debt and the default by making a complaint.

You could use our sample letter as your main template and then amend it, as you see fit, to raise the issue of the default on your credit file (i.e. it has been incorrectly recorded and you want it removed). You can highlight that if they refuse to do this and continue to contact you for the money (without giving you proof that it is enforceable) you will complain to the Financial Ombudsman on the grounds of harassment and the Information Commissioner for recording inaccurate information on your credit file.

It is important to note that only inaccurate information can be removed from your credit file. We also have a factsheet about Credit Files that may help you - https://www.nationaldebtline.org/EW/factsheets/Pages/05 EW Credit reference agencies and credit reports/Default.aspx

Laura
@natdebtline