Persistent Debt Discussion

MSE_Petar

Hi!

This is the discussion thread for the

Persistent Debt guide

If you haven't already, join the forum to reply.

Thanks!
[purplesignup][/purplesignup]

lancstulip

I received one of these letters back in March just as we were heading into lockdown. Following the advice in the Persistent debt guide I contacted my lender and explained that I was only paying a bit more than the minimum monthly amount because I was paying off another card at a higher rate (which is what the guide advises to do). I continued to pay through lockdown with no payment holiday and I’ve paid off  £2k this way and transferred as much as possible of the balance to a zero rate card. So the balance remaining on the original card is now less than half of what it was in March but they have now written to me and closed, (not frozen) the card. This just doesn’t feel ‘reasonable’ especially during a pandemic.

Yahoo_Mail

lancstulip said:

I received one of these letters back in March just as we were heading into lockdown. Following the advice in the Persistent debt guide I contacted my lender and explained that I was only paying a bit more than the minimum monthly amount because I was paying off another card at a higher rate (which is what the guide advises to do). I continued to pay through lockdown with no payment holiday and I’ve paid off  £2k this way and transferred as much as possible of the balance to a zero rate card. So the balance remaining on the original card is now less than half of what it was in March but they have now written to me and closed, (not frozen) the card. This just doesn’t feel ‘reasonable’ especially during a pandemic.

Not allowing people to rack up debt when it looks like they're struggling to service what they currently have seems entirely reasonable.

At the end of the day, if you have a problem with this, speak to the regulator.  They're the ones who imposed it on the banks .

lancstulip

I would agree if I had had to take a payment holiday (I haven’t), continued using my card (I haven’t) and I hadn’t paid off a substantial amount of the debt (which I have) -just not sure how this can be interpreted that I am struggling.

Yahoo_Mail

lancstulip said:

I would agree if I had had to take a payment holiday (I haven’t), continued using my card (I haven’t) and I hadn’t paid off a substantial amount of the debt (which I have) -just not sure how this can be interpreted that I am struggling.

Well, unfortunately, they tend to be rigidly sticking to the letter of the law here, probably because it's not worth sticking their necks out over.

It's also possible that the closure is more down to them reducing their liabilities as a result of the economic fallout from COVID, than specifically about persistent debt.

lancstulip

I hadn’t thought of it like that! 

[Deleted User]

lancstulip said:

I received one of these letters back in March just as we were heading into lockdown. Following the advice in the Persistent debt guide I contacted my lender and explained that I was only paying a bit more than the minimum monthly amount because I was paying off another card at a higher rate (which is what the guide advises to do). I continued to pay through lockdown with no payment holiday and I’ve paid off  £2k this way and transferred as much as possible of the balance to a zero rate card. So the balance remaining on the original card is now less than half of what it was in March but they have now written to me and closed, (not frozen) the card. This just doesn’t feel ‘reasonable’ especially during a pandemic.

You have to remember that people won't take responsibility for their actions. That was evident in the PPI debacle, bank charges reclaiming etc - people sign up for things then complain they didn't want them and demand a refund as they see a pay day. With PPI. towards the end, over 50% of "complaints" banks were getting from people about how awful it was, how they were pressured into taking products etc didn't even have PPI yet felt entitled to money. With persistent debt, people will bury their head in the sand and then a few years down the line, claim it was terrible they didn't realise that paying the minimum wouldn't pay off the balance and they want it writing off. Look at the responses on this forum to older debts - all people trying to get out of paying using every trick in the book. The banks acting now (as the regulator is making them) are making it clear that you need to pay more to help your debt situation. It is a blanket rule, it doesn't take into account personal circumstances e.g. someone like you taking action and doing the right thing. Come the next crash, you'll be in a good position, hopefully it will push others along as well so that more people are better placed.

born_again

lancstulip said:

I would agree if I had had to take a payment holiday (I haven’t), continued using my card (I haven’t) and I hadn’t paid off a substantial amount of the debt (which I have) -just not sure how this can be interpreted that I am struggling.

While you have paid of a large chunk of the debt with that card provider. In reality all you have done is moved a chunk of it elsewhere. As you said you had taken out a 0% deal on some of the debt. Which they will be able to see and also know due to the balance transfer. 
So my guess is that they are protecting themselves from further exposure. 

Hats off to you as well for not taking the easy way out and taking the payment holiday. Many have taken them, that did not need to do. Which is going to cause issues further down the line. In terms of persistent debt.

Yahoo_Mail

anyusernameleft said:

I have a credit card with Nationwide after I ran up some dental bills after a root filling went badly wrong.
I pay a bit more than the minimum amount each month and have never missed a payment.
Late last year the Nationwide sent me a letter out of the blue saying I was in "persistent debt" and I had to send them an extra £600 right away or they would stop my card. I didn't have £600 but I phoned them and increased my monthly payment a bit more and they said that would fix it. I also asked them to move the card to one of their low rate loans and they refused to do this. In writing.

I wasn't happy with them and started looking around to move the debt to a loan elsewhere or a 0% card.
Then came Covid and wiped out my business. I work in Events.
In spite of things being very difficult financially this year I have kept up the payments to the Nationwide regardless.

Now I have had a letter saying I'm still in "persistent debt" and demanding that I move to some sort of loan at 15.9%!! and higher monthly payments. During lockdown.
I spoke to Nationwide on the phone and the guy threatened my credit rating if I didn't agree to sign up to some arrangement he refused to tell me the details of, or what the interest rate would be. I kept saying I wasn't agreeing to anything if I didn't know what the interest rate was or what the terms and conditions were in advance and he kept refusing to tell me.
I think this is disgusting and I'm I'm refusing to do it.

I have not ever broken the terms of the arrangement I signed up to with Nationwide and I'm very unhappy that they have changed the rules on me years after I signed the contract.

Is there any advice other than "get a job" which obviously I am trying to do.
Thank you.

To be fair, most credit card interest rates are >15.9% so I wouldn't exactly be upset about the loan interest rate, it may (although not a guarantee) actually be less than whatever you're on now.

At the end of the day you can't be forced onto a payment plan, or to take out a loan but they can close the account or freeze the card to prevent any further spending.  And you really should consider upping your repayments when you can, it's absolutely in your best interests to do so.

eskbanker

anyusernameleft said:

I pay a bit more than the minimum amount each month

How much more?  As explained in the article that this thread is about, you're regarded as being in persistent debt if you're paying more in interest and other charges than you pay towards reducing the capital, so if you can find enough to shift that balance then that would take you out of the persistent debt regime.  Some of your minimum payment will already be going to balance reduction rather than interest, so if you're also paying more than minimum already, it may not be a huge leap to tweak the payments enough to make that difference?

anyusernameleft

This is a letter I have written to the Nationwide, in reply to a letter from them, on the subject of what they call "persistent debt" and I call a "Credit Card".
This was after receipt of a letter received during Lockdown offering me a totally extortionate loan at 15.9% in spite of the fact that I have never defaulted on my card payments and always pay more than the minimum rate:

"Dear Nationwide,

Thank you for your letter of XXth of November 2020 your reference XXXXX.

Thank you for your offer to switch my credit card to a four year loan at the extortionately usurious rate of 15.9% which will cost me £2,097.21 in interest charges, however, I choose to decline at this time.

I point out that I am not, nor have I ever been, in breach of your terms and conditions and always pay more than the minimum monthly payment.

I point out that the Bank of England Base Rate is currently 0.1% and therefore wonder how you justify the levels you propose to charge me?

I note also that your headline loan rate you offer on loans of up to £25,000 on terms of up to five years is a still healthy 2.9%.

I am happy to take out a loan at your advertised rate of 2.9% for four years and use this to pay off the credit card and close it down.

The minimum amount I can borrow being £7,500 I calculate that on a four year term this will cost me £165.55 per month, which is about the same as my current Credit Card costs, but only £446,44 in interest charges, which, as you are so very concerned about what you choose to call my “persistent Debt”  (which I call a “Credit Card”) you will doubtless be overjoyed at this solution.

With this 2.9% four year loan you can recoup your entire credit card outlay immediately and I can cheerfully close that card with you.

Sincerely yours,

XXX"

I await the Nationwide's response.