Default applied by MBNA nearly 3 years after 'persistent debt' began - Advice re: challenge / FOS?

LKT77

Hi everyone, this is my first posting so please excuse me if it's not quite in the right place... I'm just looking for some advice from anybody who has challenged MBNA regarding a default date.

In 2012 I took out an MBNA credit card. I was young, earning very little and had pretty poor financial literacy to be honest. I managed to make the initial repayments but by the end of 2013 I was in what most CC companies would refer to as 'persistent debt' (high balance, very low repayments and often months with no repayment whatsoever) I spent most of 2014 and 2015 in arrears, ranging from 1/2 months up to 4 and even 5 months.  From memory I would scrape together money to make repayments at around the 3/4 months mark because I was terrified of "getting a default" - although I didn't really understand what this meant. I had regular phone calls from MBNA advising me to make payment but to my knowledge was never offered much, if any, support around my debt. In the end I surpassed the 6 months of arrears mark and a default was applied in summer 2016 - when I was already on a formal debt management plan.

I have since worked really hard to bring my credit score back up; paid off all my remaining debt(s) and started saving conscientiously. Thankfully this is beginning to pay off. The only thing really holding me back is the 2016 default. I met with a financial advisor who asked me to describe how the default came about (the story above) He pointed out that defaults are usually applied between the 3rd and 6th months of arrears where no payments are made and queried why MBNA did not apply mine until 2016. I contacted MBNA (now part of the Lloyds group) to ask them. After literally hours of trying to locate my account (I no longer had any details and have moved house twice since the account was closed) they advised that they would look into this. My position was that it doesn't feel very ethical for them to have encouraged me to make the small payments that I could barely afford infrequently just to bring myself out of the 'default danger zone' only to apply it years later when we reached that stage anyway. Had I been given any advice or been financially literate enough to understand I would honestly have just stopped trying to make payments back in 2013/14. Had I done that the default that I am currently saddled with until 2022 would be a couple of years older and thus be dropping off, allowing me to recover, sooner. 

Today I received an initial response from their Debt Team who advised that the default was applied in 2016 as I managed to consistently (inadvertently!) reprieve myself. Again I argued that this didn't feel very ethical or like responsible lending. The person I spoke to agreed in principle but told me that "although the guidance has since changed" they would have been working to the FCA Regulations at the time. I remain firm in my stance and have asked that my query be escalated internally. In the interim time I'm considering taking some legal advice, should I perhaps contact the Financial Ombudsman? I've recently secured a repayment of interest accrued via payday loans I took out during the same period (on the basis of irresponsible lending) via an FOS adjudication so can demonstrate my financial situation being very poor at this time. 

Apologies for the mega long post! Any ideas / tips / thoughts very gratefully received!

adamp87

I think you may be lucky to get anything from MBNA. Although they are advised to place the default then, they aren’t compelled to.

They can apply the default even if in a repayment plan, as ultimately you have missed payments so they are accurately reporting the account is in default. 

How long between making payments did you stop making any? 

The default is nearly 4 years old & yes it has a negative impact but it’s a lot less than it was back in 2016.

I understand PayDay loans are a bit different as they are supposed to be checking your credit file & other loans with them before offering you more - if you are lending one to pay the next then clearly there’s an issue. However if you already had the card with your credit card company they wouldn’t be looking into your credit file even if in arrears. 

MEM62

Whilst I am not a fan on MBNA and have my own difficulties with them in the past, it is not their responsibility to provide you with financial advice when you get into trouble.  It sounds like the advise that they gave you at the time was in line with the guidance and standards in force at the time.  The impact of the default on your credit standing will be reducing as time goes on but is an accurate record the history of the account.  I am sure that this is emotionally difficult to let go of but I think you need to draw a line under it and move on.     

PaulW922

Remember what a default is under the Consumer credit regulations - it is a lot more than just a credit file marker. It means that the relationship between you and the lender has broken down and as such, the total amount payable under the agreement can be demanded straight away. So if you borrowed £5000 over two years paying, say, £220 a month, your contractural obligation is for that £220 a month. If you get into arrears by two months you can bring the account up to date by paying the instalments you have missed and putting yourself either back on track or in a better position that you were before. To make you pay back the full £220 x 24 months the lender would need to issue a default notice and give you a final opportunity to sort your account out. That is why the notice has a remedy date on it. The impact of a credit card default is that you can be asked to pay the full outstanding balance rather than just the monthly payments you have missed. 

LKT77

Thanks everyone for comments. Just to update, MBNA called me this morning to advise that given the circumstances they are willing to back date the default from June 2016 to June 2013 (when the arrears originally began) That means that the default will drop off of my credit file with immediate affect. Feeling absolutely delighted, triumphant and somewhat gobsmacked!

Gh18

LKT77 said:

Thanks everyone for comments. Just to update, MBNA called me this morning to advise that given the circumstances they are willing to back date the default from June 2016 to June 2013 (when the arrears originally began) That means that the default will drop off of my credit file with immediate affect. Feeling absolutely delighted, triumphant and somewhat gobsmacked!

Congratulations, that’s a fantastic achievement, well done. Are you all signed up with Experian, Equifax and TransUnion to monitor your credit file now? 

jojay75

I've been wondering the same thing, with MBNA and also the Nationwide. Did you just phone customer services? That's brilliant news. Must be such a relief. 

ldhme

I had 7 debts on my DMP, only 2 of which were fairly dated. I didn't tackle it til recently and have had a lot of success moving default dates. I started by just emailing their customer service or complaints department, to my surprise HSBC moved all three default dates to 6 months after DMP start date straight away. Tesco said no, so I escalated to the FOS who sided with me and had the default date moved to +3 months after DMP, plus I got £100 compensation. Virgin money also said no and thats also been escalated but Covid has ground that to a halt, been dragging on for months but should be sorted soon.

I suppose what I'm trying to say is if default dates seem unfair (especially if they are issued more than 6 months after first missed payment) then it's worth trying. And if they say no, try some more lol. I've gone from having to wait til July 2023 to be default free to Jan 2021 if the FOS side with me again, which I am sure they will.