Arrears “months” definition (value or time)

Lamplighter

Hi there
I had a car PCP that defaulted in 2017 but retained the vehicle via suspended possession order, and closed last year.
I’ve since complained to the lender about their triggering of (1) the notice of default and (2) the termination; and then elevated to the ombudsman.
The crux of the matter is that the notice of default was issued when the account was 2 payments in arrears, enabling the lender to terminate immediately at the 3rd missed payment (failed D/D) despite my ability to clear the arrears in full (which is what eventually occurred anyway via court).
The ombudsman has helpfully referred me to the ICO Principles, which state typically the Notice of Default isn’t issued until 3 months arrears. In my case, the difference is significant, as at the point my D/D failed I would then have had 14 days to settle.
However the Ombudsman has also surprised me by stating the months arrears can be interpreted in terms of time rather than value, ie the elapsed months since the account was up to date. As I was in an arrangement to pay, it was in fact several months since the account had been up to date.
I say surprised, because this is inconsistent with my observations of how the lender has reported the arrears digit on the credit report (which is clearly in terms of number of months value), and also inconsistent with telephone conversations at the time about the significance of “three months arrears” which was clearly in value terms (3xEMI).
Is anyone please able to point me in the direction of definitive guidance on this? Is it consistent between different lenders and different CRAs? Is it different for car finance vs say other finance agreements? I assume credit cards can only be measured in terms of elapsed time.
Thanks in advance.

sparklep0ny

It's perfectly normal to report arrears using either method.  If lenders couldn't use "value" as a way of calculating how many months of arrears you were in then anyone paying to say a pound a month could never be defaulted or reported as in arrears as they would have been making payments.  The same would be true of "time" calculations.  Pay a quid and nobody can report it, or default you.

Any lender, regardless of the product, can and will report using "value" if payments, albeit reduced ones, are being made.

I'm not sure why you're not believing the Ombudsman, they're hardly anti-consumer.

Lamplighter

Hi sparklep0ny

sparklep0ny said:

[...]
Any lender, regardless of the product, can and will report using "value" if payments, albeit reduced ones, are being made.

I'm not sure why you're not believing the Ombudsman, they're hardly anti-consumer.

Thanks for your reply.
This is exactly my point.
I would expect the lender is reporting arrears as "value", in which case my several months of AP status did not amount to greater than 3x EMI ("3 months arrears"), and ought not to have triggered a Notice of Default letter.  The instance that it did reach 3x EMI (the failed D/D) should therefore be the Default Notice point, rather than the Termination point, and have given me the 14 days to repay the arrears and continue the Agreement, if the account was compliant with the published ICO Principles.
My surprise with the Ombudsman is that the chap with whom I spoke (an "investigator" rather than an "ombudsman", as apparently that is the first point of contact, although that distinction may be irrelevant) raised that in his view my account was in arrears for longer than three months, hence would permit the lender to issue Notice of Default.
Cheers

Lamplighter

Lamplighter said:

... in which case my several months of AP status did not amount to greater than 3x EMI ("3 months arrears"), ...

Just to clarify, the AP arrangement was an increase on the original monthly installment in order to repay earlier missed payments over several months, hence in this time the arrears value was reducing each month.
(It occurred to me after posting that it might appear I had agreed a reduced payment, this was not the case) 

MattMattMattUK

How many months payments were you behind at the point the direct debit bounced and how many months had you previously not paid for?

GeordieGeorge

What do you want to get out of this? Despite you breaching your contract you were still able to keep your car, and we’re given time to make up the difference. You were the one in the wrong, so what’s the aim of complaining?

[Deleted User]

There is no rule that says you must miss 3 payments to get a default, it's just the general guideline (3-6 months) 
Arguing they should not have defaulted you after 2 and thus should remove it from your file may or may not succeed if you apply to their better nature rather than telling them they're wrong.
https://forums.moneysavingexpert.com/discussion/3172602/ico-scor-principles-for-the-reporting-of-arrears-arrangements-and-defaults

sparklep0ny

Deleted_User said:

There is no rule that says you must miss 3 payments to get a default, it's just the general guideline (3-6 months) 
Arguing they should not have defaulted you after 2 and thus should remove it from your file may or may not succeed if you apply to their better nature rather than telling them they're wrong.
https://forums.moneysavingexpert.com/discussion/3172602/ico-scor-principles-for-the-reporting-of-arrears-arrangements-and-defaults

Also worth noting that there is no rule that they need to wait until 3 payments have been missed to send a Default Notice.  The law sets no timescales on sending one.

I'm not sure what the OP wants to hear really.  Presumably, the Ombudsman sided with the lender but it's rare for them to get it wrong in favour of the lender rather than the consumer and from the drip-fed information so far it doesn't sound like they were wrong.

I would expect the lender is reporting arrears as "value", in which case my several months of AP status did not amount to greater than 3x EMI ("3 months arrears"), and ought not to have triggered a Notice of Default letter.  The instance that it did reach 3x EMI (the failed D/D) should therefore be the Default Notice point, rather than the Termination point, and have given me the 14 days to repay the arrears and continue the Agreement, if the account was compliant with the published ICO Principles.
My surprise with the Ombudsman is that the chap with whom I spoke (an "investigator" rather than an "ombudsman", as apparently that is the first point of contact, although that distinction may be irrelevant) raised that in his view my account was in arrears for longer than three months, hence would permit the lender to issue Notice of Default.
Cheers

I said either way was fine.  You can't sit there making £1 payments and expect not to be defaulted because you're making payments.  You also can't expect to make 99.999999% of the payment and essentially never be at risk of default because you'll never end up being3 full payments in arrears.  If you sit in arrears for 3 months without making them up, defaulting you is fine.  As you found out from the Ombudsman.

Lamplighter

Thanks all for your comments.
I was merely seeking guidance on the validity of what I was being told by the Ombudsman's investigator, and your replies have helped with that, so thank you.

MattMattMattUK said:

How many months payments were you behind at the point the direct debit bounced and how many months had you previously not paid for?

1.86 months (the failed D/D caused this to increase to 3.13 months, as the arranged payment was for 1.27x the EMI).  This was the first instance the account had lapsed >3 months value.
The account had been in an arrangement for 6 months previously.

GeordieGeorge said:

What do you want to get out of this? Despite you breaching your contract you were still able to keep your car, and we’re given time to make up the difference. You were the one in the wrong, so what’s the aim of complaining?

sparklep0ny said:
I'm not sure what the OP wants to hear really.  Presumably, the Ombudsman sided with the lender but it's rare for them to get it wrong in favour of the lender rather than the consumer and from the drip-fed information so far it doesn't sound like they were wrong.

Agree with you both that of course I was at fault for the arrears and for the failed payment.  However, for context I was in contact with the lender throughout the issue, and had requested the arrangement in advance as I was moving house (I rent, hence had to fund a sizeable deposit, fees and rent in advance).  The reason the D/D failed was my tenancy deposit return from the house I'd vacated was delayed.  I phoned the lender straight away, and they told me the 3 months value was the trigger.  I offered (1) an immediate payment to bring the amount under 3 months, and (2) to clear the arrears in full from my tenancy deposit, which would be within a week or two - I even offered to borrow the money to repay the arrears immediately if it would resolve the issue.  They declined on all fronts, citing their systems were inflexible, and they couldn't put me through to any human decision-maker.
The matter went to court several months later, at which time immediately before the hearing the lender agreed with what I had originally offered, i.e. to accept a full arrears payment and continue to the original schedule, and I fulfilled my obligations in that regard.  But as a consequence, I have gained a sizeable default on my credit file.
My query with the Ombudsman is on two grounds - (a) were they entitled and/or correct to ICO Principles and/or fair to issue a Notice of Default three months earlier when the arrears value was 2.39 months, yet the notice cites a greater value which I can disprove, and (b) if they were, were they then right and/or fair to be intransigent to my offers to resolve the situation immediately, whereas later they would agree exactly that in the face of the court.

Deleted_User said:

There is no rule that says you must miss 3 payments to get a default, it's just the general guideline (3-6 months) 
Arguing they should not have defaulted you after 2 and thus should remove it from your file may or may not succeed if you apply to their better nature rather than telling them they're wrong.
https://forums.moneysavingexpert.com/discussion/3172602/ico-scor-principles-for-the-reporting-of-arrears-arrangements-and-defaults

Helpful link, thanks.  I'm less about trying to tell anyone they're wrong, and more about trying to inform myself what is correct and what is custom and practice.

Again, thanks all for your time responding.

MattMattMattUK

Lamplighter said:

MattMattMattUK said:

How many months payments were you behind at the point the direct debit bounced and how many months had you previously not paid for?

1.86 months (the failed D/D caused this to increase to 3.13 months, as the arranged payment was for 1.27x the EMI).  This was the first instance the account had lapsed >3 months value.
The account had been in an arrangement for 6 months previously.

I suspect that you were in an arrangement and you then broke the arrangement is the reason they moved to default, rather than specifically because you went over three months, but there are too many unknowns to be sure.