Is this (somewhat unjust) defaulted debt worth paying?

Br0wnT0wn

During covid I got a letter from my bank, somehow an account I hadn't used for years was 200 and something pounds overdrawn and they were wanting the balance to be paid.

I managed to get into the online banking account and could see that when I had 'left' the bank (the point at which I stopped using the account) the balance was at £0 and stayed that way for some years. Then out of nowhere a £4.99 charge was debited, I don't remember what it was for but I certainly didn't use my card and also my account did not have an arranged overdraft so it shouldn't have actually gone through in the first place.
The bank had waited until this -£4.99 balance had racked up over £200 in fees before they contacted me to ask for payment.

I then went to the banks 'contact us' part of the website and filled in the form in which they ask you to leave your contact details and what the issue is, and they will get back to you. A week or two later I'd not heard from them so I did it again.

A few weeks later I got a letter in the post from a debt recovery company saying that the bank had passed the debt on to them, and obviously were asking for the payment.

Since then, I have ignored it out of spite but now I am looking to improve my credit score/rating. 
I am aware that even if I clear the debt (if this were to happen I would offer the debt recovery company a fraction of what the balance is to clear it), the defaults will remain on my credit history for potential lenders to see, so I have two questions stemming from this situation:

1) Would clearing the debt and still having the defaults on file be better or the same (as not paying it) in terms of potential future lenders checking my credit rating/history? 

2) When I check my credit history via Trans Union & the Karma app it says the date of default is Sep 2020, does this mean after Sep 2026 it will be fully removed from my credit file? Or will it be 6 years from the last missed payment? obviously every month is a missed payment which would mean I'd have to wait 6 years from now for it to be wiped from my credit file?

Thank you.
 

Nasqueron

The default will leave the record in September 2026 yes, it will then disappear forever

Paying a debt looks better as it's settled but the missed payments and default will be the ones doing the harm

You could try a complaint to the bank about this - worth a shot at least about why they allowed this charge to go in and then start charging you but I wouldn't want to guess the outcome as they would probably say you should either close the account or check it regularly just in case - they probably send all the notices electronically.

PRAISETHESUN

There are two separate 6 year timers in play here - the first is how long the default appears on your credit file, and the second relates to the enforceability of the debt. Just because a debt no longer appears on your credit file, it doesn't always stop it being enforceable. The owner may still be able to take you to court for enforcement (potentially leading to a CCJ if it is still left unpaid).

I'd stop "ignoring it out of spite" as you put it, for the sake of £200. Get in touch with the DMC to see what they would accept as a settlement figure. You could also try complaining to your bank about the fees on your unused account to see if they will reimburse you for the overdraft/account fees (although I suspect they probably won't).

As for your questions, a settled default is better than a partially settled default and both are better than an unsatisfied default. It will stay on your files for 6 years (ie. until 2026). It's also worth checking your files with all 3 CRAs (Experian, Equifax, and TransUnion) to make sure the default is being reported correctly to all of them.

Br0wnT0wn

Thank you PRAISETHESUN and Nasqueron. I've sent them an email offering a partial.

sourcrates

Has the bank sold the debt, or just assigned it?

Because if its just been assigned, they will be acting as a collector only, so won`t have authority to make much of a deal, it will be passed back to the bank to make the decision.

If they refer to "their client" then its not been sold.

The collection company has no power of enforcement here, so can be ignored if you so wish.

Original creditors don`t tend to go to court, only if the bank sells the debt, and the new owner starts hassling you, can legal action be taken for non payment.

Br0wnT0wn

sourcrates said:

Has the bank sold the debt, or just assigned it?

Because if its just been assigned, they will be acting as a collector only, so won`t have authority to make much of a deal, it will be passed back to the bank to make the decision.

If they refer to "their client" then its not been sold.

The collection company has no power of enforcement here, so can be ignored if you so wish.

Original creditors don`t tend to go to court, only if the bank sells the debt, and the new owner starts hassling you, can legal action be taken for non payment.

That's interesting, I didn't know that. The company is Intrum. The only means of contact I have from them are emails asking me to get in touch with them, although the last email they sent was in Jan 2022. They don't have any wording such as 'our client' or 'we', 'us' etc. I just checked Equifax and the debt is listed as owed to Intrum which makes me think they have obtained the debt?

They haven't yet responded to my email I sent on Monday which is odd, I would have thought they would jump at the chance to get something from a person that they have heard nothing from since 2020.

electriccactus

Br0wnT0wn said:

sourcrates said:

Has the bank sold the debt, or just assigned it?

Because if its just been assigned, they will be acting as a collector only, so won`t have authority to make much of a deal, it will be passed back to the bank to make the decision.

If they refer to "their client" then its not been sold.

The collection company has no power of enforcement here, so can be ignored if you so wish.

Original creditors don`t tend to go to court, only if the bank sells the debt, and the new owner starts hassling you, can legal action be taken for non payment.

That's interesting, I didn't know that. The company is Intrum. The only means of contact I have from them are emails asking me to get in touch with them, although the last email they sent was in Jan 2022. They don't have any wording such as 'our client' or 'we', 'us' etc. I just checked Equifax and the debt is listed as owed to Intrum which makes me think they have obtained the debt?

They haven't yet responded to my email I sent on Monday which is odd, I would have thought they would jump at the chance to get something from a person that they have heard nothing from since 2020.

Intrum are mostly debt buyers and banks are generally big enough to justify having their own in-house collections teams so are highly unlikely to outsource collection to a third party.

penners324

Figure out what the original charge was for. Then complain to the bank based on that.

If the original charge was wrong then all others should be wiped.

sourcrates

Intrum are a debt purchasing company, yes, they will have bought it then.

Having emailed them, you will have re-set the statute barred clock, unfortunately.

My instinct would be to go down the complaints route now to the original bank, you have to be careful what you do regarding debts nearing the end of there limitation period.